Companies have begun to emerge from the world’s worst recession since the 1930s, only to discover that they’re not quite out of the woods yet. Business owners who thought the easiest way to outlast the economic crisis was by sticking with the playbook and keeping their heads down aren’t necessarily going to emerge on the other side unscathed.
This recession is different from others in its scope and depth, and the worst thing you can do as a business owner is more of the same. Staying the course with your current business model could just postpone the inevitable. Instead, you need to create a competitive advantage. You need to become a game-changer.
1. Get comfortable with chaos
Globalisation and technology are leading to constant economic turbulence. Being a game changer begins with recognising this new normality and understanding that business owners will not be able to count on uninterrupted periods of prosperity.
2. Reassess your customers’ values
This recession is changing people’s mind-sets, not just their spending habits, resulting in a more cautious, anxiety-ridden consumer arising in the short-term. People are re-evaluating their values and their purchases. How have your customers’ values and needs changed in the past year? The answers could spark new product and service ideas aimed at value-conscious consumers.
3. Good products always sell
A startling number of companies and game-changing products were actually launched in very tough times. IBM launched its personal computer in 1981 and the first iPod came out in late 2001. Both periods were economic low points and seemingly not the time to launch new products. Marketing research company Nielsen found customers’ willingness to purchase innovative products in good and bad times has stayed remarkably constant over the past 30 years.
4. Think new markets, not just cost cutting
Trimming costs where you can (renegotiating prices with suppliers and distributors and lowering your overhead) is very important, but don’t stop there. Game changers see levers they can pull that change a market or create an entirely new one. These include affordability, convenience, accessibility, location and cost.
5. Scarcity is a good thing
When sales are good, there’s no urgency or any real need to be innovative. Feeling like your back is against the wall actually forces you to try new things. Now’s the time to implement a few low-cost experiments and re-examine your entire business model for weaknesses.
6. Stop defending the status quo
An idea sounds great – until you realise the operating margin or some other metric will be lower than expected. Microsoft had all the tools to create Google’s search advertising business but abandoned the idea when search produced a paltry (by Microsoft standards) US$1 million in sales during its first few months. By the time Microsoft finally recognised the importance of search, Google had a commanding lead in the market.
7. Serve the customers you hate
Every company has customers it sees as undesirable from a cost or profit perspective. US-based DVD-rentals company Netflix implemented a unique business model in response to its undesirable customers who always returned their DVDs late. In early 2000, the company switched to a subscription model without traditional late fees, a move that appealed particularly to customers who have trouble returning movies on time. At the time of the shift Netflix employed 45 people. Today it has around 250 employees and its business model is thriving; proof that even the customers that businesses have learnt to hate can inspire innovative thinking.
Rules of game changing
What to Do
- Look at your business through the lens of another industry to find new ways to operate. If you’re in manufacturing, how would you operate as a retailer, or vice versa?
- Talk to your customers about what they need today. This will help you find new competitive advantages.
- Get employees on the front lines talking about how customer mindsets have changed and how the company can better reach consumers.
- Re-examine your business model for products, processes, promotions and so on that are no longer effective.
- Constantly look for ways to add value to your company, product or service. This doesn’t have to be expensive. A retailer, for example, might set up a small play area with secondhand toys to keep kids busy while parents shop. It’s the small things that can boost a revenue line.
- Stay the course. Realise the economy has changed and your company must change with it.
- Stop marketing your product or service. You need to actually communicate with customers now more than ever.
- Assume your suppliers, vendors and distributors are doing fine. Go see them in person. Check in with their suppliers, too.
- Get complacent if margins are still good because rapid industry transformations rise to the surface in tough times. The newspaper industry, for example, saw trouble coming for years, but healthy sales kept it from making necessary changes.
- Stop being creative. Aim for discipline in your core business balanced with a willingness to try new things and create new markets.
3 Strategies To Implement A Culture Of Innovation In Your Business (Without Blowing Billions)
Learn to think differently, encourage your team to do the same, and innovative disruption could become a part of your company’s DNA.
You’re seeing it everywhere. Disruptive innovation is becoming the new norm, and you’re concerned that your business is merely going through the motions, missing opportunities.
How can you join the Elon Musks of the world, without the corresponding bulging budget?
It turns out that many of the techniques of today’s top innovators don’t require vast outlay. They’re simply about different ways of thinking.
Here are three strategies for enhancing the culture of innovation in your organisation without blowing billions.
1Use ‘Ignorance as strategy’
You’ve encountered the aphorism, ‘To a man with a hammer, everything looks like a nail.’ Similarly, to a banker, the only imaginable approach to banking is ‘the way banking has always been done’. When bankers try to think of innovative new ways of banking, they invariably think of greater complexity.
Along came PayPal
In the April 2016 edition of Harvard Business Review, Reid Hoffman, one of the founders of PayPal, said, ‘All the banking people knew the rules. That prevented them from trying anything that looked remotely like PayPal.’
