Business Model
Business Model

A company’s business model is at the core of its functioning and defines what value it adds for its consumers and how it ensures the said value to be created.

A crucial part of any business model concerns its economic dimension. An incorrect business model can result in low effectiveness of an organization and financial instability. And should the company still manage to be profitable, this can take place at the expense of important values, such as: low quality product, irritated and exhausted employees, complicated and disorganized relationships with providers, high operational risks and consequently, increased expenses, and dissatisfied and non-loyal clients. The resilience of an organization facing such challenges then becomes questionable.

When an organization fully understands who its consumer are, it should ask what features its product should have and what the main channels for providing this product are, what value it creates for consumers and what economic model it should have – in order to operate effectively and achieve top results with the existing resources available. If needed, such companies can easily transform their business model, by re-modelling it to modern requirements and challenges.

For start-up companies, a well-chosen business model can guarantee that the product they offer is tailored to the needs of potential clients and when pursuing a new market, that the capacities available in the company will be utilized to the full. As a result, resources will be correctly calculated.

As for already established, strong companies that have achieved success through a specific business model, they often fail to realize that in the meantime, their business model still requires revision and update. Often, when such companies suffer from stagnation, they fail to see the need for change in their business models and utilize time and resources unwisely to solve problems. On the other hand, successful companies know that their business model is a live and constantly changing system that will be revised from time to time and will be transformed in compliance with market requirements, consumer behavior and new technological challenges.

A business model requires transformation when:

  • An organization is excessively focused on a product or service and does not take consumers’ needs into account. Companies like these miss the opportunity of long-term development and their pace of growth slows down.

  • An organization is less effective and its profitability index does not improve year-on-year.

  • An organization does not take every important stakeholder into account and their impact on its activity. As a result, it loses control and operates in a reactive manner.

  • An organization is not familiar with its consumers and their needs, fails to have effective communication in the language consumers understand which results in a loss of interest and in the end, the company’s market shares go down.

  • Necessary resources and respective operational activities are not correctly assessed in the business model, which hinders the pace of business development.

  • A business model that does not envisage external threats and opportunities deprives the company of the ability to prepare for new challenges, adapt in a changing environment or acquire new opportunities and incorporate innovations.

  • A business model is weak if the distribution channels selected by the company are not effective. It does not matter how valuable the offer made by the business is if potential clients do not know about it or do not know how to search for       it. As such, the company’s sales are low and stagnant.


We help companies in assessing the effectiveness of their business model, the formation of a new business or transformation of an existing one. In this process, we are guided by the company’s values and goals, and we do our best to tailor the business model to clients and in general, the market needs so in the end, everything results in sustainable economic development.

When developing a business model, our cooperation with a client involves the following stages:

Stage 1 – diagnostics of a business model arrow
  • The first phase of strengthening the business model involves analysis and diagnostics of the said model. For this purpose, ACT undertakes the following actions:
  • Analysis of income and costs
  • Audit and evaluation of processes and procedures
  • Evaluation of financial and human resources
  • Analysis of the effectiveness of distribution channels
  • Analysis of the effectiveness of communication
  • Analysis of the loyalty of existing clients
  • Analysis of competitors and the consumer market
Stage 2 - assessment of the existing business model and planning the changes required arrow

The following phase is an evaluation of the organization’s current business model based on insights identified during diagnostics. In order to ensure the effectiveness of decisions, ACT’s consultants organize workshops with the participation of those responsible for the strategic business domain of the client company. This stage also involves making decisions on the need of transformation of the business model and identification of the required changes.

Stage 3 – transformation / renewal of the business model arrow

This stage involves the renewal and improvement of separate components of the business model or full transformation.

Stage 4 – supporting and incorporating changes arrow

The final stage is the incorporation and implementation of a new business model. This is the stage when ACT empowers its clients in the following directions:

  • Development of strategies respective to changes and action plan
  • Supporting communication of changes
  • Supporting operational changes
  • Supporting other required changes.

Featured Insights

Ancient Chinese merchants were among the first entrepreneurs. They have found a unique way to manage risk in international trade. They distributed their goods for sale on several ships and released at sea. Thus, if one ship was sunk or became a victim of pirates, the rest had a chance to survive. In this way, Chinese merchants safely transported most of their goods to the market of the neighboring city and avoided serious financial losses.

In the 21st century, the export-oriented business is no longer threatened by pirates, but it continues to face other challenges. In today's world, the political, economic and social environment is changing so rapidly that the most difficult task for any company is to find and retain a loyal customer.

The main conclusion that a business must make in the current reality is this: Chinese merchants learned this centuries ago - they realized how much risk the principle "Put all your eggs in one basket" contains. Inspired by an old adage, this concept perfectly explains the importance of market diversification. Its relevance is growing day by day for international marketers and it is clear that Georgian companies are no exception. The Russian-Ukrainian war once again showed us what we have already witnessed many times - how dependence on the market of one country interferes with business.

