One of the hot topics in our world today is innovation. Companies love to broadcast to the world that they are a leader in innovation. If you google “innovation” you end up with about 321 million hits. If you google “innovation in business” you get about 960 million hits. It’s a topic that’s on everyone’s mind.
And with good reason. Things change so quickly. A company may come up with some kind of new idea, but it seems that almost immediately all their competitors have the same thing. It’s not possible in today’s world to come up with something great and then ride it for 20 years. No matter how great it is, it’s obsolete almost overnight. Perhaps the only long term sustainable competitive advantage that really exists is the ability to innovate.
But what is “innovation”? Quite often when we visit with business leaders, innovation means something like “creating a new product”. People are trying to roll out new product lines, new services, new features, etc. And certainly that all qualifies as innovation.
One of the dictionary definitions of innovation is “A new method, idea, product, etc”. Note that “product” is only one of the things listed. “Method” and “idea” are there too. I think a lot of businesses miss out on opportunities to innovate because they’re only thinking about product innovation. Ask yourself:
- Where can we innovate? Think about every part of your business. How could each process work more smoothly? What are you doing simply because “we’ve always done it that way?” And don’t limit yourself to production. How can you be innovative with your human resources? How can you be innovative with finance? IT?
- Who are our best innovators? Think about everyone who is part of your organization. Who are the people to consistently come up with new ideas? Who are the people who are always challenging the status quo? Hint: it’s not necessarily the people who are in “R&D” positions.
- What can I do as the leader to encourage more innovation? One of the simple definitions of leadership is removing barriers so that your people can do what they do at a high level. What barriers exist for your people to innovate? What tasks are they performing that aren’t really necessary or could be done by someone else? Are you creating an environment where those innovators have the chance to innovate?
Innovation may not be the only
key to success in today’s world, but it’s certainly one of the big
keys. Steve Jobs said, “Innovation distinguishes between a leader and a follower.” Which are you?
As another year comes to a close, business owners will be busy poring through financial statements to determine the extent to which they need to do tax planning. They may also be busy working up forecasts and budgets for 2013. Too often a disproportionate amount of attention is given to the tax situation. Forecasting and budgeting becomes nothing more than a formality with growth estimates being nothing more than figures plucked out of the air – e.g., an across the board 5 – 10 % increase.
How many businesses build budgets based upon the development and implementation of strategy? Far too few I’m afraid. Few are taking the time to identify the actions that will support a 10% growth in sales. Too many have a strategy of “hope” – let’s hope that the sales appear.
Success in any business requires a strong plan to drive growth – a plan of action for the next 12 months or longer. The plan should encompass the following:
1. Identification of your Sustainable Competitive Advantage (SCA) and how you intend to leverage it.
2. Completion of a Strategic SWOT Analysis (i.e., strengths, weaknesses, opportunities and threats) to help create a list of actions to capitalize on your greatest opportunities and strategically drive growth.
3. Analysis of the marketing, capital and personnel requirements to fund the estimated growth.
4. An accountability process to insure that your great ideas get implemented.
Having a revenue model that is linked to specific actions in your strategic plan is the best alternative to a strategy of hope. A well defined strategic plan that is backed up by sound research is the surest way to drive growth and profits in your company.
How about you? Is your business strategy a strategy of hope? Make it a goal to get started on a strategic plan for your business today!
Want some help getting started? Click here to download a Strategic SWOT template.docs/swot template.pdf
The last two posts have discussed who we want to sell to and what we want to sell to them. So how are we going to get those people to buy those products? Now we’re talking about Promotion – aka, marketing and sales.
There have been thousands of books written about marketing and sales. We could write weekly blog posts for years about nothing but those topics (some people do!) and still not cover everything. But here are some brief thoughts to keep in mind as you do your planning.
Marketing and sales are closely intertwined, but they are two different disciplines. Marketing is the preparation of people to buy. Sales is the conversion of the buying desire into action (an actual sale). And you have to decide how you want to do each.
Think about the marketing and sales functions in your business as they are NOW: Do you understand why people buy from you? Do you understand your sustainable competitive advantage? Do you understand your competitors? How do you compare to them? How would you rate your selling skills?
Now think about the future: WHERE does your marketing and sales functions need to be in the future? Why will people buy from you? What will your sustainable competitive advantage be? Who will your competitors be? What characteristics will they have? How will you sell?
Remember that the purpose to all of this is to give a simple outline you can use to plan for your business. So answering all of those questions is a good beginning – as long as you follow it up with action!
How will you close the gap between NOW and WHERE? How good are your sales skills? If you are not using SPIN questions, you should be.