PayPal was not invented by a bank, just as Uber was not invented by a taxi driver.
To make use of ‘ignorance as strategy,’ try this. Gather a group of strategic thinkers and set the rule: ‘The old way of doing it has been outlawed. How else might we serve the same need?’
Or: ‘We are now our competitors. We have half the budget, but our hearts and souls are invested in one purpose: To topple the original company. We can’t do it the way they do it. So how could we go about it?’
Or: ‘The company has burnt to the ground. We’ve lost everything. We need to keep serving our customers but we need a new, cheap, fast way to do it right now that doesn’t rely on any equipment or systems we used before. What have you got?’
2Use commander’s intent
Imagine: You’re a military commander. You need to move a convoy of trucks through a dangerous canyon. Your intelligence tells you that there is a sniper on one of the escarpments.
There are two ways you could issue an instruction to a soldier:
The first way: ‘Go take out that sniper.’
That’s very clear, and very good. But there’s something surprisingly important missing from it. The ‘why’ is not overtly stated, and for that reason, the mission could actually fail.
Let’s try it again the second way: ‘Go take out that sniper because we need to ensure safe passage through the canyon for our convoy.’
That may sound like a ridiculously obvious addition. Here is why it’s not: In a real, dynamic scenario, things change constantly.
Let’s say your soldier breaks off from the convoy and heads up into the mountains. Very quickly, three things go wrong:
- He can’t find the sniper
- Enemy forces start firing at him, making it difficult to look for the sniper
- His own weapon fails to fire so that he can’t shoot back.
If our soldier thinks only about the literal instruction — ‘shoot the sniper’ — he is now unable to carry it out. But if he bases his actions on the commander’s intention — ‘secure our convoy’ — other options open up to him.
He might draw their fire. He might set a bushfire. Or he might cause a commotion in a different canyon, disguising the movements of his convoy. He might, he might, he might… But only if he is absolutely clear on Commander’s Intent, and not working according to an explicit tasked item only.
Managers love to create detailed rules and procedures. But these can actually stifle innovation. Commander’s Intent is the life hack by which we get the upper hand again, freeing up leeway for creative potential.
3Instead of rules: Imaginative debate
Organisations accumulate rules over time. Problematically, rules can become a form of culture. And there is a better way.
When NASA faced two separate, well-known challenges, their culture at each stage was very different.
In 1970, Apollo 13 was two days into its mission when an explosion knocked out one of their oxygen tanks. The ensuing creative scramble to get the astronauts safely home is the stuff of legend. The creative trial and experimentation that went into rescuing them was formidable. New procedures were made up back on earth, then tested in the simulator, then relayed to the astronauts 200 000 miles away, almost in real-time.
Through this process of creative trial and experimentation, of collaborative inter-disciplinary debate, one by one the issues were resolved and the crew was brought home safely.
At this point in time, NASA’s culture was ruled by imaginative debate. It was an exploratory culture, an experimenting culture, a culture based on learning and evolution.
By contrast, at the time of the Columbia disaster of 2003, the culture of experimentation had given way to one of formalised rules, regimented procedures and rigid hierarchy. NASA had stopped being a learning organisation. It had become a bureaucracy instead.
As Columbia re-entered the earth’s atmosphere, a large piece of foam fell from the shuttle’s external tank and broke the wing of the spacecraft. The shuttle broke into pieces. NASA recovered 84 000 pieces from a debris field of over 2 000 square miles.
The investigation revealed some damning insights about the culture that led to the problem.
During a post-launch review, a group of engineers actually saw this foam dislodge from the rocket. They tried to pass on this information. NASA’s management, which by this stage liked to manage everything ‘by the rules’, had seen dislodged foam before, and, according to their institutionalised perceptions, deemed it to be unimportant.
The engineers tried to argue that it seemed like a lot more foam than usual. It was a qualitative argument, based on human insight and intelligence. But NASA was unable to listen. Dislodging foam was a known quantity, and the voices of dissenters went unheeded.
NASA by this stage was so bound in rules and procedures that, in important ways, it had ceased to be a learning, experimenting culture. And that made it incapable of hearing an idea, to its great detriment.
Imaginative debate allows situational awareness to pass up and down the chain of command. It promotes the opportunity to see innovation possibilities. It shows up problems that fall outside of the capacity of norms and guidelines.
The Israeli Defence Force uses an examination of these two cultures within NASA as a way of perpetuating a learning culture within its own organisation. In Start-Up Nation, Israeli air-force pilot Tal Keinan is quoted as saying that if NASA had stuck to their experimental culture, the way his own air force and military do, they would have identified and seriously debated the foam strikes at the daily debrief.
Debating everything isn’t tedious. It’s illuminating.
Putting rules in place of debate isn’t clarifying. It’s dulling.
Rigid rules enforced by unlearning authority are a recipe for real danger. The use of strenuous debate helps to overcome these blind spots.