No one disputes that market diversification is the best solution for risk insurance. However, the implementation of this principle in the modern world requires much more effort than "several cargo ships". Even in the case of the local market, there are many challenges - finding a relevant target customer, winning and maintaining his loyalty. It is even more difficult to fulfill this mission in the international arena. So when we discuss reducing risk and increasing capacity for export-oriented enterprises, the question is not what? but the question is - how?

How companies can better find and develop an unknown market or, at best, markets? It is obvious, and it can be seen with the naked eye, that it will be difficult to succeed only by watching the trends. The most effective tool for planning an international marketing strategy is market research, and consumer research occupies one of the main places in this process.

Well, if you are a business owner and want to expand, open up new markets, consumer research can be the most necessary and useful tool for you.

opportunities for consumer research:

  • Find out who your customer is and what they want.

The number one task in the process of finding a new market is to find out if the buyer needs the offered product or service at the offered price. For a company, entering a new market without consumer research is like wandering through a maze. Obviously, a business can have a rough idea of the needs of foreign customers, that is, of where and to whom it will be profitable to export this or that product. However, these ideas are largely based on intuition and may well not correspond to reality. After all, any foreign market is unique and differs in many ways from the local market - its buyers live in a different geographical area, speak a different language, have special requirements, opportunities and preferences. Accounting for all these factors is a prerequisite for success, in which consumer research can be of great help.

The survey provides the business owner with detailed information that:

  • in what segments of the population there is a demand for this product;
  • What is the consumer behavior of the specified segment
  • What preferences, explicit or hidden desires do users have;
  • Who are the competitors and what is their marketing strategy;
  • How does the buyer feel about the price.

This is not an exhaustive list of the knowledge that can be obtained through consumer research. If it is analyzed correctly, the business will have the opportunity to get to know the new market well and find the right target segment - the client who is most likely to buy his product or service. In this case, the decision to enter a new market is made on the basis of evidence, not assumptions, which significantly reduces risks.

ACT actively helps Georgian and foreign companies to develop foreign markets. One example of this is a consumer survey conducted in Yerevan commissioned by a supermarket chain. ACT has conducted a study of consumer preferences and consumer basket in Armenia. Analysis of the research results allowed the customer company to offer the client a product that takes into account the needs of the target segment. Thus, consumer research helped the business to insure the risks, due to which it established itself rather painlessly in the new market.

  • Grab the attention of the target use.

Finding a target customer is the first step in entering a new market. The next and no less important task is to attract the attention of potential customers. To do this, the business needs to properly pack the product and deliver it to the customer in such a way that it arouses his interest. The role of research is also important at this stage of the development of an unknown market. Research, in addition to the rational motives of human behavior, also reveals what topics potential customers react emotionally to, what excites them, likes or annoys them. Having received this information, the business will be able to offer the product to the buyer, taking into account his wishes and develop an effective way of advertising.

A good example of this is the entry into the Georgian market of several foreign shopping centers. By their order, ACT conducted a study - studied the consumer behavior of Georgians, brand preferences and consumer attitudes towards the proposed product. According to the results of the study, the companies adjusted their marketing strategy, offered the buyer a product that meets his requirements, and earned the location of the target segment. Thus, research-based solutions ended up being effective for them.

  • Constantly keep abreast of the user.

The key to the success of any business is a satisfied customer. As soon as a customer buys a product or service, a timer starts. The business really wins if the customer comes back to buy again and again. This will be a sign that the brand has received the most important award - customer loyalty. However, loyalty is not permanent. People's tastes change every day, new needs and desires arise. In fact, the success of a business depends on how well it listens to its customers. An effective tool for maintaining their loyalty is customer research. This allows the company to constantly keep abreast of the buyer - not to miss a single change in his mood and always be aware of trends.

This consumer research opportunity was successfully used by one of the representatives of the banking and financial sector from Georgia. ACT conducted several stages of consumer research for him in Uzbekistan, Central Asia. In order to identify the preferences of local consumers, the study was conducted both before and after entering an unknown market. As a result, the company managed to take a worthy place in the financial sector of the foreign market.

As we can see, consumer research is a necessary and useful step for a company that wants to expand and open up new markets. This allows business owners to make informed decisions, which greatly reduces the risk of opening, exploiting and maintaining new markets. However, businesses should not forget that the “stopwatch that starts when entering a new market” runs continuously while the company operates in this market. Thus, entering the market of a foreign country is not a one-time decision. Business must constantly be in the process of research and analysis of experience.


Manage the cause, not the result – this phrase belongs to the founder of Total Quality Management, William Edwards Deming. Total Quality Management is a concept, designed to create such an environment for the entire organizational staff, where the employees are given the floor to continuously develop and build their capacity and skills in order to born valuable products and services for their customers. Even though this phrase sounds short and simple, it dramatically transforms the behavior paradigm dominating nowadays.

Literary, in almost every organization we find a manager who does not like to hear about problems, and the employee bringing that issue to the agenda is usually doomed to be placed off. The way how a Manager behaves, in this case, serves as a sign to others meaning that talking over the issues is supposedly far not appreciated. Accordingly, all the employees use to try to represent any point in a positive context and whenever an issue arises due to mistakes made or due to an unaccomplished project, the Manager rebukes the employee, in another case, detains part of his salary or even dismisses him altogether. All the said above serves as a good example of Managing the Result and the way how to combat it. In some organizations, such behavior is so much appreciated, that rebuking the employee and/or posing sanctions on him is considered a “good management” example so far. Such behavior, as a rule, restrains from identifying a real cause, meaning that the issue cannot be solved and it will inevitably show up again.

