Too many companies create their strategy in a vacuum. To be successful, you need to consider and react to these external factors.
If you want to grow quickly and successfully, you need a solid plan that positions you well in the market and gives you plenty of business opportunities. Strategy is fundamentally about how you are going to respond to what's happening in your market and what your competitors are doing. If you're only looking at what's happening inside your company, you'll miss the bigger picture and many of the great opportunities--and risks--that are out there.
Developing strategy is one of the main things I do with leadership teams as we plan for how they are going to scale and grow their businesses. When we conduct our strategy sessions, we start with a broad assessment of the external factors that we need to look at. From these, we can pull insights, predictions, patterns, and trends that are going to play key roles in the decisions we make about where we go.
Knowing what's happening in your customers' business and having insight into their market is critical. Ask them how things are going, what they are worried about, what their big plans are, and where they are investing their time and energy. Look at your best customers and worst customer and see what they are doing differently.
Beyond your current customers, what are your prospects doing? Try to understand why they are the not buying, what else are they buying, and how it is different from your product or service. Look at what criteria they are using to make decisions and what channels they are buying through. See if you can develop insights into what's preventing them from buying.
3. Direct competitors
Knowing what your competitors are doing is critical. Have they launched or announced new products or services, made key hires, or opened new locations? One of the best sources of this information is the people who have recently left said companies. If you're connected to someone who just left, take them out to lunch and see what you can learn.
4. Indirect competitors
Too many teams only focus on direct competitors. Instead, you need to consider all of the options your customers and prospects have to solve their problems. Don't forget that coping with the situation is a viable option for some of your current and prospective customers. Knowing the options that these people are considering is key to positioning.
Knowing what's happening in your local market is critical. And if you're in multiple markets, this is even more important because it's easy to become blind to local conditions that might impact your business. Understand what's happening on the ground in the place you do business.
Stay aware of shifts in your industry that will impact you and your business. If everyone else is moving staff from 1099s to full time hires, this will impact access to talent and the expectations of your potential employees.
Staying current with the changes in the underlying technology and the infrastructure of your industry is critical. Many companies have gone belly up or been swooped up in acquisitions because they missed a key shift in technical trends. These tend to happen quickly, so suss them out early.
If you're a growing company, access to good talent is critical. Understand what's happening with salaries, benefits, and who else is competing for the same people you are. If labor is tight or expensive, it will hinder your growth and cut into your margins.
Macro issues like interest rates and general economic growth will impact the business environment. But you should also pay attention to how these impact your specific industry. For example, interest rates will impact real estate, which will hit construction, which means building supplies will be less in-demand.
Politics define policy which can have a significant impact on business conditions. New regulations or changes to existing ones can make or break businesses. Make sure to look beyond national politics; pay attention to state and local issues because hese can often fly under the radar.
Trends and movements can change customer expectations, behaviors, and priorities. And sometimes this happens more quickly than we anticipate. Companies that respond quickly can take advantage of the slower competitors and gain market share.
While there are others you can, and should, consider that are unique to you business, these twelve factors are a good starting point. By collecting what you know about each of these you'll be better informed and will make better, more insightful choices about the strategic moves you plan to make. Good teams look at all of these on a regular basis to catch changes that can have a big impact on the business and help them take advantage of opportunities and avoid pitfalls.
This article was originally published on Inc.com: https://www.inc.com/bruce-eckfeldt/12-external-factors-you-need-to-create-an-effective-business-strategy.html