Your biggest business challenge this week: the economy
Answer:
The economy falls into the category of business factors called “macro external forcing functions.” Macro external forcing functions are things outside of your control that affect your business. They almost always affect other businesses around you and typically also affect the personal lives of the people in your community. Depending on the factor, they can also affect your state, region, nation or the entire world.
The key phrase in all of that is: “things outside of your control that affect your business.”
By definition, an external forcing function is one that is outside of your business and outside of your control.
It’s important to keep that in mind, as, at least for me, the most frustrating thing about having my business affected in this way is that I feel powerless to do anything about it. When we’re running a business, we usually want to at least have some level of belief that we’re mostly in control of our own destiny. A macro external forcing function, whether it’s the weather, new regulations, the unemployment rate or a commercial credit crisis, reminds us that we are often not in control of our own fate.
What can you do?
First, accept the fact that you are not in control of the external forcing function. That sounds obvious, and it is, but it is more important than you may initially realize. We can waste a tremendous amount of energy tilting against the windmills of an external forcing function, cursing the gods, the politicians, the bankers or whoever we can personalize as the source of our misery. Every bit of energy we put into cursing and railing against the external forcing function is time and energy we’re not putting into our business. So, first, come to terms with the fact that we are very unlikely to be able to alter the external forcing function itself. Instead, put that energy into your business.
Turn away from the windmills and back to the new reality of what exists today. Face and accept that whatever the new reality is, it is the reality you must operate in, these are the new parameters; this is the new normal.
The question to ask yourself is, “What can I do to reshape, reform and re-invent my business to be sustainably profitable in this new reality?” Do you need completely new products or services? Do you need completely new ideal customers? Or can you modify your value proposition to meet the needs of your existing customers within the framework of the new reality?
When you are considering those options, remember that it takes about 16 times as many resources to gain a new customer as to win repeat business from an existing customer. Your customers are the most valuable asset in your business, and they don’t appear on your balance sheet. That reality implies that it makes a lot more sense to retain your existing customers and offer modified or completely new products or services than the opposite.
That prospect, keeping your existing customers but completely changing what you sell, can sound intimidating, if not completely wacky. But consider the alternative. Would you rather keep selling what you are now with either no customers or to new customers you must spend 16 times as much to win? Or, would you rather retain your existing customers and sell them what they want to buy to meet their needs? Look around at the businesses that successfully weathered the storm of a major external forcing function and I think you’ll see that most of them focused on serving the changing needs of their existing customers; they did not stick stubbornly to what worked in the past.
So, when a macro external forcing function wounds, damages or destroys your existing business model, start by talking to your customers. What are their ongoing needs in the new reality? How can you meet those needs in a sustainably profitable way?
Waking up in the morning and learning that the world as you knew it is over due to a macro external forcing function is no fun. I’ve been there. But, it doesn’t have to be the end of your world. It can be a great new beginning if you view it as an opportunity rather than a disaster.
Remember the old adage, “An opportunity is a problem dressed in work clothes.”
It won’t be easy, but if you focus on your most important asset—your customers—and remain flexible and open minded about how you can meet their ongoing needs in a new way, you can come out of the transition in a much stronger position, especially relative to your competition, than before the world changed.
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