For
many US businesses, one story has played out repeatedly over the past several
years: lower revenue and higher earnings. Investors may cheer the short-term
results, but it's unsustainable
over the long run. Eventually, the cost-cutting must end, and value must be
created.
For any business owner, the opportunity to cut costs is a constant obsession,
and the slow economic recovery we've been dealing with just makes cost-cutting
an increasingly urgent concern. While cutting any unnecessary cost is good for
a business, long term, sustainable value creation depends on constantly
renewing and demonstrating a business's value to existing and potential
customers.
Managers must evolve their
business plans to meet customers’ changing needs. Every business, if it wants
to grow, needs to identify how customers’ behaviors change and how this creates
new markets—large and niche—that are as yet untapped. This goes for companies
large and small.
Are
you missing new opportunities?
It
is crucial for businesses to understand how they can leverage their customer’s
additional needs to produce new revenue streams. This can be done in many ways.
It may mean offering more services, tailoring existing services to further
serve customers' needs, or adjusting pricing tiers in a way that makes the
product or service better for customers while augmenting the business’ earnings
potential.
At
the Argyle Executive Forum in 2009, I discussed the need for companies to
leverage existing capital to create new business opportunities. These
priorities are even more pressing today. Instead of cutting costs to boost
earnings, businesses should evaluate untapped markets by bringing a fresh
perspective to their existing business models.
Bringing the product to market
You and your business need
to completely understand its entire supply chain, from production to delivery
to service, before embarking on an initiative. This
is why it is so important to leverage and build on existing business practices.
Market experience can guide you, and make it possible to address the market
with your new product or service quickly without sacrificing quality or
introducing unnecessary friction into the process.
Some friction will arise—it
always does. Fortunately, a disciplined focus based upon institutional experience
can minimize risk and keep you ahead of potential problems. When you leverage
your existing business model, you can apply the lessons you've learned in the
past to your new venture. If it's entirely uncharted territory, try to learn
from the mistakes and successes of the most relevant businesses. That
is one of the cheapest and easiest ways to avoid foreseeable mistakes and turn
those lessons learned into success.
Identifying core
competencies to drive product or service conceptualization is the first step.
The next step is identifying potential challenges in the design, production,
and distribution stages in advance of constructing the business model and go to
market plan.
The new economic environment
has made margins thinner, competition stronger, and profitability more
difficult—but by leveraging your existing intellectual capital, you can
identify new opportunities, create value, and bring new products to new niche
markets faster and more successfully.
