Many leaders of middle-market companies – especially if they’re the founders – have a never-ending desire to stay ahead. They love the thought of winning, and likewise, hate the thought of losing. These are terrific positive leadership qualities and we strongly support them. The problem however is they often forget the strategy that drove their company to its current success has already proven itself a winner. So, continuously contemplating new and different directions – although exciting – makes little sense because it could use up precious time and resources and cause the company to lose its way.
Just look at the myriad of companies that start strong and then find themselves going out of business. Why does this happen over and over again? According to the Department of Commerce, only one out of ten businesses make it to year 10, and of those that do only 1 out of ten will make it to year 20. These are horrible statistics since the majority of US businesses are privately held.
There are three common mistakes business owners make, and they can kill any company of any size or success.
Use flawed assumptions. If you read this blog regularly you know we often talk about the absolute need to “Know” your market, your customers in your market, and what makes them tick. Not knowing is like going into battle with a blinder over your eyes and yet, how many companies have actively researched their market in the past 12 months? Or, how many have a best practice in place to gather customer information each day? Even with a commanding lead in a given market, it’s only a matter of time before your competition comes up with a brilliant alternative to challenge your offering. If you have assumed that your positional strength will always carry you through thick and thin, that’s an assumption we would not want to bank on.
Set unrealistic time estimates. A company might have a strong showing in a specific niche market, and might be earning higher than average profit margins, and therefore establish a timetable for a new product using the same metrics. After all, we did it in this market, why shouldn’t we be able to do it in another? To gain an upward curve in any niche market requires expanding many parts of a company. This could include production, operations, sales, marketing and the list goes on. Trying to stand up all of these areas at the same pace of the established business could lead to frustrating results if an appropriate timetable is not established and funded.
Test in wide open markets. Rather than experiment cautiously in micro markets with variations on selective strategies, often companies are bolstered by their current success so they employ a full steam ahead methodology. Again, nothing wrong with speed, but most successful companies insist their core strategy be written down, then tested and refined, and the full speed ahead button is only pushed once the strategy is fully proven. Testing in micro markets is a long-standing practice of consumer corporations, but rarely practiced by their B2B brethren.
Such discipline creates focus and this leads to better managed companies. Knowing how to improve your current strategy will usually outperform coming up with all new ones. These simple practices can be the difference between a company that knows where it is going and is moving there profitably, to one that ends up on the side of a road with a flat tire because it became unfocused.