“I want to put you and your company out of business.”
That sounds like a harsh statement. But your competitors are saying it all the time.
The U.S. Bureau of Labor Statistics published the most recent business survival rates from 1994 through 2010. On average, about 78 percent of businesses survive for two years. Slightly more than half survive for five years.
Michael Ames writes in “Small Business Management” that the most common reasons businesses fail are:
- Lack of experience
- Insufficient capital
- Bad location
- Poor inventory management
- Over-investing in fixed assets
- Poor credit arrangements
- Personal use of business funds
- Unexpected growth
Gustav Berle, author of “The Do-It-Yourself Business Book,” adds competition and low sales to that list. I think there’s a much bigger problem: management or owners that are incompetent.
A company should address all of those problems early on and use planning, processes and outside counsel to solve them.
Let’s focus on business failure due to competition and changing business environments. Did Kmart run its stores that poorly? Or did Walmart and Target manage their stores better?
Target has hit significant bumps in the road recently. It is closing 133 stores in Canada and 11 in the United States. It would be naïve to attribute the closures only to competition. But any business will be hurt if it doesn’t understand the competition it faces in all forms. That includes Internet sales, prospective competitors, and changing customer perceptions or needs.
Companies that want to be successful must keep one eye focused on their goals and the other eye focused on competitors and the changing environment.
SWOT: The ultimate power tool
So what kind of tools can we use to scan the business environment for competition or environmental threats?
One of the most traditional is the SWOT analysis used during strategic planning. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Unfortunately, too many companies have become complacent with this exercise. Others, like Sears and McDonald’s, can become overconfident from past success and ignore due diligence.
One tool that I have used in my TEC groups is the “put your company out of business” exercise. We put one member in the center of the room. The other members strategize how to put the company out of business. It is fascinating to see the insights from outsiders. They hold up a mirror to the company that isn’t distorted by biases or past experiences.
Consider doing the same exercise for your company with several outside participants.
Other helpful tools
Here are several other things you can do to keep an eye on the competition and challenges you might face:
- Conduct a PESTLE analysis.
Evaluate changes in Political, Economic, Social, Technological, Legal and Environmental areas. - Use Google Alerts, an electronic clipping system.
Create an alert that will help you monitor the web for news about any topic. You can ask for updates about a product you like, find out when people post content about you online, or keep up with news stories.
At a minimum, you should create alerts to monitor your company name, senior management’s names, your competitors, innovations within and outside of your industry, and industry terms. Google Alerts can be posted on a company intranet or circulated to appropriate employees. - Read the management’s discussion and analysis sections of public companies in your industry.
The MD&A is a report from management to shareholders that accompanies the firm’s financial statements in the annual report. - Use social media tools to find information on topics of interest.
Hashtags and Twitter search are among them. - Experiment with Stumbleupon.com, a discovery search engine.
Identify topics you like, and Stumbleupon will introduce you to amazing websites, videos, photos and more that you wouldn’t have found on your own.
Never forget a fable attributed to securities analyst Dan Montano: “Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running.”
Jim Lindell is president of Thorsten Consulting Group, Inc., a Wisconsin-based provider of strategic and financial consulting, professional speaking, training and executive coaching. He has worked with a variety of industries including manufacturing, health care, nonprofit, distribution and food processing. He chairs two groups for TEC Wisconsin and is author of the new book “Controller as Business Manager.”
