Find out where the growth is
Tuesday, August 24, 2010/
Business sectors are never stable. They are subject to change from new technologies and innovations in processes and business models, new regulations and the constant flux of competitors entering and leaving.
Without exception, there will be parts of the sector declining while other parts are growing. Even industries in decline will change as demand consolidates and the replacement market takes over from new sales. What is important for the business owner is to understand these changes and ensure they are part of the growth activity.
Growth is often unstable as a market attempts to settle on a specific business model, process or technology. During that period, those companies which are part of the growth activity experience excess demand, allowing them to try different products and approaches in the market and to make mistakes and survive them. Not so in the declining sector where cutthroat competition is the norm and businesses are desperate to gain as much business as they can to cover their fixed costs. In a declining market, businesses compete on price where discounts, rebates and promotions eat away margins. Far better to seek out the growth spots and work to be part of that activity.
Growth segments can often be predicted. When you see new regulations coming, they will drive changes in the industry and create demand for new products or business models. Innovations supersede older products creating a demand for the new and a business disposing of the old. The internet has broken the supply chain of many industries, creating new pockets of demand through new forms of business models where customers connect directly with suppliers.
Innovative companies look for growth opportunities. They monitor changes within their own sector to see what is happening and are proactive in seeking out growth opportunities. As an example, most sectors have national and international trade conferences and exhibitions where trends are discussed, new products are put on show and businesses look for new ways of connecting to suppliers and customers. These are places where growth opportunities can be spotted and often captured. Many local businesses take the opportunity to sign up agencies for emerging products so that they can catch the next wave of demand.
While you can be lucky in business and be in the right place when demand increases, this is something which you cannot rely on. You need to take control of your growth opportunities. Periodically you need to review your sector and identify the changes taking place. Even a simple question like -‘what has happened since we last discussed the industry?’ can throw up insights into changes which need to be reviewed. People within the business need to be sensitive to changes and bring them up for discussion. Such a discussion should be directed at spotting growth opportunities. Without a specific objective, such changes are simply of interest but don’t lead to action.
You may need to take on several initiatives to find one which is sustainable. What is clear is that if you don’t try, there is no reason to suppose you will find anything to drive your growth.