During the pandemic companies have hunted for new ways to make money, better serve customers and fulfill unmet needs. In an Oracle survey of 300 global businesses, over 80% reported the intention to make big strategic moves in 2021 — including shifting their business models.
Business model pivots, also referred to as business model innovations, involve longer-term, strategic changes to a company’s offerings. “A radical business pivot may help save the company from stagnation, slow sales or being out of touch with their target consumers,” notes Adam Lyons, London-based business consultant.
In some cases, pivots are necessary in the face of world-changing events. For example, Lola.com transformed its travel management platform during the pandemic into a fintech offering that can manage all employee spend. In other cases, savvy pivots can unlock new revenue streams — tapping into million- or billion-dollar markets — without disrupting the core business. (See turntable maker Victrola’s push into ancillary music markets.)
However, not every pivot involves moving into a risky emerging sector or inventing a never-before-seen product. “Many [companies], if not most, just need some changes and adjustments to their current business models,” Lyons says. For example, companies can create a subscription service or new delivery method for a product they already have. Lyons points to a restaurant chain that decided to create a delivery arm for its business, after in-person sales continued to slump in 2021.
Here are some of the most surprising business model pivots we’ve seen in 2021.
1. Philip Morris International’s Shift to Inhalers
- About the Pivot: The tobacco company plans to use the acquisition of Vectura, which makes inhalers for people with asthma, to increase the brand’s knowledge of smoke-free products. That includes nicotine inhalers and respiratory wellness devices. “Philip Morris [did] a big push in 2021 to change their public image and pivot to smoke-free products,” says Tendayi Viki, from innovation consulting firm Strategyzer. “They know that the world is becoming more and more smoke-free, and they are trying to stay one step ahead of this change.”
- Pivot Price: Philip Morris spent $1.45 billion to acquire Vectura.
- Potential Revenue by 2025: In the next three year, Philip Morris expects to generate more than 50% of its sales from smoke-free products. The company also aims to earn at least $1 billion from non-nicotine based products, including respiratory drug delivery and wellness offerings.
2. Foxconn’s Expansion into the World of Electric Cars
In 2020, Foxconn generated $181 billion in revenue, making the Taiwanese company the largest electronics manufacturer in the world. While the company is best known for making products for Apple, Nintendo and Google, Foxconn unveiled a surprising new product in 2020: a chassis, or steel frame, for electric cars and the technology platform to create it. The company pressed forward in 2021, debuting three electric vehicle prototypes in October.
- About the Pivot: “It’s definitely not a natural extension for them [Foxconn], like making iPhones and then making an iPad,” Viki says, “because you’re entering a different industry with different rules and different regulations.” However, Foxconn’s shorter production times and infrastructure give the company a competitive advantage for EV technology over traditional carmakers, he notes. Leaning into the expansion, Foxconn created its MIH EV Platform, as a forum for innovators from many companies to collaborate on electric vehicle technology. Through MIH, Foxconn has also made it easier for its main customer, Apple, to access the electric vehicle sector.
- Pivot Price: Outside of research and development, Foxconn has ramped up its spending on regional manufacturing capabilities. Foxconn committed to purchasing a factory from U.S.-based Lordstown Motors for $230 million as of October 2021. The company also committed to an EV production facility, valued at between $1 to $2 billion, in Thailand last year.
- Potential Revenue by 2025: With growing EV sales, Bloomberg NEF estimates Foxconn’s automotive business could make over $200 billion by 2025. On whole, the electric vehicle industry is estimated to grow to over $950 billion by 2030.
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3. Facebook’s Rebrand as Meta
In 2021, Mark Zuckerberg’s Silicon Valley-based tech behemoth made a big bet on the metaverse — a digital universe that includes virtual reality, augmented reality and the transaction of virtual items. In fact, the company changed its name to demonstrate the pivot away from its social media beginnings and into emerging terrain. Meta employs over 59,000 people globally and generated nearly $86 billion in revenue as of 2020.
- About the Pivot: The venture into the metaverse allows the company to leverage its massive user base of almost 3 billion people into an emerging, virtual economy. The company has already been investing in virtual reality infrastructure. Meta created its own VR headset, Oculus Quest 2, in 2020. One year later, the company released Horizon Workrooms, a virtual workspace that can be accessed on the device. Zuckerberg has referred to the metaverse as the “successor to the mobile internet,” which allows users to bring their digital lives anywhere.
- Pivot Price: In 2021, Facebook (ahem, Meta) estimated that it invested $10 billion in its metaverse play — a number we can expect to increase.
- Timeline to Profit: The path to and market cap of the metaverse are yet to be known. However, Zuckerberg predicts the experience will take years to build out — indicating a long-term business model play.
4. Manufacturing Company AptarGroup’s Shift to Digital Therapeutics
U.S.-based AptarGroup generated $2.9 billion in revenue in 2020 from manufacturing aerosol valves, pumps and dispensing packaging. The company’s products range from nasal spray packaging, inhalers, perfume dispensers, caps for bottles and pumps for soap dispensers. However, the company acquired a majority stake of French digital therapeutics developer Voluntis in 2021, opening its first digital healthcare line.
- About the Pivot: By acquiring a majority of Voluntis, AptarGroup gets a foothold into the digital therapeutics industry, where software solutions are used to improve a patient’s care and health. This also presents a diversification away from physical goods and into the digital realm. “A company like Aptar was manufacturing plastic parts,” says Soren Kaplan, an innovation consultant and co-founder of web platform Praxie.com. “It’s very hard to wrap your mind around a whole new business model where you’re selling data, and you’ve got to focus on the customer experience.”
- Pivot Price: AptarGroup spent nearly $94 million on the digital therapeutics acquisition in 2021.
- Potential Revenue in Ten Years: With this pivot into digital therapeutics, AptarGroup has access to a market estimated to grow to $23.5 billion by 2031.