If you own a small or medium enterprise (SME), you have probably heard the statistic that 60 per cent of small businesses don’t make it past the three-year mark.
Recent figures suggest the market is becoming even rougher in Australia. Data registry and analytics company Ilion provided Fairfax Media with statistics in August showing that business failures increased by 12.7 per cent during the last financial year. More than quarter of a million entities were deregistered, 87 per cent of which were SMEs.
Data from earlier in the decade from the Australian Securities and Investments Commission (ASIC), reported by the Huffington Post, found businesses fail for really simple reasons. About 44 per cent were poorly handled strategically, 40 per cent had poor cash flow and 33 per cent experienced trading losses.
A brief look at that list suggests that some forethought and external expertise early on can help a business avoid some big problems.
Blirt’s approach is for small business owners to ask themselves seven questions about seven subjects: vision, market, strategy, the business model, customer experience, employee experience and the top priorities to action.
We go into the questions comprehensively here and in the Blirt podcast.
The purpose of asking the questions is to see what requires improvement within the business. The business owner must always approach this process through a desire for constant improvement, because some of the answers may prove uncomfortable. By asking the seven questions regularly, a business owner can move past their own biases and identify the gaps in their own knowledge and determine where they need assistance.
Blirt has developed a strategic framework which acts as the tool that guides business owners through each step, allowing them to efficiently uncover the areas that need improvement.
1. What is our vision? Is this driven by our purpose? What’s holding us back? How can we overcome those obstacles?
The vision of a business defines its direction and acts as its northern star. It is a subjective view of what the future looks like for the marketplace or humanity once the business has achieved its purpose. By contrast, purpose is the job the business exists to do or the problem that it solves.
A business should achieve its purpose every single day and consistently work toward its vision but never fully achieve it. For example, (very simply) if the business is an online clothes shop, its purpose would be sell clothes and its vision might be to make the world a more stylish place.
2. What is our market? Who is our ideal customer? Are we perceived as different? Does this difference help us – so is it competitive advantage?
A business must continually put itself in the shoes of its customers. What are customers looking for, and how does the business satisfy that demand?
Are there enough customers out there to make a substantial market? What is the ideal customer within this market segment? And, how do we understand this customer and go deep in supporting them?
If poor strategic decisions are the top reason for business failure, the decisions at this early point – deciding who customers are and what makes the business unique – are critical to the long-term survival of the business.
It’s also important that a business finds a market space that it can own by developing a unique offering that is different from the competition. This is most critical in a well-established industry where the competitors are large and experienced.
For example, there are plenty of online competitors for our clothes store and well-established competitors including Amazon. This store might be able to differentiate itself through efficiencies that create lower prices or quicker distribution, or it simply might offer more stylish designs.
The process of developing competitive advantage is analysed in question four.
3. What is our strategy? Where is our growth focused? Does this support how we are positioned?
The Blirt podcast mentions that strategy is more an end point than a process. If we compare business to a battle, the strategy is the outcome or the commander’s objective rather than the actual plan to bring about victory.
In his paper The Importance of Strategic Management to Business Organisations, Julius Tapera from Lupane State University analyses leading academic literature and determines that strategy gives business the impetus to work proactively and is more likely to develop profitability. The paper also suggests that strategy can be in a process of continual development.
If a business’s strategy is not achieving the vision, the owner has to decide whether to change the strategy or the vision. It isn’t always the strategy that needs changing; sometimes, a business may find that it has tapped into an unseen market with excellent growth potential and might choose to re-position to take advantage.
4. What is our business model? Is it creating value? What metrics tell us? What practices reinforce the value creation process to build our competitive advantage?
A business model can be displayed as a diagram which shows how a business creates commercial value or will create commercial value. Business metrics, key performance indicators, dashboards and other statistics can provide objective answers about if the model is working in the marketplace.
Today’s essential tool for businesses is a comprehensive Customer Relationship Management (CRM) platform that can provide all this detailed analysis and show where a business is succeeding – or failing.
Blirt helps businesses utilise Salesforce CRM, the market’s leading CRM, and bring about business transformation through it. Businesses can automate interactions with customers and obtain comprehensive data from almost anywhere in the world on any device through Salesforce.
Salesforce cloud platforms are also imbued with an artificial intelligence, called Einstein AI, that can draw conclusions of its own and save time by performing tasks itself.
In his seminal 1985 strategic management work, Competitive Advantage: Creating and Sustaining Superior Performance, Michael Porter breaks down the creation of a product or service into a value chain. He theorises that each link of this chain can add value to what a business produces and so create competitive advantage.
Consider what makes furniture giant Ikea successful. Is it the design of the furniture? Is it the warehouse-style shopping experience? Is it the range available? Or perhaps its affordability? In fact, it is all of these things. Each link in Ikea’s value chain gives it an advantage over other businesses and they all combine to create an unassailable competitive advantage in the marketplace.
Every time a business introduces a system giving it additional competitive advantage over its competitors, it is multiplying the competitive advantage it has. Doing this is crucial for a business to succeed on the global stage.
5. What is our customers’ experience? How do we acquire, retain and grow our customers through our brand personality and experience? What improvements need to be made?
Customer experience is simply defined as the unification of sales, marketing and service across a platform that can be used to acquire and accelerate the customer journey. Businesses are becoming more cognisant of it today because customers return to businesses where they have a personalised experience and ignore businesses where they do not.
Businesses with a leading CRM platform should plug it into every department to gather as much data as possible about customers. This can be analysed and business owners can make changes to their interactions with customers and automate steps using the CRM so the customer journey is smoother, and the content that customers receive is more relevant. This personalisation helps retain customers in the long-term.
6. What is our employees’ experience? How do we acquire, retain and grow our talent? What improvements need to be made?
Maslow’s Hierarchy of Needs sets out the five things employees look for in their employment. It starts with physiological needs at the base (food, breathing, sleep), then safety, love (friendship) and esteem (respect from others, achievement). Meeting these needs is crucial for providing an excellent employee experience.
However, self-actualisation sits at the peak of the pyramid as the highest human need. It is the idea of using employment as a vehicle for reaching one’s full potential. An employee achieving this sees work as more than a job, but rather something that aligns with their character, makes them a better person or fulfils a higher purpose.
The vision of a business is an important place for self-actualisation to start – and is often a place where businesses seem to fail. Forbes points out that a World Economic Forum report recently found that millennials rate ‘purpose’ at work the second most important criteria for taking a job. And a Gallup report from 2016 discovered that only 40 per cent of millennials were connected with their company’s purpose.
7. What one, two or three things that, if we delivered, will shift the needle of the business?
The answer to this question will vary depending on the business – it might be on-boarding, innovation or optimising customer experience. Answering the first six questions honestly will generally help a business uncover any major discrepancies that need addressing.
Ultimately, this process of questioning requires action. It necessitates passion and a desire to change from the business owner. And if you act on your insights, it’s possible to bring about business transformation.
At Blirt, we specialise in helping small and medium enterprises transform themselves across sales, marketing, service and finance, with the objective of improving their processes and results. We can help you develop a strategy and business model that works and then implement the changes to move your business in the right direction.
If you would like to find out more, book a discovery call to find out what you need and tell you more about our approach.