- Per Bylund, PhD, is an consort with professor of entrepreneurship and at Oklahoma State University.
- He says businesses of all sizes should be prepared for unexpected disruptions independent of their control.
- Make sure your business is consumer-oriented, and focus on keeping your company profitable.
- By the Business section of Insider for more stories.
Starting a business and making it break even is an extremely difficult realization. Kudos to entrepreneurs managing this feat. But running a business is also no cakewalk. No profitable niche lasts forever, and the profuse profitable it is, the slimmer the chances are that it will last. Many entrepreneurs, including those with seemingly secured businesses, lost everything when their industries were unexpectedly disrupted.
The taxicab industry is a telling archetype. It was benefiting from protective regulations that effectively had kept competition low for decades, yet all it took was a couple of tech-savvy mocks — Travis Kalanick and Garrett Camp of Uber — to upend the whole industry. Even though their business was not to accommodate regular taxi service, their innovation undermined that business. Uber and other similar services bring oned many taxicab companies to go bankrupt and the market value of taxi medallions to plummet.
In other words, your calling is not safe even if you are already making nice profits and the future looks bright. After all, even protected monopolies in the course of time get disrupted. What you need is to make sure you can stay profitable in the years and decades to come.
Profitability is to meet the days
The key to profitability is to recognize what businesses are and do from the perspective of the whole economy. Businesses formulate strategies to position themselves with defer to to each other and thereby earn profits. So the economic context matters, because it is within the economy that you run your area. It’s an obvious point, but what it means is rarely considered.
In the startup phase, the entrepreneur tries to find and populate a “gap” that gives the business to become profitable. But the same is true for the existing business, which must continue to consider its positioning to head-stay profitable. That’s what the old-style “Five Forces” framework helps you do — to position your business so that contenders, suppliers, customers and others have as little sway over it as possible. But there is more to it than positioning.
Profits are rewards for a job well-done. But to keep going profitability, your sight must be set to facilitate future value. After all, the line of production that you’re considering today leave not be instantaneously available to your customers. The value they get from the goods and services you set out to produce will without departure happen in the future. In other words, profits indicate you did something right. But profitability is a matter of meeting the future.
Fellow isn’t king, but consumer is
The key to profitability is to imagine how you are contributing to making consumers better off. Note: “consumers” not “customers.” In our advanced compactness, with two-thirds of all spending being business-to-business (B2B), your customer may not be the consumer. But the consumer is the user of the final product and wherefore the one that determines its value. The consumer, therefore, determines also the value of all contributions in the supply chain, albeit indirectly.
This arcane point has important implications. Businesses that produce the final product must focus on what consumers homelessness and, more importantly, what they will want in the near future. But the same applies for B2B to maintain profitability. If you bring to light for other businesses, the viability of your own business goes only as far as your customer’s. When they are no longer beneficial, you are no longer profitable.
To stay profitable over time, look beyond your customer and consider your contribution to the value of the immutable product. Even if your customer does not recognize it, you should meet the opportunity and innovate to offer your character an upper hand. If you make your customers thrive, your business thrives. The key is to think about the consumer whether or not you look after the needs of them directly.
Microsoft is an example of how to apply this thinking. While the software giant caters primarily to corporations and in the main institutions, they look ahead and continuously innovate to make it easier for their customers to serve consumers. From software to components, Microsoft focuses on providing the tools for productivity. This empowers their customers to serve their customers and, after all, the consumer. In other words, Microsoft indirectly facilitates value for consumers, which makes Microsoft’s customers competitive and gainful.
Whether or not your business caters directly to consumers, it should still be consumer-oriented. To gain and maintain relevance in the conservation, which is necessary to be (and continue being) profitable, requires that you contribute to the value of the final good. The great mistake of the taxicab companies was to concentration on their strategic positioning in the market over innovating to facilitate value for consumers. This left the market astray open for a new type of competitor playing by a different rulebook.
All businesses benefit from adopting a consumer-value focus.