In a hyperdynamic world that is characterized by heightened competition, rapid technological improvements and constantly changing user needs, strategic renewal is rarely about one single decision. Instead, it requires continuous adaptation and processes that allow solo businesses to do that.

The vast majority of businesses in Finland are solo businesses. Despite this fact, most research on strategic renewal focuses on large organizations and lacks applicability to solo business context. When faced with declining revenue and the need for renewal, there is shortage for theories, case studies and roadmaps to follow for solo entrepreneurs to change their situations.

This longitudinal case study on how one solo business faced strategic renewal and regained it’s competitiveness in a saturated market offers practical and applicable insight for other firms in similar situations.

In a hyperdynamic world, differentiation is not enough

Business theories usually have emphasized the importance of having a competitive advantage or valuable resources. These were seen as cornerstones of superior performance. But in a hyperdynamic world where the business landscape is in a constant state of change, competitive advantages and valuable resources provide possibilities for performance for only a little while until their competitiveness is challenged by the changing circumstances. To sustain performance and ensure survival, businesses need to turn their focus from static competitive advantages into the capabilities that allow them to identify meaningful changes and adapt to them.

Small business and solo businesses are particularly well-suited for adaptation, as they lack the rigid structures of larger enterprises and they are often in close contact with the customer base. However, the challenge is that entrepreneurs, especially in creative industries, often tie their identities to their creative ideas, which leads to them missing opportunities that could be discovered by taking advantage of processes that tackle cognitive biases and assumptions.

Design thinking offers a structured roadmap for renewal

Despite being often seen as an innovation approach, design thinking offers a structured roadmap for solo businesses facing poor financial performance or other challenges that require strategic renewal. Especially for solo businesses left to tackle their challenges on their own who are often too close to their own businesses to see where the problem lies or how to approach the challenge, design thinking can offer a clear, structured roadmap for strategic renewal.

By following the five stages of design thinking (empathize, define, ideate, prototype, test), solo businesses can define more clearly where their problem lies, identify opportunities for future growth and finally market test them. Each phase offers possibilities to discover new strategic opportunities, challenge the assumptions that sometimes keep them stuck and validate their hypothesis in real market conditions. This way they can iteratively find their way eventually out of hardships – and regain their competitiveness.

Renewal is often incremental and iterative

Though the media landscape is filled with stories of radical innovations that challenged their entire industries (Netflix, Airbnb, Uber), for most businesses and especially solo businesses, it is more likely that renewal happens incrementally. In addition, it is often iterative and on-going, each iteration building on top of the previous ones.

For a firm that is facing challenges, one round of changes in the business model might lead to improvements in financial performance. Or it might not. The only way to know is to market-test it. After that, it is likely for new questions, challenges or opportunities to arise. This cycle rarely ends in a constantly evolving world. The firms that keep iterating and adapting, are more likely to reap on-going benefits and improve better financial performance in a sustainable way.

Revenue decline can signal unalignment

The reason for decline in revenue can be caused by misalignment with the service offering and the target audience’s wants and needs. This can happen even with the entrepreneurs that are highly involved with their audiences. However, this can be easily confirmed. By applying user empathization that aims to understand the wants and needs of the target audience, it is possible to quickly validate whether the reason for revenue decline lies in offer unalignment. If this is confirmed, the business is presented with an opportunity to change the situation by creating or modifying the offers to better match their client’s needs, and this way strategically regain its competitiveness.

One round of user empathization can already provide useful strategic insights that can spark revisions on the entire business model, but true benefits are reaped by regularly conducting user interviews, analysing client feedback and other insight methods. This way the insights build on top of each other, allowing the entrepreneur to increase the user understanding over time, and intentionally expand on the aspects that are relevant in different seasons.

Conclusions

Strategic renewal happens for solo businesses through incremental changes. Implementing design thinking as an on-going strategic dynamic capability, it provides solo businesses the necessary structure to combat cognitive biases, identify avenues for growth and quickly validate hypothesis.

For the case company, this lead to business model innovation and revenue increase of 84 % over two years.

Source

Vahanen, R. (2026). Competitive by design – case study on strategic renewal in solo business. Master’s Thesis. Turku University of Applied Sciences.

Picture: Reetta Vahanen