When you’re driving a car, riding a motorcycle, or even flying an airplane, it’s best to play it safe for you and your passengers. This same strategy, however, can hold a business back, whether its goal is a lifestyle business or one that seeks scale and significant growth.
In a study by Statistic Brain, the failure rate of U.S. companies is over 50 percent after five years and over 70 percent after 10 years. None of these companies wanted to fail, but it is common for a business to rely on the “safety” of the status quo after a few years of operation. More often than not, companies choose to stay the course because it’s familiar, comfortable, and “less risky” than taking a different tack to take advantage of market opportunity, forging ahead and securing a leading competitive position. Taking measured risks is important to stay relevant in an ever-competitive environment.
There’s no magic formula for a successful business, but there are a few approaches that every business should follow. How do you determine your optimum risk profile? Here are some areas to consider:
Past success is in the past
Things change, plain and simple. The market, the demand, available technology, you name it. Companies that assume that their product, service and support offerings from five years ago are still as compelling, relevant and beneficial in serving customers tomorrow may suddenly be becalmed. A business that continues to coast on vintage practices not appreciated by existing and new customers run the risk of losing its ability to easily innovate and quickly adapt to the evolving competitive landscape.
Continue to see what’s happening in the market. Follow its ebbs and flows, and then respond accordingly. Bring in fresh perspectives to build upon those past successful tactics. This gives you the ammo to quickly respond to changes in the economics of an industry before it’s too late to make a difference.
It’s quite easy to lose perspective on what needs to really change unless, of course, something very abrupt happens like losing your biggest customer, having a major accident or discovering you need to make a huge inventory write-off. While incidents like these are certainly motivators, they are reactive and insular to a business.
Assume your competitors are taking risks … because they are
You want to stay ahead, but so do your competitors. Do not underestimate them. A curious mindset into what you believe is going on with your competitors will help you plan for adjustments to your market strategy as you go along. Gauge their business strategies, where possible, based on their current products, services, sales channels, street pricing, how they’re positioned in the markets they serve and financial condition, where numbers are available. Keeping your ear to the ground is always a better strategy than being blindsided and frantically reacting to an unforeseen pivot from a competitor.
Take those measured risks and accept that not all of them will be successful. Learning from the company’s failures and forging ahead is much more important than playing it safe. Embrace the challenge instead of pretending it isn’t there, because it will always be there. And speaking of risks and competitors, don’t just pay attention to the biggest players because startups are taking risks too. Many times, it’s more prudent to let your competitors make the big mistakes, many of which are quite obvious.
When you hear from your customers and prospects that they experience terrible service, or their products miss the mark, empathize with them and probe further. It’s a great way to naturally pick up some competitive intelligence.
Don’t rely on patchwork for a long-term fix
Past investments in technology, workarounds and hacking software to satisfy today’s challenges can also cloud a company’s vision to press forward. A quick fix can sound appealing when you’re on a time-crunch or in the middle of the issue, but it can prevent you from scaling for the long-term. Whether it’s a software patch or a short-term business strategy adjustment, if a long-term improvement is never made, then it shows a lack of commitment – either because of distractions or the benefits do not outweigh investing in the improvement.
I just spoke with a company that is still reeling from four years of time and budget spent to continuously patch its purchasing software system. In hindsight, the company agrees that it should have made the decision to invest in software that would not only solve the problem but improve operations and ultimately save the company a lot of headaches and money.
It’s safe to say that every business owner wishes they could predict whether certain strategies are worth the risk. However, what is known is that a successful business doesn’t sit back, turn a blind eye to its competitors and follow a routine. A successful business will follow the market, learn from the latest trends and then jump in, head first. A company that allows itself to evolve as the market evolves, (or blazes the trail to create new markets) strategically and even structurally will be the one to stay ahead of the competition and capture more market share.