Transformation of the existing paradigm actually starts when a process becomes the main target, instead of assessing the employee’s fault. The processes taking place within the organization are the very place where the causes keep generating while leaving the space for the employees to make mistakes and perform their work inefficiently. Any process within the organization should serve to the creation of values for the customers and/or to the reduction of the risks of making mistakes at least. Thus, any process or any part of the process which does not serve to achieve either of these two goals mentioned above can be qualified as a loss. This kind of loss being accumulated through the flow of the processes usually causes a decline in the efficiency of the company and hampers the accomplishment of major goals.

To identify and manage the losses found in the processes it is necessary to learn the opinions of the employees actually involved in those processes, as they are carriers of the valuable information required for finding the actual causes. The fact is that whenever an employee is scared by the “follow-up punishment”, he tries to share possibly less information in consideration that each extra word uttered can eventually lead to more severe “punishment”. Therefore, the first priority of the company is to give the employees a sense of security. To achieve the above, we need to openly announce that mentioning the deficiencies and losses existing in the process will in no way lead to the punishment and setting off the employees concerned. It is most important to each employee to know that his voice is heard and he can express his opinion freely without any restrictions. It is significant that this process should not be shaped into the talks about winning the mark and endless complaints, though each deficiency or deviation discussed should be grounded and based on actual facts.

While having the said discussions it is important to depersonalize the processes and the steps undertaken. This approach can easy the way the employees talk over any action or when a certain employee refers to a specific action or a part of the process as a loss. It never causes a sense of discomfort or does not lead to conflict situations in most cases. It is important that everyone agrees on that if any action undertaken in the process is acknowledged as a failure, it does not inevitably mean that the employee who made it, is of no good.

As a rule, discussing the processes and the conversations around the topic take place in the meeting room or at the Manager’s Office. This is where the employees often dispute over the ways of the flow of the processes. To avoid such meaningless and ineffective disputes would not it be better if simply everyone just starts observing the process and agrees that the process is like the one that everybody sees. This behavior may even help the Manager sitting in his office to see and feel what are the challenges his employees have to deal with. While “overseeing” the processes the questions put by the Manager should in no way imply the threat within but indicate the readiness to show support and compassion. The openhearted and sincere gratitude expressed by the Manager to his employees for their answers and their time will significantly grow the confidence of the employees towards the process.

As soon as the agreement on the process and the losses identified within is achieved, there comes the necessity of making changes. It is important to ensure the involvement of the employees in planning for the changes as this will make them feel more responsible for the process is a part of it and when the process is successful they even may feel proud of it. Fear of changes is common to all humans and you can often hear the accompanying words like “it is of no good,” “it will not work” etc. To avoid such an approach, it is important that the employees involved in the process understand that everybody is “on board” (“in the same boat”) and they all share the responsibility for its success or failure. Make efforts to promote the way of thinking, where the questions like “how it could be done?”, “What is needed to make this possible?”, “What is the cost of this getting accomplished?” or “let us try and then discuss will it work or not” dominate.

The next powerful enemy to the possible changes to be made to the process and a spot generating causes for losses definitely - is the inheritance of the actions within the process. We often come across the mechanical actions performed by the employees unconsciously. This is peculiar to the kind of organizations where putting of the question “Why?” is not much appreciated. The organization’s aim is to ensure that each employee is motivated and encouraged to put a constructive question “Why?” To put this question in a due manner and to appreciate it means that everyone in the organization is constantly watching and finding the losses and brainstorming on how to correct the issue.

General Diagram of the constant process of identifying the losses and making improvements looks like the one below:

On the long way of constant changes to the process we should always remember the following:

Acknowledgment of the problem means getting it solved by 70%

99% of the problems are caused by the poorly organized process and not by the employees

Wisdom and experience of the many weigh way too much rather than that of one man

Make a try first and only then say whether “it does work or not”

There are no limits, improvement of the process can be endless

According to Heraclitus: “The only constant in life is change.” Today these words make more sense than ever. The changes can be painful but they are inevitable.

Relying on the support of the executive branch, a united effort of the employees on the way towards the improvement of the process is actually the key to a successful accomplishment of the company’s goals. Research and Consulting Company ACT tested this concept first within its own organization and only after shaping it into the unique transformational and management model PWR3, which is widely offered now to the company’s clients. Back in 2021, the company launched a great transformational process, where the main three forces – Managers and their philosophy, employees and the organizational culture, and well-administered processes collaborated to make the common mechanism work. It is obvious, that rearrangements to move to the said mode of thinking and starting transformational processes will not be that easy, though everybody agrees that changes are needed for moving forward and achieving greater goals.

If you get the same results as last year and you guess you need improvements, we are here to remind you, please, could you appraise: how actual is the point of view of Heraclitus today, regarded as The New Norm.