Last time we looked at why growth matters – So…We should now understand that growth (and size) really does matter and that it has a direct impact on the value of a business
And we’ve got a framework for helping us to identify opportunities with the greatest potential and lowest risk of failure
I ended last time by saying this is not the whole story –
This time we’ll take a look at assessing and working up these opportunities further to make sure we are prioritising our efforts on opportunities with the greatest chance of success.
To listen to Kevin delivering a webinar on this topic
You can also see his SlideShare here
A common challenge business owners face is working out where to focus our energies to make the biggest difference. Well the Ansoff Matrix helps by making us think about the ‘low hanging fruit’ – or the least risky options – but it isn’t the whole story. So I’ll be looking at how we take these opportunities and work them up in a practical way that helps us to focus
And focus is a key thing – we can’t pursue everything.
Indeed it’s worth spending a couple of minutes looking at a common trap business owners fall into in the early years – and is often the reason businesses don’t make it big.
Growth – The Owner’s Trap
This phenomenon is called “The Owner’s Trap”. Signs you’ve fallen into the trap – or maybe got a foot stuck in it are:
-business slows when you take a vacation
-customers come to you with problems
-your growth has reached a plateau
Not only are businesses stuck in the owner’s trap stressful to run, they’re also worthless because nobody is going to buy a company dependent on its owner – and it also means that the business is extremely difficult if not impossible to scale
When we start a business we are usually on our own – which means we do all the selling.
We are the ones that go out and about to all those network meetings, the 1-2-1 meetings – we’re the ones that put together the proposal and agree the terms with the prospect.
Typically most business owners are pretty knowledgeable about their sector – and we’re keen, if not anxious to win the business so we come to the table with lost of expertise and enthusiasm
The customer or prospect sees that and will often ask the business owner if we can deliver on more things – often outside of the original scope of products and services that we originally decided to offer.
So we went into business selling widgets and the customer asks us if we can supply grommets – well we know a lot about widgets and we think we can probably deliver on grommets too so we say ‘yes’
Which means before long we are offering a wide range of things – probably beyond what we set out to do
The problem is that employees aren’t typically as deep subject matter experts as you are in your industry
Which makes it very difficult for our employees to deliver on what you are selling.
We are the only ones that give the final seal of approval on the products and services we are delivering which ultimately means we are the only one capable of delivering the wide range of products and services.
Which in turn means that we are the ones that the customer wants to deal with – they know that we have the knowledge and expertise to help them and feel that our employees don’t have the same level of expertise – so we can’t hand on the customer relationship to one of our staff.
So the consequence is what we saw earlier – business slows when we are away, customers come to us when something goes wrong and ultimately we will reach a plateau beyond which we can’t seem to grow – it could be at £100k, £half a million – a million, 5 million 10 million. And year after year we seem stuck and can’t push beyond it.
Escaping the Owners’s Trap
So how do we begin to escape from this trap where the business is reliant on us?
The philosophy here is moving from a business where we are selling lots of things to a few customers to one where
We are selling a few things to lots of customers.
Let me repeat that in case you missed it – We want to move from a business where we are selling lots of things to a few customers, to one where we are selling a few things to lots of customers.
Now think about that for a moment – think about your business and the owner’s trap we just talked about. It may sound like a turn of phrase, but it represents a wholesale shift in the way you think about your business – and one that is essential to be able to scale your business.
In order to start to do that, what we are looking for are a few products and services that meet what we call the ‘Scalability Trifecta’ – although I’ve come to refer to them as the ‘3 ‘ables’ of Scalable. And this is the first framework I mentioned we would look at to help you prioritise your growth opportunities (remembering that this is likely to start with/ be based on your existing products and services)
So we are looking for products and services that meet the following 3 criteria (or ‘ables’)
Firstly they must be teachable to your employees
Secondly they’ve got to be Valuable – by which we mean they are not a commodity
And thirdly they’ve got to be Repeatable – which means that customers purchase them on some sort of repeating frequency
So here’s an exercise you can go through in your own business – list your key opportunities for growth from doing the Ansoff Matrix and make sure you include your current products and services.
As an example, I’m going to take you through an example using a creative agency we worked with
We started by listing all the current products/ services they did and some they were considering doing from Growth Opportunties Ansoff Matrix – I’ve just listed a few here.
