There are two critical elements to achieving your business growth goals: One, you must successfully run your business from the inside. Two, you must monitor the external environment.
While most CEOs know the inner workings of their businesses, they are less in touch with the outside factors that affect it. Case in point: In a recent webinar I hosted, “External Factors that Stall Growth and How to Combat Them,” I asked participants, “Do you have a system to identify and monitor external factors that affect your business?” One-hundred percent of participants responded, “No, but I do want to create a system.” The presentation then focused on helping to identify the external factors businesses should be monitoring and how to monitor them.
This article summarizes the recommendations presented in the webinar. Here’s how to grow your business by monitoring five key factors and developing strategies based on an external environmental analysis.
1. Conduct a competitive environmental analysis to set your business apart.
Identify both direct and indirect competitors. Direct competitors are companies that offer products and services similar to your company. They should be easy to identify, as they are the competitors that your business most often sees in the market. But most businesses forget to identify indirect competitors — businesses that offer different products and services that a customer could use in place of yours.
Monitor marketing channels. In today’s digital world, it’s easier than ever to access your competitors’ marketing data. Use tools such as SEMrush to get detailed information about your competitors’ website traffic, traffic sources, paid advertising efforts and keywords for search engine optimization. Comparing your marketing activities to your competition’s will give you insights into reaching new customers and increasing revenue.
2. Monitor disruptive innovation so you can be the disruptor — rather than the disrupted.
Focus on disruptive and sustainable innovation. We all want to be the next Uber and disrupt a market for rapid growth. But don’t forget about the power of continued, sustainable innovations — that is, innovating the current products and services that you offer. Ensuring that your current offerings are competitive — in addition to using disruptive innovation to enter or create new markets — is key to your company’s growth.
Create an internal climate for creativity. All too often, employees are afraid to speak up and suggest ideas for innovation. Encourage everyone to participate in idea generation by adopting a “no idea is a bad idea” philosophy. Also, start by asking what pain points aren’t addressed by your offerings, rather than asking for product or service ideas.
Implement an ongoing innovation process. Having a strong product innovation process is critical and looks different for every organization. Be a facilitator rather than the driver. Start by talking about customer needs that are not currently met, and then move into product- or service-concept creation. An important final step in this process is forecasting and aligning sales projections with development costs.
3. Separate from the herd when it comes to substitute products.
Accept that substitutes are competitors. Substitute offerings are free or repurposed products or services that a customer could use in lieu of your offerings. Accepting that they compete with your offerings is essential to growing your business, as they also represent threats.
Show increased value for customer investment. It’s essential to prove to customers that your offerings have more value than substitute offerings. Identify the benefits that customers receive when buying your offerings and the risks that they may experience when using a substitute.
4. Don’t compete on price; price for value.
Identify the real value to your customers. When a customer becomes price sensitive, all too often it’s because competitors are pricing their offerings cheaper than yours. Your first reaction might be to decrease your price to remain competitive. But rather than cutting into your profit margin, communicate your value and key differentiators to your customers. When customers understand what problems you solve for them, they’ll see an increase in value and pay more for your offerings.
Don’t forget about value-based marketing and sales. Value-based pricing is only 1/3 of the battle. Your marketing and sales teams must adopt a new way of going to market. Marketing and sales must start by addressing your customers’ needs before they present the features of your offerings.
5. Know how economic trends are affecting your business.
Don’t take this on yourself. There is an organization that you can partner with to identify economic data that affects your business and forecast trends that you should be aware of. ITR Economics has a 94.7% forecasting accuracy rate and specializes in working with businesses to provide essential data to help you make informed business decisions for growth.
Oftentimes, the best-run companies have the hardest time growing. Building a process for monitoring your external environment and developing strategies based on that analysis can help position your business for sustainable growth.