Cultures of learning are far more idea-friendly than bureaucracies. And it costs nothing to become one. Merely a little willingness.
To Have An Innovative Company, Let Your Employees Take The Reins
‘In order to clean, they need to get messy,’ serial entrepreneur Justin Klosky tells Entrepreneur’s editor-in-chief Jason Feifer.
An innovative company starts with an innovative team. And what’s the best way to innovate? Give your employees the freedom to run with their own ideas, then manage the chaos later. At least that’s what Reid Hoffman believes.
“If you want your company to innovate, your job is to manage the chaos,” says the co-founder of LinkedIn, partner at VC firm Greylock and host of Masters of Scale, a podcast series examining counterintuitive theories to growing a company.
Hoffman’s theory doesn’t seem too far-fetched either. In fact, he’s not the only person who thinks giving employees the freedom to think and create on their own triggers innovation.
“When [people] have that ability to explore and innovate without the pressure of failing, you’re setting yourself up for a ‘win’ situation, because you’re going to get the best out of somebody,” Justin Klosky, founder of professional organizing company O.C.D. Experience, tells Entrepreneur’s editor-in-chief, Jason Feifer, in a video.
Although, when you’re empowering employees with this much freedom, you’ve got to be hiring people you trust. This can be easier said than done. Rather than dissecting a person’s resume, Klosky recommends digging deeper and asking prospective employees questions that will really open them up – anything from who they are, where they’re going and what brought them here.
After you’ve hired a group of honest, intelligent employees, now what? Don’t tell them how to innovate. Instead, let them figure that out on their own. Allow employees to do what they do best, return to you with their results and from there manage the chaos.
“In order to clean, they need to get messy,” says Klosky.
For more insights and advice about managing an innovative culture, check out the video.
This article was originally posted here on Entrepreneur.com.
Do You Know How To Stay Relevant?
In this tough economic climate, you need to start focusing on business areas you can control. The ability to stay agile and relevant is in your hands.
We have seen huge changes in South Africa recently. Just five years ago, we had a thriving platinum mining sector, good exports of commodities, no e-tolls, a rand dollar rate of better than 8:1 and peaceful universities.
All that has changed, with a significant effect on our SME sector. Imports cost more, finance is expensive and socio-political and labour issues disrupt business frequently.
Customers have changed too; many buyers now complete over 60% of the sale by Internet research. They make comparisons, shortlist potential suppliers and only ask for quotations when they are close to deciding on their supplier.
You could’ve fallen off the shortlist and didn’t even know it
Your company could have been a potential supplier and then fallen off the shortlist without you ever knowing about the lost opportunity. Customers no longer rely on sales staff to provide information about products and applications, and even the least tech-savvy customer checks prices and specifications online.
24/7 availability is now expected, and long delivery times become unacceptable. Customers assume you will be able to slot in unplanned orders efficiently. Loyalty is no longer a given; buyers will move to suppliers who provide better value, even if that supplier is overseas.
Lead through quality
Entrepreneurs should recognise that the way we have done business in the past might need modification; there is a risk of being overtaken by more agile competitors. Uber, Airbnb and Netflix are great examples of competitors changing the rules.
What is happening in your markets? What are your competitors doing? Do not just accept feedback from your staff — they are also in their comfort zones. Research competitors and new technologies; ask customers what they would like to see you change.
If you make a decision to update your business, there are several areas you could focus on to build a more agile business that gives better value for money. Technology, quality, customer service, IT, Internet presence, continuous learning and strategy review are among those. A few of the vital ones include:
- Use available technology. Check prices and terms from alternate suppliers, investigate IT solutions to provide flexible manufacturing systems, optimise inventory and give better response times for customer enquiries.
A good CRM system can track complaints, give basic data to spot new market trends and identify customers starting to move away from you. Develop apps to improve customer convenience or optimise sales calls.
- Increase quality in all respects, from your products to the accuracy of your invoices. Spend money on quality systems and business processes. You will get it all back in direct and indirect savings by having less comebacks of all types. Better quality in all respects increases your value proposition, and helps to justify your price.
Overhaul your customer service. Set improvement targets for order fulfilment, right first time repairs, shorter lead times, more convenient customer interfaces and all the other elements of great customer service. Then put plans in place and implement them. Financial returns will follow.
You need an effective and integrated Internet presence, with rich content, which means useful short pieces, not lots of content. Your social media presence must be integrated and support your brand and value proposition. Do not follow trends blindly because everyone thinks they are cool.
Revisit your strategy
Your company must be agile enough to change strategies and tactics to take advantage of market and competitor changes, rather than seeing them as threats. An outside facilitator helps.
All of this sounds like a lot of work and expense, but right now you may be using large chunks of time and money fixing errors, working around old systems, losing customers you should not lose and not getting new customers you should get. Stop all that and you will have time and money to create the new agile and informed company you could be, and stay relevant in your markets.
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