Do you know where you are?
People often ask business owners “where do you want to go?” Now that’s a great question but perhaps the first question should be “do you know where you are right now?”
When we use our Maps Ap on our phones this is the first thing the phone does – it tries to locate you, only then can it give you directions to a specified place. Whilst many business owners believe they know where they are right now, do they really?
- Do they know their own numbers, metrics and performance targets?
- Do they know their industries numbers, metrics and performance targets and how they compare?
- Do they know the changes occurring in their industry?
- Are they even considering themselves in the correct industry?
- Are they aware of larger, global trends?
We often look outward from our business, but have you considered looking in from the outside?
The first place to start is to take a look at global trends, not just trends specific to your industry (we will get to that later) but a wider focus. A great tool for this is PESTELID.
Brainstorm all the things going on in the world and put them under the above headings. This can be a mammoth task so take to the internet as many research houses prepare these regularly. Don’t be tempted to just concentrate on your industry upfront as you may miss identifying future change trends or items in other industries that may impact your own. Think about Kodak when digital photography came out, they believed that they were in the “film industry” so missed the threat coming and this had a massive impact on their business. The same happened to Nokia with the advancement of Smart Phones – they believed they were in the “phone industry” not the “computer industry”.
Now that you’ve taken a wide view and considered items outside your industry that may affect your business into the future you can focus on key items from the PESTELID to look at further. You might want to go into greater consideration of how these may influence your business. You want to identify the driving forces within your industry. These are the factors that drive change and may trigger a change in your business strategy. Next you want to identify the Key Success Factors; these are items that drive success within your industry. For example if you operate an internet business a secure payment portal will be a key success factor. Lastly you should consider conducting a Porter’s Five Forces Analysis. This helps to ascertain the level of competition within an industry and can be used to drive business strategy.
Once you’ve analysed both the macro and industry environment, you can finally turn to analysing your business. Frameworks such as SWOT and VRIO analysis can help you determine where your competitive advantage is and this can then be used as a foundation to build a business strategy.
When building that strategy remember the Three Golden Rules:
1/ Be better before cheaper.
2/ Focus on revenues before costs.
3/ That’s it – there are no more rules.
Business Consulting | The Money Edge | Bundaberg