If you put the energy, time, thought, and open-mindedness into reevaluating your existing business as you would a start-up business, your business would probably really take off!
But it’s hard. It’s very, very hard. It’s hard to really substantively change the way you’ve gotten used to running your business. It’s hard to change old habits; it’s hard to change existing perspectives, and it’s especially hard to change your strategy, the essential core of what your business stands for. This is true whether you are running a one-person business or a one-thousand-person business.
Since it’s hard, you must, first of all, really want to make it happen. Even before you get into the specifics of what you are going to do, its good to try to form a rough mental vision of that bigger, more successful, more profitable business that you want to become and what the payoff could be if you came up with a powerful new strategy. This will help keep you motivated.
Before continuing reading the article, take a minute to take this quiz. It will show you what business you should start.
QUIZ: WHAT BUSINESS IS BEST FOR YOU?
As you get ready to reexamine your strategy, you want to try to put aside the emotional ties and thoughts of all the investment of time and energy you have spent creating this business to date. There is a reason that many businesses spend a ton of money hiring outside consultants to help them reinvent themselves: consultants don’t have a vested interest or emotional ties in protecting how things are currently being done. But you do. You must acknowledge this hurdle in order to leap over it and move on!
So a great perspective to take is to pretend that you are coming in to look at your business as an outside consultant. If you have some employees who are also participating in the strategic review process, you want to tell and encourage them also try to take on this perspective.
Speaking of employees (if you have key employees), if you do involve them in the strategic review process, the unspoken question they have is “What’s in it for me?” So I’d come right out and tell them that by going through a strategic review you hope with your team to build a much better business, which should lead to not only a more solid and competitive business but also a faster growing business with more potential opportunities for all.
Okay, so where do you start?
I’d start with doing an evaluation of the state of the industry, including such factors as the nature of the competition and how the industry is changing. Then I would evaluate key competitors and the company itself in depth, particularly including what makes them different from one another, and with an emphasis on key strengths and weaknesses. I might also consider how the products and services of each compare with one another in the eyes of customers. (To learn more about these topics, you may want to see other presentations I have given on strategy and creating business plans.)
Then, rather than spending too much time focusing on my current strategy, I would list all of the strategies that key competitors are using. By “strategy,” I want to emphasize that I mean what makes each competitor different, not necessarily just better than one another.
Next, I would brainstorm—ideally with key employees, if there are any key employees—which strategies might make the most sense for my business, given my research on my business’s competitive strengths and weaknesses. Another way to look at this is ask yourself, “What is our core competency?” Or maybe there are multiple core competencies. Maybe there are multiple things that we do better than most competitors. That’s how some excellent business strategies and high-priced consulting firms recommend choosing a business strategy.
But I wouldn’t leave it there. I truly believe that just because your strengths and weaknesses lead you to a specific strategy doesn’t necessarily mean it’s a great strategy. In fact, there may be a better strategy out there for you that isn’t logically based on your strengths and weaknesses. The new strategy you come up with might not first seem logical at all.
I would suggest that you have multiple brainstorming sessions, even if you are a one-person business. Have sessions where you just write down every possible strategic course that comes to mind, no matter how far-fetched it seems at first.
Later, have a second brainstorming session where you think through each possible course—what would it look like? What are the pluses and minuses? How might it play out? Then I would start to eliminate some options, start paying attention to others, and perhaps combine options or even use them for springboards to still new, fresh additional options to consider. I might even look at totally different industries for ideas of really fresh strategies.
Here’s an example of why the traditional strategic analysis of just looking at your strengths and weaknesses may not be enough, or perhaps a lesson in why you have to realistically weigh your competitors’ offsetting strengths.
In the early days of the Internet, Adams Media, the book publishing company I created, was one of the leaders in publishing books on job hunting and careers. We launched an Internet site listing jobs openings and job hunting advice, called CareerCity.com—and because our books appealed to a very broad audience of people looking for professional jobs, we decided not to specialize either geographically or by job function. This allowed us to advertise and promote CareerCity.com in all of the millions of books we sold each year and to use tons of our great how-to content on the website.
Unfortunately, it was a fatal decision. We just didn’t have the resources to compete head-to-head with other general job hunting sites, like Monster and Hot Jobs, which each raised tens of millions of dollars and were spending money like drunken sailors. Hot Jobs, for example, one January decided to spend $6 million on ads during the Super Bowl after ending a year with total revenue of just $3 million. How was I supposed to compete with that? I was self-financed and couldn’t even pay off my house mortgage!
