Many of you may be familiar with Michael Porter’s famous work of the same title, on understanding business models more effectively. Porter’s book remains relevant and in 2016, our Chairman Kevin Uphill published “Creating Competitive Advantage in Dynamic Markets”, to address the question of how you stay ahead with your business model and strategy when markets evolve so quickly that your plans are outdated before they have even been put into action.
Given the subsequent disruptions of Brexit, COVID-19, and the war in Ukraine, perhaps Advantage in Volatile Markets would have been a more fitting title. Eight years later, potentially with some economic stability on the horizon — UK Plc has seen the fastest growth in the G7 group in recent months. Whilst this is a positive achievement, it should be noted that growth for UK Plc has been elusive over the past five years and the question now is: “How can we achieve competitive advantage in unpredictable times?”
Just as the UK economy must become more productive to create effective, profitable demand, businesses must adapt their models to market trends instead of resisting them. I believe that aligning your business model with the current market conditions is key to success. The most effective strategies for achieving a competitive advantage begin with a clear assessment of your current situation. Put aside past assumptions, history, and any associated baggage and instead, ask yourself: “So, now that we know what works and, most importantly, what does not, how can we run a more effective and higher margin business?”
Steve Jobs once said, “Let’s go invent tomorrow rather than worrying about what happened yesterday,”. His forward-looking mindset resonates in today’s world. There is opportunity out there, but to seize it, we must shift our perspective. In this regard, smaller businesses have an edge over large corporations as whilst they may lack resources, their agility allows them to adapt more quickly giving them a competitive advantage.
These are challenging times, but a growth mindset can triumph in adversity. Consider what acquisitions or new services might help you engage your customers better, what strategies will align with their evolving needs and desires, and what technology can make you more effective.
Markets can shift rapidly, yet many leaders fail to anticipate market changes effectively. A useful technique is mapping the “line of probability.” This involves identifying the historical steps that have brought you (and your sector) to this point and projecting forward with assumptions for the next five to ten years.
For example, will virtual reality become the future of kitchen showrooms, allowing businesses to reduce showroom square footage? If VR headset prices drop, why not invest in 100 units, send them to customers, and close the physical showrooms altogether?
In the “line of probability,” we also consider macro trends, such as what is happening in the wider world and micro trends, such as customer behaviours, preferences, and demographics. Are your customers getting younger or older? What is your data telling you about their interests? By understanding these trends, we can determine the new products, strategic alliances, acquisitions, or territories needed to drive our businesses forward.
If we can envisage the line of probability for tomorrow, we can begin to shape it, as Steve Jobs suggested. Henry Ford famously said, “Whether you think you can or you think you can’t—you’re right.” In other words, despite the challenges we face today, if you believe in your ability to create and design positive outcomes in your business, you will, but the first step should be a detailed and objective analysis of where you are.
This can be a challenge for many owners therefore outside help is recommended. Even private equity, who have succeeded against a world of cheap money, are going to have to learn to be better operators. An easy statement, but what does that mean for the team in terms of their business model?
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