This particular business has a real capability in 3D Characters and animations
So we started there and looked at rating each service on the ‘able’ criteria
Scoring very highly for valuable/ differentiation
But low for teachability because it required the owner’s skills acquired over many years along with a high degree of creativity – hard to teach
And also low on repeatability – clients would tend to stick with a character once done and not necessarily repeat.
Also what the client was finding was that although this should be really high value work, it was difficult to find clients willing and able to pay the level of fees to allow for the man hours that went into it.
Next we rated websites – fairly valuable, definitely teachable but not particularly repeatable
And so on for the other products/ services – info graphics teachable but commoditized etc
And what become clear was that Explainer videos and presentations ranked highest in the first pass.
Explainer videos – particularly 3D – were not commoditized and held a reasonable premium, most of the process was very teachable (with perhaps a little bit of the owner’s skills required upfront) and they have the potential to be repeated – particularly with a larger client or agency.
Similarly presentations – very teachable and repeatable, slightly less differentiated but with the particular style and approach of this business then a definite opportunity
Now what, so what
We’ve now picked our key opportunities for growth – we’ve identified them and prioritized them.
Now we need to start to consider how to unlock them – what do we need to consider to make sure we don’t miss something
Well the age old SWOT is a useful tool – but not in the way most people use it and you may have seen in countless courses and text books and as you see here.
This does something but typically what we end up with is 4 boxes filled in with a few points that goes in a plan somewhere and never sees the light of day – and we probably spend more time arguing about whether strengths are internal things or external and which box things should go in.
So our answer to that is to switch it around and start with the Opportunity.
This way you are focused on the opportunity, think about the strengths and weaknesses and threats linearly – which then should make you think about what you can do to enhance your strengths and mitigate your weaknesses for that opportunity
But we can do even better than that…
Let’s continue with our example of the Creative Agency and the two key opportunities we identified – Explainer Videos and Presentations
First let’s record their relative risk of failure according to the Ansoff Matrix.
In this case Presentations were low because they already do these and it would be to the same type of clients primarily
Explainer videos are a little more risky – because although we do them, we need to get into different clients in order to earn the appropriate fees. So the primary client would be different (Larger businesses and large agencies potentially)
Then we can record the TVR score
But now it gets more interesting.
Who is the key target client/ key types of clients? – I’m not going to fill these in because it will get too difficult to read but for example Academy Schools of a particular size/ type/ location – try to be specific so that you can do the next step…
Which is to think about that client group and identify the key pains or needs that your service or product is going to address
Then note down your primary competition for these customers with that service or product – again competitor types rather than actual businesses unless it helps you to think of ones you know to identify types – e.g. one man bands, small creative agencies with less than 5 employees etc etc
Then, what are your strengths or pros relative to that competition type with that type of customer for that service or product – where do you score against them and what is it that makes you great to deliver your offer for that type of company ? Think also about the things that you like about that kind of customer – do you have particularly strong relationships, or inside knowledge – something that might separate you from the competition
Similarly what don’t you like/ where do you think you are weak against the competition – where do they have an advantage. Also include things you might not like about that customer group – perhaps they are slow payers, perhaps they have a long tendering process etc. It might be that that particular target group are hard to reach
Before we finish – just have another think about what might happen in the future. Note I have labelled this trends before threats – because we should also consider if there any trends that you might be able to take advantage of by getting ahead of the game as well as any negative trends or threats (e.g. new type of competitor or product/ service that might reduce the need for ours)
And finally we can then think about tactics we might wish to employ to strengthen our pros and mitigate against our weaknesses.
If you do this exercise – ideally with your team and/ or an external facilitator I can guarantee that it will do 2 things:
1.You will think of something you hadn’t thought of that will lead to a new tactic
2.It will bring tremendous clarity and buy-in from the team
I recommend that you find a very large whiteboard – or use one of the magic whiteboard rolls that are available – you’ll need lots of wall!
And there you have it.
Two key frameworks you can use – firstly use the TVR or ‘able’ criteria to examine your current offerings and growth opportunities to make sure you are focusing on scalable products and services
And secondly use the Smart SWOT framework to think deeper about your key plans for focus and what it will take to succeed
To listen to Kevin delivering a webinar on this topic
BizSmart helps business owners of small and medium sized businesses to create value and scale their businesses through sound practical business support by providing- Insight, Clarity and business support with a real determination to help you succeed. You can access blogs like this and more besides through our free SmartRoom service here