Are You Riding the Wave or Creating Your Market?

Date: 31 January 2017
Category: Core Management Principles
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In my Vistage workshops, I talk a lot about predicting the future. And in my last post, I outlined the process I use with CEOs to enable them to more accurately predict the future of their business.

I accept that it’s impossible to continually predict the future with 100% accuracy. But I’ve seen a lot of CEOs learn to predict their financial performance for the next 180 days with a high level of accuracy, even up to 90%. That’s not bad.

And it’s always fun to work with a growing business, when revenues are increasing, profits are increasing, and the celebration culture is off the charts! Yet sometimes, that growing revenue can deliver a false signal about your performance or the performance of your business.

How?

It’s important to understand what is causing your profitable growth. To do so, during your monthly SON communication meeting, listen carefully to the answers about your market changes, competitors and marketing and sales performance when you ask the question what information has come to light in the last 30 days that changes our view of the future?

Profitable growth is almost always a good thing for a business. It’s a result of overall demand increasing for your products or services. But dig deeper in each meeting and explore why the demand is increasing. Ask the following question:

Is my growth market driven, or is it due to the performance of our marketing and sales?

In growing markets, I see plenty of businesses that are growing profitable and creating happy owners and executives. But that growth is not always occurring because they are particularly well run businesses; they’re growing because their market is growing, and that opportunity is so big that it is pushing everybody with the market.

To use a surfing analogy, it was more about the wave than the rider.

If you’re riding a wave, life is good, but be careful about getting complacent in the good times; it can mask flaws in your business that could rear their ugly head when the market growth slows. Research your market to see how your growth compares to the overall market and your competitors. If you’re growing faster than both, you’re probably doing the right things. If you’re growing at 20% but the market is growing at 100%, you’re falling behind the competition. When that growth levels off, you could be in trouble.

If your market isn’t growing, or you’re growing faster than your market, then congratulations! You’re generating the growth from your own activities. That means that your slice of overall pie is getting bigger, and you’re taking market share from your competitors.

After you celebrate your success, talk about the reasons why you’re succeeding. Has your strategic marketing or tactical sales process changed? Marketing is planting and watering the tree, sales is picking the fruit – which is driving the growth? What’s happening on your pricing landscape? Do you see opportunity to increase your price because of your brand?

If you can identify the causes of your success, then double down on them to increase your rate of growth over the next 90 days. Your business will be stronger because of it.

And then look for the next wave to ride, and life will get even better.