Business Evolution - Part 1
“When you’re green you grow; when you’re ripe you rot” said Ray Kroc, founder of McDonalds. Business is a competitive game and staying ahead requires continuous improvement and effort. The surest way to advance your company is being willing to learn from everyone and anyone. By staying green, you will avoid the curse of being an “expert” – knowing it all and having no desire to listen. You can improve yourself by reading, attending seminars, visiting trade shows, presenting at conferences and otherwise interacting with knowledgeable peers and associates.
The history of business is rife with examples of companies that failed because they didn’t remain competitive, or were wiped out by not observing a critical change in their industry. From cameras to buggy-wheel makers, thermal fax machines to railroads, business history teaches valuable lessons about the importance of understanding who your real competitors are. The vital question to ask yourself is, “What business am I really in?”
As technologies and processes improve, established industries continually come under threat by innovative newcomers. For example, video and music stores have struggled to compete against downloadable content, with many failing due to their inability to adapt to this changing environment.
Businesses that have successfully navigated this new terrain have done so by adapting to the industry’s technological and market shifts – such as by offering innovative subscription-based streaming services.
USP & point of difference
Every successful business must have a compelling point of difference – a “unique selling proposition” (USP) which they offer to their customers. Your USP needs to concisely encapsulate why people should buy from you over anyone and everyone else.
If the only positioning statement you can offer is “we’re cheaper” then be very careful that you can support this claim through massive bulk buying, modest expenses, low-cost infrastructure and technological innovation. If you’re choosing to be “cheaper” based on a strategy of low margins, then exercise caution. The only viable excuse for lower margins is market penetration through low-price and low-risk sample offers.
Rather than emphasising low cost, consider whether another point of difference might be better suited to your business such as: excellent customer service, 100% guarantees, most expensive or exclusive, highest quality, well-known, world-famous, quicker, longer lasting, celebrity-endorsed, oldest, most durable, or featuring the largest range.
Gathering and analysing market information is a key way to stay informed, competitive and in-step with market changes. In addition to leveraging internal data sources – such as financials, product performance and team member interactions – external sources such as customer feedback, competitors’ performance and tactics, media coverage and commentary from industry experts can all be useful information sources too.
The owner of a business is responsible for identifying better ways to do business, being innovative, improving systems and most importantly, watching for any trends that can affect the business. If you’re too busy performing the business’ day-to-day tasks, who will be left to keep the “big picture” in view? If you wait for a serious decline in turnover to make issues apparent, it may be too late to change direction, sell up or invest in new technology.
On the flipside, when collecting information try to avoid “paralysis by analysis”. As Bill Gates of Microsoft said, “If you have enough information to make a business case, you are too late.”
Collect as much information as is possible and practicable, and then listen to what your gut instinct says is right for you. Business plans are essential, but perfection is both impossible and impractical.
Know your outcome
Many business owners haven’t considered the long- term future of their company. How about you? Do you operate an intentionally small “lifestyle” business that simply supports you to enjoy a relaxed way of living, or do you want to work hard and grow the business as much as possible – perhaps to eventually sell or hand over to relatives in the future?
Consider the following questions:
- Is business growth important to you?
- Do you want a high turnover, large number of employees, exceptional profitability and great return on equity (ROE)?
- Would you like to diversify into other industries you may not know much about, or do you prefer to concentrate on core activities you know well?
- Do you enjoy learning fast and thinking on your feet?
- Is vertical integration important to you?
- Would you want to buy and own some of your suppliers or customers? (Note that removing extra layers in the supply chain can be positive, but what will your existing customers and suppliers think? Will they still do business with you afterwards?)
Discuss with trusted advisors what approaches you'd like to take:
- Do you want to be known for innovative new products (first mover status), or would you rather wait until new markets are proven?
- Are you driven by innovation, R&D, and live for new things and constant change?
- If you want to expand into new locations (country, interstate or overseas), do you like traveling and being away from home?
- Do you want to sell your products and services online? Are you a passionate internet-buff?
- Do you like working with others and making shared decisions? If so, maybe a partnership or strategic alliance would suit you.
- Can you sell, lead, negotiate and motivate others? If so, consider franchising as a possible direction for your business interests.
Are you focused?
Markets are crowded places. There’s usually only room for two or three highly profitable leaders in most industries. So what are your core strengths that will take you to the top? Are you focusing on your core business, or being a jack-of-all-trades and master of none?
There’s never a shortage of things to do in business. The trick is to remain focused on what’s really important – those activities which will deliver the outcomes you want.
Concentrate largely on the profitable and productive areas of your business. Use Pareto’s Principle: focus on the 20% of activities that get you 80% of your results. Dedicate attention to your best suppliers, customers, team members and products.
Beware the pitfalls of unfocused activity. Do you associate being busy with being productive? Are you juggling too many balls? Remember that quality work yields better results than sheer quantity, and there’s only so much energy and passion you can give to each of your projects. What you focus on will grow and flourish; what you ignore will wither and fade away.
If you want to have a full life schedule and run a number of businesses at once, then make sure you manage your time well. Practice effective delegation and be clear about your role in each area.
Want to know more?
Check back for Part 2, which covers;
- Growing pains
- Alternative distribution channels,
- Strategic thinking,
- Legislative landscapes,
- Merger and acquisition,
- Timing, and
- How to manage it all.