Here's a 3-Step Exercise to Determine Growth--Driver 7
In the last several posts, I’ve been covering the seven business drivers. In order, they are: you, the strategic team, employees, customers, investors and creditors, cash and now growth. Under each driver flows a unique set of KPIs for each department of the company. In this e-mail, I’m going to focus on the last driver, which is growth.
The axiom, “if you aren’t growing, you’re dying” is a pithy phrase that sums up everything I’m going to say as well as just about every business book ever written. I haven’t yet coached any business owner who did not agree with this fact.
That said, there’s been a very popular blind spot in many of my clients that deceived them into thinking that just because they are growing revenue, profits or both, that they aren’t “dying.” It’s true—you can grow and shrink in business simultaneously.
How? Market share. Most small business owners I’ve met do not pay attention to market share. Market share is the single most important growth variable to track. Why is that? If you’re growing market share, then you are truly growing. If you’re company is losing market share, then it is dying—even if it is profitable.
Think about market share this way: Market share is a piece of property you defend. While on this property, you can be healthy, happy and loving life. Little by little, however, the ocean erodes your property until it’s nothing more than a tiny island. Eventually, the island disappears and your company with it—either through acquisition or going out of business. The erosion process can be subtle and the ocean waves can be generated from a variety of sources, not just your competitors.
To that end, what is a competitor? In 2018, the main competitor EVERY company is facing is technology. Technology is eroding more market share and putting more companies out of business than anything else. Look at the Whole Foods sale to Amazon. Whole Foods, the multi-billion chain of health food stores was highly profitable when it sold to Amazon. It sold because it was losing market share and knew the technology-rich online retailer could put it out of business. Amazon may be the most obvious example of a company that has used technology to erode market share—more than 50% of all online commerce now goes through Amazon—but technology is eroding and transforming every aspect of our life. State Farm Insurance in 2018 announced it was now a technology company, not an insurance firm.
What technologies, if used by your competitors threaten to erode your market share? Is the product or service you are currently selling on the chopping block of a technological disruption? Is your competitor deploying technologies that help them work faster, better, or cheaper than you do?
Here’s an exercise to do:
1. Determine your current market share. How big is the size of your market (local is fine) and what are your revenues?
2. Calculate this backwards for the last three years.
3. Are you growing or shrinking?
Now, let’s add a twist of complication: Is your market growing or shrinking? If you are growing in a shrinking market, the question is why stay in that market? Think of Kodak. That film giant remained steadfast it its belief that digital photography would never replace film. Oops. It grew its market share in film only because others were jumping off the island as the waves of technology eroded that market almost entirely.
I’ll be covering a lot more about growth in my next book The Seven Business Drivers. For now, however, take some time research the plot of land on which you reside.
Are the waves crashing in at you, or are you the waves?
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Interested in executive business coaching or joining a group of your peers in the 8/6 Club? Write me at: peter@livefused.com.