We thank our good friend, Chris Mason, for contributing this post to our blog. Chris is the Founder of Mindshop. Mindshop fast-tracks the success of business leaders and advisors by providing them with the business tools, strategic methodologies, global peer-networking opportunities and experienced coaching support needed to achieve their growth and profit objectives.
I like having competitors, I even admire some, and respect others. I race a car as a hobby and I learn more from my competitors than I do from any other source. I have purchased books and attended driver training courses, yet it has been the analysis of my own performance, in relation to the performance of more experienced and more capable competitors, that has benefited me the most.
I have installed cameras and data recorders in my car so that I can review each race I participate in to see where and how to improve. This is important because I am really competing against myself, striving to continuously improve my skills and improvements. My race car is actually road-registered and has the number plate "KAIZEN" which is a Japanese word meaning incremental improvement. The number plate reminds me that my objective when on the track is continuous improvement, not just about winning. Kaizen is a philosophy, and it includes elements such as, quality, involvement, effort, willingness to change, and communication.
I share my videos and data with one of my competitors, he has emulated my data recording sytem in his car specifically so we can share the data. I am quicker than him on some corners even though we have the same make and model of car, and he is quicker on others, resulting in him being about 3 or 4 seconds a lap faster than me on all the tracks we compete on. I am not improving in relation to him (because we are both improving at roughly the same rate) but in 2012 I improved my average lap time for each track by 2 - 4 seconds.
We at Mindshop have a adopted a similar approach to our business competitors except for the bit about exchanging data. I think the motives and ethics of my race-car competitor are a mirror of mine; so I trust him. I can't say the same about my two main competitors. I can still learn from them, particularly by studying their strengths and using their weaknesses to develop strategies that I know they would find very difficult to copy.
My advice to you is to do a comprehensive competitive analysis of your competitors using yourself as the benchmark, then decide on some changes you need to make to continuously improve your own performance in relation to your current performance. This year, 2012, will be full of opportunities, but you need to be more capable than you currently are to take advantage of them. Your competitors will show you the way to KAIZEN, embrace it as your philosophy for 2012.
In the current economic environment, many business leaders are finding it difficult to grow the bottom line. Often, either because of frustration or desperation, strategy defaults to price-cutting. The storied logic is the same, “What we lose in margin we will make up for in volume.” If this strategy is done without careful analysis, these may literally become ‘famous last words.’
We suggest there is a better and more strategic way to approach profit improvement. Assuming that your company has a good grasp of its sustainable competitive advantage (SCA), consider this as your Three-Point Profit Improvement Strategy:
- Conduct a Waste Audit. Most businesses usually put most of their energy into increasing sales. However pushing more business through an inefficient system makes no sense. Waste can account for up to 30% of a company’s operating cost and eliminating it represents the single greatest opportunity to improve profitability. It is important to take time to identify the wide range of waste issues within your company. We suggest that the identified wastes be prioritized so that the most important issues are dealt with first. You don’t have enough time to tackle the issues yourself, so consider using a team process to create the waste elimination plan; but be diligent in measuring the team’s progress toward achieving the overall objective.
- Perform a Pricing Review. This is a critical step. If you price too high you will miss sales; price too low and you’ll leave money on the table. While cost of production is often used to set prices, more must be considered if you want to succeed in an increasingly competitive environment. In setting your price, you must also consider what your competitors are charging. Your competitor’s price shouldn’t necessarily dictate your price, but it is a point of reference. The best way to make a comparison with competitors is try to determine “What the Market will Bear” – i.e., what customers will pay for your product. We suggest you conduct a Product Benefits Analysis to score your product against your competitors and see what price you can demand due to the relative score of your product compared to your competitors. Such an analysis might reveal that you are justified in reducing prices, or it might also reveal that your product is positioned for ‘premium’ pricing relative to the competitors and you can feel more comfortable actually taking a price increase.
- Once you are comfortable that you’ve eliminated waste and are confident in your pricing, you are ready to address marketing. A Marketing Audit involves assessing your company’s performance on key factors that are critical to long term success. These factors might include customer satisfaction, product knowledge, internet strategy, sales growth rates, etc. The answers to these questions vary from company to company and there is no right or wrong answer. How will you fix the poor performing areas that are obvious? Make a decision and implement it. If it works do more of it. If it doesn’t work do something different.
Once this process is complete you will have better control on your costs and pricing, and your marketing strategies will be better aligned with your product positioning. This is a practical and effective way to approach profit improvement.
Your business is constantly changing. As time goes by, your business will progress through various stages of the business life cycle.