Although coming up with a strategy, especially a new strategy, can be very difficult, if it does work, the payoff can be huge. Let me give you a couple of examples.
In the mid-1980s, I launched a biweekly publication of local Boston-area job listings. Jobs were listed for free, and our revenue came from selling copies of the publication, called JobBank, at thousands of local newsstands. Unfortunately, the job market—on the strength of the economy and Ronald Reagan’s economic policies—was quickly strengthening, and I was too late. Our paid circulation peaked at 7,000. Increasingly, employers were having unfilled job openings and job seekers were getting multiple offers.
So I made the very difficult decision to change the circulation first partially, and then completely, to free and began switching our revenue model to selling job listings. It was such a total change of strategy it was almost a new business. We had no experience or staff to sell local recruitment advertising. Furthermore, there was already one strong competitor and a couple of weak competitors doing the same thing. We were also competing directly against the Boston Globe and the Boston Herald, Boston’s leading newspapers. I seemed to be walking into a minefield of powerful, experienced, and well-financed competitors.
If I had done a traditional strategic analysis of where our strengths and weaknesses lay, then I would have known that switching to a free circulation with paid advertisement model made no sense. But I did it anyway. I really aggressively managed the business, expanding the circulation to 175,000 copies, building a top-tier sales staff, and eventually starting a synergistic job fair company.
Over time, we made lots of money and eventually trounced our free competitors. It wasn’t always pretty, and there were some tough times, but I stayed at it. Although it made no sense, it still made more sense than continuing with a clearly losing business model of trying to sell copies of a job newspaper in a strong job market.
My point is that changing strategy is hard, and it can be more of an art than a science, but I cannot emphasize it enough: the results can be terrific!
Another very difficult and ultimately incredibly successful strategic change I made was many years later in the book publishing business. Actually, I changed strategy in this business many times, but let me tell you about the one that really brought home the bacon.
After competing in the book industry for many years, I eventually built a modestly growing, multimillion-dollar-a-year business with average, at best, profit margins. Not bad, but not satisfying my ambitions. So I carefully set up an extended strategy planning session over many days with key staff members. To do this, you might want to hire an outside facilitator, but I did it myself, partially to save money and partially because, to me, it was already clear what the outcome should be.
We did the traditional industry and competitive evaluation and concluded that what really set us apart from the competition was that some of our publishing was based on a series of books for which we chose the topics and either wrote the content ourselves or paid a freelancer a flat fee to write it. This is totally different than the traditional book-publishing model where the book agent pitches an author’s idea to multiple publishers based on maybe a single sample chapter and a table of contents. The publishers then bid on the book, guaranteeing the author a fixed advance plus royalties.
We decided to switch most of our publishing effort to the work-for-hire model. We decided which topics we would publish—this ensured that we would choose topics that we thought would sell like crazy. We put the books in our established brand-name series, which decreased the risk of poor sales for booksellers so that they bought more copies. And because we didn’t pay royalties, only a flat fee, our costs were dramatically less than that of the traditional model.
It sounded great in theory, and everyone—all the key employees—agreed it was the right thing to do. However, in practice it was very hard to implement. Once we turned theory into actuality, the employees hated the strategy! Our editors hated it because the book agents and authors we currently did business with were angry when we told them we were not going to pay royalties and the editors had to really work to find new authors. The salespeople didn’t like it because it was not as exciting to present these books at stores and book shows. Our publicists didn’t like it because it was hard to book TV shows for our new, work-for-hire authors whom no one had ever heard of.
Nonetheless, the new strategy worked like gangbusters—book sales took off, our revenue surged, and our profit margin surged to three times the industry average, which was much more than even the very largest publishers, which had the huge advantages of economy of scale, a roster of best-selling authors, and more. Many of the employees who didn’t like it working with the new way of doing business ended up going somewhere else, but we replaced them with new employees who liked the new strategy just fine.
This just shows that a great strategy, including a great strategy that is a totally new strategy for you, can be much more powerful than you could possibly imagine.
Yes, spending lots of time reexamining your strategy is worth a lot of thought. Then, once you’re done ripping apart your core strategy, work on the other parts of the business plan that are most important to change to support the new strategy. I would caution about getting too carried away—changing strategy is very, very difficult, so I would tend to minimize other changes for the time being, unless they are directly important to the strategic change.
Developing a new strategy can be a challenge. You might want to look at my presentations on business planning, which will take you through the process step by step.