ASHUTOSH KHARANGATE highlights the importance of re-imagining one’s business so as to keep growing and innovating
It is forever critical to keep re-imagining your business. It is a must to survive and keep growing. Even the larger companies are always looking to have some amount of chaos and disruption in their business to re-invent and grow. The classic case is of Google. When the decision makers felt that they were getting too complacent, they formed a holding company called Alphabet and broke down Google into smaller entities to keep the ‘startup’ culture alive in them. They wanted to make sure every Google entity and its decision makers keep re-imagining their business at all time, so that they innovate and grow. Those companies who failed to re-imagine their business have perished. So how do you re-imagine your business?
1) Market opportunities: It is critical to keep evaluating your market in terms of changes and new opportunities. We live in a Volatile, Uncertain, Complex, and Ambiguous (VUCA) world and that makes constant evaluation of the market almost mandatory. You need to keep checking for any changes that your product may need, any new geographies that may have opened up for your business, or for that matter a completely different opportunity that may have arisen and is within your capabilities and capacities. You need to also look for red flags that your product or service may become redundant in times to come. This has become more pronounced post covid where your business may have become redundant or new opportunities of growth may have sprung up. It is critical to analyse your market at interim intervals to stay awake to such noises. As they say, keep your ears close to the ground at all times.
2) Profitability analyses: It is important to keep evaluating your performance. It is critical to analyse your sales and profitability in various categories – product wise, geography wise, customer wise etc. At the minimum you should do this every year. Depending on how seasonal your business is, you may also want to do this month on month or quarter on quarter. If you have drawn up a budget, then you may want to compare it with your budget, as well. It is also important to understand which products or customers give you higher margins. Most times, 20% of your products contribute to 80% of your profits. It is important to identify such products or customers and sustain or grow them. Analysing your business is equivalent to doing a routine health check. It is always better to keep updated about vital health parameters of your business also called as Key Performance Indicators (KPIs) so that corrective action can be taken in the course of time.
3) Mergers and acquisitions: Even the largest companies are always looking for such opportunities to grow. These are inorganic growth opportunities which far surpass an organic growth.
Organic growth is when you increase your revenues year on year in the ordinary course of business. Inorganic growth is where your revenue increases by acquiring another entity or some merger. However, one needs to be very careful with such opportunities. We need to be clear about our end objective, the partner we seek, the amount of investment and its deployment. A clear business plan needs to be drawn out with as much clarity as possible. Valuation expectations need to be set right. The returns we envisage from such investments need to be drawn out clearly so that we have some anticipation of the RoI. Even in case of a strategic merger or joint venture, the objective of this initiative needs to be clearly spelt out. Further, the terms and conditions of such arrangements need to be well understood and documented. Many times, while accepting an investment, the owner is agreeable to any terms and conditions. This could spell a disaster as certain clauses could result in the owner losing the business. Hence, it is important to understand every clause before the formal sign off.
While the owner can do the above himself, it is always advisable to have a team to undertake the above tasks. For an owner ‘it is easy to believe his own lies’, but the others in the team could smell the reality and make the owner understand the obvious perils or opportunities. Hence, it is important to have professionals in such a team who have a good exposure. Sometimes businesses involve employees who have been there in the organisation since the very beginning. The issue is that they are not able to confront the boss or do not have the exposure to see the larger picture. So, it is important to choose this think tank wisely. Finally, undertake these activities once a year but break it down into quarterly evaluations to ensure your yearly strategy is on the right track. These 3 ways to re-imagine your business will ensure you survive, sustain, and grow exponentially.