Company valuations these days are based on potential, as much as book value- with the latter diminishing in importance as the unicorn wave sweeps by. Even once leading-edge technology companies such as IBM (IMB) and “tech darlings” like Facebook (FB) face an inevitable point of slowing, or declining growth rates. How then, do enterprises ensure their longevity in this rapidly evolving economic climate? In today’s article, we take a look at 5 steps companies, big and small, can take to ensure they remain at the top of their game for years to come.
1: Be prepared- Change is coming
The number one step to future-proofing your business is to be prepared for change. Don’t expect things to stay constant, and always be on the lookout for the latest trends and technologies. Processes are being disrupted at such a rapid rate that if you didn’t see a change coming, you run the risk of being left behind. Remember, if you don’t do it, someone else will. The truth is, things are happening more quickly than they have in the past, especially with technology, and this means- regardless of how successful your business is now, there is no room for getting comfortable. We’ve seen many businesses make the mistake of assuming they’re immune to disruption or competition, and eventually realizing their mistake when its too late. Take once iconic retailers like Sears, RadioShack and Toys R Us as prominent examples- these companies had billions of dollars in liquid assets alone at their peak, and the dominance of Sears was once thought to be untouchable. Despite this, or perhaps because of this, these brands failed to keep up with the times and eventually met their demise.
The “next big thing” isn’t always going to be obvious, but what is obvious is the need to be prepared. If your company is in its prime, that also means its in the best position to innovate- don’t wait till its too late; catch-up isn’t fun.
2: Don’t put all your eggs in one basket
History has shown that companies with only one offering (or a highly limited specialty) tend to struggle if their main market is disrupted. If your business has managed to create a top selling product or service, that’s great- and you’ve got good reason to be proud of the achievement. However, you don’t want to be a one trick pony. For large enterprises, a relatively cheap method of ensuring their continued relevance is to form partnerships with startups in emerging fields. For example, IMAGR works in close collaboration with brands such as Foodstuffs in an effort to deliver a smarter, more personalized solution for their customers.
You might have heard people complain of how difficult it is to communicate with the management of a large business- this is something you want to avoid. Purely from a business perspective, it is never a good idea to ignore feedback coming from your front-line staff, as they have a much more intimate understanding of what is being worked on, as well as ways for improving efficiency. Forming special project teams or partnering with startups (with an open mind) can be an excellent way of attaining tremendous value for only a small financial investment. However, partnering is just one step required in ensuring a successful transition of a new product, service or solution into an enterprise. It is essential that there is a clear path to market, with internal OKR measurements to attract new levels of attention and possibly investment from management to push this endeavor further and get real use out of it. At the end, companies like IMAGR are here to solve a problem, and being a startup, our goal is to solve that problem with the least amount of resources for our retail partners. For us, efficiency beats out brute force, and this is reflected in our product solutions. SMARTCART can be implemented at a fraction of what Amazon spends building a Go store, and it is available for everyone! Embracing the latest technology is a safe method for ensuring your enterprise doesn’t get left behind in our rapidly evolving economy, and we are confident products like our SMARTCART will revolutionize the world of retail.
3: Listen to your customers- they are the ones paying you
Today, more than ever, customers are empowered to make decisions which impact them and their experiences. From a business perspective, it isn’t mandatory to listen to every request coming from your customers- the truth is, customers don’t always know what they want. A part of your job as a company is to convince your customers of what they want. This needs to be done carefully however- the objective is to retain existing customers and acquire new ones. At the end, if you want to extract money out of discerning customers, they need to feel like they’re being listened to (rightly or wrongly). Most companies don’t have such loyalty that they can get away with not listening to the very people who are paying them, so creating a positive perception is certainly a good idea. Simple (and relatively) cheap steps can be taken, such as providing an easy way for customers to express their opinions, or lodge complaints. A common problem with big companies is the extreme difficulty in reaching them when something goes wrong. In the past, this might have gone unchecked, as it was too difficult for customers to jump ship- but these days it has never been easier for customers to abandon companies who do not provide a smooth, personalized experience.
That last point about experience is the main focus of IMAGR. Our goal is to revolutionize the way people shop, by providing a smarter, more personalized solution that eliminates one of the biggest obstacles to a positive shopping experience. Price is one way to compete- but when it comes to experience, research has shown a willingness by customers to pay a premium if they receive a superior experience. This isn’t to say our SMARTCART is more expensive in any way (its actually 6X cheaper than a traditional checkout), but the point stands. The moment price sensitivity is diminished is when the experience is improved. Building a sustainable and future-proofed business requires an acknowledgment that it isn’t a race to the bottom- price is only one factor.
Expanding on the aforementioned point of listening to your customers and improving their experience, technology has allowed far greater and more accurate tracking of customer behaviors. This is achieved through the harnessing of big data, a technique which allows precise monitoring of what works and what doesn’t. Traditionally, gauging customer preference has been done through surveys- which are quite ineffective. With big data however, companies essentially gain the ability to look into their customer’s minds, and this paints an exceedingly accurate picture their behavior.
4: Build recurring revenue
Whatever you call it- recurring revenue, contractual revenue, evergreen revenue; it’s always better if you only have to make the sale once to get a customer on-board. We acknowledge that not all business models allow for recurring revenue, but things like subscription services are often seen as the way forward these days.
According to Chris George, chairman of the board of the Subscription Trade Association, there are now more than 5,000 subscription-based businesses, in industries as diverse as pet food and razors. The reason companies are shifting towards a subscription-based business model is due to the ongoing income it provides, which results in cumulatively higher revenue. (for example, while you might be able to sell a license for your software for $100, it’s better to sell a monthly subscription for $10 a month). Such a business model reduces the upfront costs, while increasing overall revenue. (You couldn’t sell the license for $120 even if you wanted to). Utilizing a monthly subscription provides a greater level of certainty in terms of how much money the company will make, and instead of chasing individual sales each time, the focus can be turned onto increasing the total subscription base.
“There are some very small players who are uncovering various niches,” says Jon Wood, global knowledge management director for Kantar Consulting North America, a specialist growth consulting firm in New York City. The most successful companies are those that apply careful market research to solve customers’ problems, Wood says.
Examples of brands using a subscription business model include Microsoft, Adobe, Netflix, Dollarshaveclub, among many others.
5: Customers aren’t the only ones who can jump ship
The final point relates back somewhat to the first step we talked about. The objective of any for-profit business is to create value for their shareholders, and this is usually done through “making money” (whatever that means). We mentioned how various industries are being rapidly disrupted, and how easy it is for customers to jump ship. Well, the truth is, there might come a day when your enterprise also needs to jump ship. Not all industries will survive going forward- and if you are in one of those industries, its best to look into your options while you’re still in a healthy financial position, as opposed to waiting until the bitter end. This might seem obvious, but it obviously isn’t… (Remember how we talked about Kodak, Nokia, Sears, etc?)
At some point, it becomes a matter of capital allocation. Numbers don’t lie, and profit can be achieved in various different ways. If you look at truly long-lasting companies, how many are still doing today, what they did when they were founded? How many of their original industries still exist to