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Vol. 4 — No. 4 Escape Velocity: Defying Business
Gravity Starts with Discovery Diagnostics
Escape Velocity: The minimum velocity an object must have in order to escape the gravitational
field of the earth Business Gravity: The factors that hold your business back from accelerated growth Discovery: The active review of information regarding the environment and its potential impact on your
organization To
achieve escape velocity (or accelerated growth) for your business, it is
imperative to start with an understanding of the environment in which you
will operate and the conditions you will likely face. Your business is not an
isolated organization. It functions within an economy, industry and market
that influence the opportunities you have and the challenges you encounter. To
develop an effective growth plan, you must understand these forces as they
are today and as they are likely to be in the future. It requires a macro or
“big picture” look at the market you serve as well as a closer inspection of
the micro factors unique to your business or niche. Discovery
is a process that transforms data into information and forms the foundation
of decision-making on the best growth alternative for your company. There are
three reasons why discovery is critical to your growth planning: 1) Accuracy: Using real data means we are
able to make a well-informed decision. We take out guesswork as much as we
possibly can. There is always room for experience to serve as a guide and
even for antidotal information about your business and the market you serve.
But it is wise to lace decision-making with a heavy dose of reality. You may
be surprised how often perceptions and facts don’t align. 2) Objectivity: Using facts also removes some of
the emotion of decision making. Rather than have a lively debate about what
is or is not true, data can make the picture much clearer in terms of
defining historical trends, identifying issues or topics that are most
important, and focusing the team where they can make the most difference.
This means your team can all start on the same page relative to what you need
to talk about and what you should consider in your decision-making process. 3) Confidence: It increases your confidence in
the plans you make so that you are more inclined to stay the course. You know
that the data you based your decisions on was not your best guess, but real
information gathered to let you see into your business and its operations.
When the path becomes difficult—and it will from time to time—you are more
likely to be committed to the journey because you carefully researched the
market and the business and understand what is needed. The
critical steps in the discovery phase include the following: • Diagnostics: defining gravitational factors (or
what is holding you back) as well as the space or the environment in which
you compete and how it might change in the future
• Determine Options: After understanding what the
market looks like and where it is going, you are ready to determine what the
best opportunities are.
• Decide
Opportunities:
After investigating the opportunities available to you and applying standard
business evaluation, use objective-based decision-making to prioritize your
opportunities.
Today,
we are going to focus on the diagnostic activities of the discovery process
which is also broken down into a few key activities: 1) Market Assessment: Identify the current market in which you are
operating and determine key trends or changes you anticipate. Some questions
to ask include: • How big is the industry in which
you compete and how fast is it growing?
• What changes in the industry will
be most relevant to you and your company?
• What companies are gaining or
losing share and why?
2) Competitive Assessment: It is important to understand
who your competitors are and what they offer to the customer. Customers have
a choice in their purchase decisions. Not all customers will choose you. In
fact, you are not trying to appeal to every
customer as that means you are not distinctive in your offer, as different
customers may seek different benefits. But you do want to understand the
other choices customers have in the market. In this step, Reynolds
Consulting, LLC works with clients to develop a “map” of the competitive set
to better understand what choices the customer has and where current
competitive advantage lies. 3) Business Assessment: There are three key areas involved in business
assessment: • An understanding of organization
goal achievement—Review goals set for the last few years and assess whether
they were met or exceeded as well as the reasons why. Was a certain type of
goal met and others were consistently not met? What gets in the way of goal
accomplishment? Are these factors in your control?
• An assessment of internal
capabilities—Understanding relative strengths and weaknesses is important in
defining the growth opportunities that are the best fit for your company. What
are your biggest strengths? And greatest competencies? What do you do better
than your competitors? What do they do better than you?
• An evaluation of financial
performance and trends—Understanding how well you are doing against plan,
what costs are rising the fastest, which customers are contributing the most
to margin, which products contribute the most to revenue and new customer
acquisition are all important things to understand in the diagnostic phase.
Developing a growth plan that doesn’t consider your financial model and how
you make money is not likely to maximize your success.
Completing
thorough analysis is critical to laying a strong foundation for a growth
plan. Lack of information or erroneous information means you are making
uninformed decisions. Obviously, you will never know everything you would like
to know about your markets, your competitors or the future. None of us has a
crystal ball. It is also true that the future is not always an extrapolation
of the past. Your job in completing the diagnostics is to look for
game-changing impact—“Where am I spending too much money and what can I do
about it?” “Where is the market heading and how might that affect/effect my
business?” “Where is the market underserved and how can I capitalize on that?”
“What are the potential challenges to growth and how can I avoid them?” This
kind of analysis sets the stage for defining your growth options, which is
the next step in the journey to achieve escape velocity growth and will be
addressed in the next newsletter! Reynolds Consulting, LLC has a number of tools and resources
to help clients complete their diagnostics. We help clients focus on the
information that is most useful in constructing a growth plan and guide them
in the analysis to ensure they are asking the right questions and laying the
foundation for growth. To learn more, email Margaret Reynolds, managing principal
of Reynolds Consulting, LLC at mreynolds@reynolds-consulting.com. |
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We all recognize that
growth is an important goal for our businesses, and while it is never easy to
achieve, that is especially so in challenging economic times. However, by recognizing the
factors that restrain us and the opportunities that are available to us, we
can beat the odds and see our businesses grow to surpass the industry
average. This newsletter continues
a series of articles on what it takes to grow—from understanding what is currently
holding you back, to identifying the opportunities inherent in your market,
to constructing a comprehensive and winning plan, to, finally, implementing
the plan you have crafted. This newsletter series
will run through the rest of the year. Don’t
miss an issue! This is Issue No. 2 in a series of eight. If you missed a
previous issue, please let us know and we will be happy to send it to you. No. 1—Escape Velocity
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