Make 2021 the most successful year for your small business
By Nita Sanger.
There is a Chinese curse which says, 'may you live in interesting times.' I am sure that we will all agree that 2020 has been very interesting. The current market conditions have created an inflection point in our society, significantly accelerating the adoption of technologies to meet better meet personal, social, and leisure needs, run a business, and even work remotely. As we move into 2021, forward-thinking leaders (CEOs, Board of Directors) of small and mid-sized businesses should use this "once-in-a-lifetime" opportunity to make strategic bets to grow revenues and gain market share, by nimbly meeting evolving customer needs, expanding their go-to-market footprint, and competing more effectively with some of their larger, less agile, competitors. At the same time, opportunities exist to reduce costs and improve the bottom line, by optimizing operations and talent models.
Below are a few steps for leaders to take to position their business for success in 2021.
1. Look Outward, Reexamine - The business environment, to identify if there are shifts in customer needs, competitive landscape, regulatory environment, new technologies, etc., and their impact. Ascertain if these market shifts provide an opportunity or a risk to the business and how best to leverage them to your advantage. The key is to relentlessly focus on understanding consumer needs and identifying optimal ways to meet them.
2. Look Inward, Reassess - The firm's product/service offerings, including the technology to develop and support them, go-to-market strategy (customers, sales channels, sales team, products/services), business operations, and talent skills and capabilities, to determine the changes that need to be made for continued revenue growth.
Product/services offerings - Examine the existing product/services being offered, and identify what changes need to be made to increase current customer retention and grow the customer base. Determine additional service offerings to provide consumers, and opportunities to move to a recurring revenue model (as relevant), which are more valued by investors, i.e., through a subscription, as-a-service, managed service model, platform/ecosystem play, etc. The technologies needed to develop a new solution, or a recurring revenue business will also be critical for success.
Go-to-market strategy - According to a Bain study, increasing customer retention rates by 5% increases profits by 25% to 95%. Traditionally leaders tend to focus on making their business development and sales force teams more effective to grow revenues, through customer segmentation, setting revenue targets, establishing KPIs for calls/sales ratios, revenue targets, service metrics, etc. At the same targeted marketing efforts, and social media are used to reach customers. It is critical to align and optimize the sales force, customer support, and marketing teams. Today, leadership has three additional options for growth: build, buy, or form strategic alliances. Each has its pros and cons. Building new solutions or services requires co-creating solutions with clients, testing, iterating, and then finally rolling out the new product or service. Developing and launching a new product can take significant time and money, and returns can be slow. Firms often tend to buy businesses, with adjacent offerings, to get an immediate jump in revenues. This approach is being used extensively by many PE-funded firms but can be time-consuming for leadership to first identify potential targets, execute the transaction, and then successfully perform post-merger integration. Another approach for growth is to form a strategic alliance(s) with firm(s) that offers complementary services to the same customer base or to become part of an industry or market ecosystem. While this option can provide significant access to customers, there is a risk of potential disintermediation from the consumer. While using any of these options, leadership has to ensure that they do not "take their eye off the ball" from running the day-to-day business.
Business Operations - Most firms require several functions to effectively run the business, such as operations, finance, legal, risk and regulatory, procurement, technology support, real estate, etc. There are now alternate approaches to business operations, with providers offering these operations As-a-Service. In addition, there is a lot of experienced talent available for "fractional" business and operating roles. Leadership should examine how each of these areas has been impacted and determine the approach they want to take to run them more efficiently and cost-effectively. i.e., whether they need to be onsite/offsite, in a shared service center, outsourced to a low-cost provider, sent out as a managed service, etc.
Talent: Leadership needs to take a hard look at the business leaders and determine if they have the right talent in place, or they make need to make changes to the existing leadership team. Then a similar process will need to be done for the rest of the employees. The four main business capabilities the leadership team needs for growth are: industry/product knowledge to determine the products/solutions to offer that would best meet the changing needs of the market and the customer, technology to develop and deliver any service or product offering, and/or to evolve the business/sales model, and sales & marketing, to sell to customers, and a combination of strategy, operations, and execution to help develop the approach for growth, manage the
3. Reengineer - the business for success. To effectively position the business for growth, a single member of the C-suite, potentially the Chief Operating Officer (COO), should be made responsible for driving the changes. This individual will guide, co-create and execute the strategy that the CEO and the Board of Directors develop, and then orchestrate all operations within the firm, and with external business and service providers, in addition to forming strategic alliances, and executing on any acquisitions and post-merger integrations.
In conclusion, the focus of leadership should be to take advantage of opportunities in the current environment and have a relentless focus on growing revenues. All activities that are not core to revenue generation, should be optimized, leveraging alternate business and talent models, with a single member of the C-suite (potentially the COO) acting as the orchestrator of all the activity. There is no single approach for a firm to take to position itself for success. The approach that each firm takes would depend on its current market position, products and services offered, business model, leadership team, funding sources, and its vision for the future.
To discuss this article further, or for additional information, please contact me at email@example.com. Additional articles on how to transform your business can be found here the role of leadership in a business transformation, transforming business operations, transforming the go-to-market strategy and approach, tried and tested tools, processes, and techniques.
About the Author
Nita Sanger is the Chief Executive Officer of Idea Innovate Consulting, a boutique strategy consulting firm focused on accelerating growth of firms in Professional, Financial and Legal Services.