Businesses go through developmental stages the same way people do. As someone with twin daughters, I know the parenting strategies we used when they were two years old; don’t work now that they’re five. And the strategies we’re using now will not work when they’re ten years old. Quite frankly, when they are teenagers, I’m not sure anything will work.
There are numerous articles & papers that have been written related to the business life cycle. Some people feel there are four or five stages, some people more. Everyone gives the stages different names, but in the end they all cover the same thing. In this blog series, we’ll talk about what we see as the seven stages of the business life cycle and the challenges of each.
Stage #1 – The Idea
This is the point where your business is just a passing thought or perhaps more accurately, a dream. It’s the birth of a new business. One of the biggest challenges business owners need to consider in this stage is market acceptance. Why will people buy from you? You have no track record, no success stories, no one to “sing your song”. More importantly, even if you did, what song would they sing?
A common mistake businesses make is to try and be everything to everyone. What do you really do well? What are you going to be? And to whom? What are your core products? As we’ve discussed before in this blog, it’s vital to understand your Sustainable Competitive Advangage (SCA) . This is also the time to figure out what kind of ownership structure you’ll have, who your professional advisors will be, etc.
If your business is currently in the "dream" stage, what challenges are you facing? If your business has already passed through this stage, what other challenges did you deal with? What did you learn? What advice to you have to pass on to others?
In the last two weeks we have covered the importance of knowing your market and focusing your marketing the benefits your product/service will deliver to the customer. Today, we will discuss the third reason marketing plans fail: not knowing your point of difference.
In today’s globally competitive environment it’s tough for businesses to stand out from the crowd – i.e., to differentiate themselves from their competitors. We’ve often stated in this blog how important we feel it is for any business to identify their sustainable competitive advantage (SCA) – also referred to as the unique selling proposition. Your SCA is that “point of difference” that distinguishes you from all of your competitors.
A competitive advantage arises from activities that provide high value to the customer. Examples of SCA’s include factors such as quickest turnaround time, high product quality, low cost production techniques, patents and copyrights, long-term contracts, and a good reputation. To be really effective the advantage must be:
- Hard to copy
- Superior to the competition
- Applicable in most situations
Determining the SCA for your business requires an understanding of customer needs and preferences. Once you have identified your SCA, it becomes the filter for your marketing strategy. It is used to allocate time and money to the issues that will allow the organization to win in the market place.
The bottom line is that your SCA is your driver for marketing strategy – giving you a recognizable “point of difference” in your target market.
Ask anyone who’s ever started or owned their own business about what they’ve learned, and every one of them will say the same things: “If I had it to do over again…” or “If I’d only known…” or “I wish we had paid more attention to…” Each one will have a different list of lessons they’ve learned, usually the hard way. However, there will typically be a few key ideas that show up time and time again in these conversations. In this series, we’re going to talk about 4 of the most common mistakes entrepreneurs make.
Today, we will discuss the first common mistake: a lack of strategic focus.
Lack of Strategic Focus
Most small businesses (new or not) have limited resources, which requires leadership to focus on core competencies. What are your core products? What do you really do well? What is it that makes you unique? As a small business owner, you don’t have the resources to try and be everything to everyone. What are you going to be? And to whom?
One key to strategic focus is understanding your organization’s Sustainable Competitive Advantage (SCA). Your SCA is that unique, sustainable, hard-to-copy characteristic that customers value. Maybe it’s price, maybe it’s innovation, maybe it’s quality. Understand who you are and what makes you successful. Once you understand that, you’ll know what markets to focus on, how to develop your marketing strategy, and how to structure your operations.
What is your SCA?
Sustainable competitive advantage (SCA) is a marketing term that is also commonly referred to as unique selling proposition (USP). Once determined, the SCA is used as a filter for allocating time and money to the strategic issues that will best position your company in the market place.
Determining the SCA for your company requires a good understanding of your customer’s needs and preferences. Your competitive advantage arises from those activities which provide high value to your customers and for which you have a strong ability to beat your competitors. Examples of your SCA might be rapid order fulfillment, reputation for high quality, perceived product value, patented process, etc.
A true competitive advantage must be:
- hard to copy,
- superior to the competition, and
- applicable in most situations.
Once identified, your SCA can become a filter for priority ranking the key issues in your organization.
In today's fast changing and competitive world, very few SCA's can be sustained for long periods of time. Regular checks of your SCA will ensure that you keep in step with strategies and your market environment. We suggest you do a formal review of your SCA at least annually.
There are numerous ways to win in your market place. Have you identified your SCA?