The Bureau of Labor and Statistics in 2016 reports that only two-thirds of businesses will survive 2 years, half of all businesses will survive 5 years, and a mere one-third will survive 10 years or more. Most of us have heard these statistics, or at least a version of them. In the modern market, the success of a business depends on its growth. But why do some businesses successfully grow and survive while others become a failing statistic?
One of the most commonly asked questions of me by a CEO is, “Can you help me understand why my business is no longer growing?” The most interesting word in that question is “understand.” My usual reaction to this question is to query what information (or lack of) is causing confusion. To make it simple, there are two major information centers to examine – the internal environment and the external factors of the business. Looking at the business internally helps to understand if it is being effectively managed. Do you have the right people to accomplish your business objectives? Are you executing on your business goals? Is your business being properly financially managed? Is inventory moving in and out of your business effectively? In general, CEO’s can answer these questions readily. It’s the external factors, however, that are more elusive.
As a Chief Marketing Officer, I focus on helping CEOs understand and analyze external factors and translating those findings into actionable business strategies for growth. In many cases, a quick downturn in business success can be attributed to one or multiple factors outside of the business. Just as in medicine, time is of the essence here! The more quickly the problem can be diagnosed, the more quickly a remedy can be prescribed, thus increasing the chance of implementing strategic actions to put your business on a path to recovery.
Watch the Webinar Replay - External Forces Affecting Your Business
Here are the five external factors I’ve identified that, if left unexamined, are the most fatal to businesses and what your business needs to do to survive:
1. Disruptive Innovations
In today’s fast-based, technology supported business environment, disruptive innovations are happening at a faster-pace than ever before. A disruptive innovation is a new offering that creates new markets and value, all while displacing established competitors. To avoid being displaced, your business needs to become the disruptor. You’ll need to find out what it would take to become an innovator in your markets. Be the disruptor instead of the disrupted.
2. Increasingly Competitive Landscape
Think back to when your business decided to become a business. You entered a market with products and services because there was demand and space for another competitor. Now that you are an established competitor, you need to be aware of all current and new competitors. You must identify, characterize, and compare these competitors against your business. You need to find a competitive edge in order to grow. Set your business apart.
3. Product or Service Substitution
The term “substitution” is an important one here. The key is not to think about just competitive products, but anything that a customer could use in place of your offering. Identify and create strong positioning and key differentiators that show investing in your offering is the best option for customers. Separate from the herd.
4. Pricing Pressures
When businesses compete on price, no one wins. Your competitors might be using price as their major differentiator and most reactions are to decrease prices to avoid losing customers. Value-based pricing strategies allows for the ability to maximize pricing through the identification of value propositions. Be sure to craft a value-based pricing story. Make sure to transform your sales and marketing efforts to capitalize on your value rather than focus on price alone. Show value rather than decreasing prices.
It’s no secret that the economy has a significant impact on your business. Understanding which business trends, and the data associated with them, affect your type of business can seem like a monumental task. ITR Economics is a well-respected and utilized firm to assist in this process. Find out what services ITR Economics can provide that would be valuable to your business. Identify trends that will affect your business.
Each of these external factors can cause significant change to your business. Thus, understanding them is paramount before you can even put processes in place to monitor and strategically plan for them. Doing so, however, will increase your chance of continued business growth and, thus, survival.