Building a Better Business
The better business is as much about the business itself as it is the product, service, or technology provided. Without a sound business model, the ability to produce, sell, and deliver the product to the customer—consistently and with quality—competing against other product offerings and other businesses is an uphill battle at best. The successful business, the better business, has to be able to distinguish itself from the multitude of other offerings, not only with its products, but also by how it does business and serves the customer.
Profitable and with a Competitive Advantage
From product design to customer service, the better business must do business profitably. To accomplish this it must have a competitive advantage, through intellectual property protection, cost of production, or some other aspect of “doing” business.
The exact definition of a “better business” may be a subject for debate. But the case can be made for the definition to include steady growth of revenues and profits. It also can be argued that comparatively a business that has a higher return on existing resources versus its competitors, industry standards, or current economic conditions indicates “better” performance. So typically a better business has:
A competitive advantage
The ability to generate stable and/or growing revenues
The ability to generate sustainable profits
Positive cash flows
An ability to maintain its existing asset base at optimum capacity and efficiency
The capability to add to capacity as needed to support growth
An ability to generate opportunities
The resources to compete.
The Ability to Compete for Resources
Not only does the better business earn a return on its existing resources, it also has the capacity to obtain additional resources when needed to replace existing capacity (worn out equipment and departing employees) and to grow (new capacity, skill sets, and employees). How the organization is able to generate the capability to invest and finance operations is a function of many factors, including:
Stage of business development
Amount of capital needed
Stage of products/services
Operational cash flows
This better positioning to compete successfully for resources is a function of the business’ ability to convey its potential and actual returns that exist to prospective stakeholders (e.g., employees, vendors, investors). The potential is encapsulated in the ability to pay a fair wage to its employees and its desirability as a place to work, with opportunities to advance, a safe working environment, job security, a productive environment, an ethical company culture. Competitiveness also includes the ability to develop new products, services, and markets for its business
Competitive Capability in the Business Infrastructure
Competitive capability also balances the business with the product, recognizing the need for a strong infrastructure to be behind the “product” that is being delivered. It is able to constantly and consistently monitor the internal and external environment for risks and threats to its core systems and beliefs, to maintain its ability to survive and thrive. Moreover, the organization has to have the capacity to assess the risks and potential of continuing existing lines of business and practices as well as pursuing new opportunities and alternative markets and models of operations.
A Strong Core
One lesson that has been learned by better businesses is to stick to the core competency and not get caught up in the need to be bigger at any cost. The better businesses understand what they are good at and how they achieved success. They wisely craft and pursue growth at a pace that they can fund (keep in mind that growth requires cash) and that they can manage (today and tomorrow). They also grow in areas that they know, that are complementary to the organizations skill sets and business, or that are necessary to the business (providing resources or strategic advantages, providing more competitive means).
What does the better business NOT do? It doesn’t get caught up in the “bigger is always better” mentality. Better businesses don’t race to be the biggest at any cost, especially at the sacrifice of profitability. Being number one in market share, doesn’t mean much to the better business if it doesn’t also mean being number one in profitability and having positive cash flow. If you won’t have the capability to pay the bills and you put the organization’s long-term viability at risk to be “number one,” then it is better to be number two and profitable, viable, and sustainable … and wait for number one to not be able to sustain its position.
The better business is in business for the long run—building, growing, and making the right choices to create a business that won’t find its foundations crumbling under bad economies, credit crises, or other momentary stumbles. The better business has loyal customers, dedicated employees, and a core strength that sustains it through the tough times and reaps the rewards during the good times. Do you have the better business?
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