Business... Are you 'making the magic happen'!

Within my role as a consultant, business coach and mentor, I’m often asked what enables some business to succeed whilst other always seem to be on struggle street ? In our current world of turbulent and uncertain times, there now appears more businesses than ever including banks (the bastion of society and business) falling within the latter classification.

It's important to note that the failure rates can vary across different industries, regions, and economic conditions. However, it is commonly cited that a significant number of businesses do fail within their first five years of operation. Here are some key statistics and evidence:

1.  Small Business Administration (SBA) Data: According to the U.S. Small Business Administration, about 20% of small businesses fail within their first year, 30% fail within the second year, and by the fifth year, approximately 50% have failed.

2.  Dun & Bradstreet Study: In a study conducted by Dun & Bradstreet, a global business analytics company, they found that 90% of small business failures were due to a lack of skills and knowledge of the owner, including poor financial management, inability to control costs, no strategic vision and a lack of business planning.

3.  CB Insights Analysis: CB Insights, a venture capital database and research firm, analysed over 100 startup failure post-mortems to identify the most common reasons for failure. Their findings revealed that the top reasons included lack of market need, running out of cash, poor team dynamics, fierce competition, and pricing / cost issues.

4.  Harvard Business School: A study conducted by the Harvard Business School analysed data from over 2,000 venture capital-backed startups. It found that approximately 75% of these startups did not return investors' capital. While this study focused on venture-backed startups, it provides insights into the challenges faced by new businesses.

Additionally, the definition of "failure" may differ, with some businesses shutting down completely while others may experience significant setbacks or pivot their operations. These statistics should be considered as general trends and not definitive measures of success or failure for any individual business. 

Historically though, its proven that those businesses who "make the magic happen " and become successful, essentially share several key factors that are important elements of their organisations strategic thinking:

They almost always have …

1.  Clear Vision: All businesses large or small need to have a clear vision of what they want to achieve, both in the short term and long term. This includes defining their mission, establishing values (guiding principles), and goals, and ensuring that these are communicated effectively to employees and stakeholders.

2.  Entrepreneurial Spirit: Small business owners in particular need to have an entrepreneurial mindset, which involves being willing to take risks, innovate, and adapt to changing circumstances. This can help them to identify opportunities, overcome challenges, and stay ahead of their competition.

3.  Strategic Planning: Although small businesses may not engage in formal strategic planning as frequently as larger organisations, they still need to have clearly defined strategies with action items supported by a plan for achieving their goals. This can involve setting priorities, allocating resources effectively, evaluating plan effectiveness and monitoring progress towards their identified business objectives.

4.  A Focus on Customers: All businesses need to prioritise their customers and ensure that they are providing value and meeting their needs. This includes understanding their target market, providing excellent customer service, and continually improving their products and services. I often say to clients when we discuss customer experience that YES, the customer is the most important person in your business, try staying in business without them!

5.  Agility and Flexibility: In today’s volatile markets all businesses need to be agile and flexible, which means being able to respond quickly to changes in the market, customer needs, or internal operational factors. This can involve adapting their business model, changing their product or service offerings, or pivoting their overarching business strategy altogether.

6.  Strategy and Culture Alignment: All businesses need to have a strong team of employees who are committed, skilled, and aligned with the company's vision and values. This also includes being a stakeholder in the business’ strategy discussions and working as a team to identify success metrics. These outcomes are achievable through targeted and ongoing training and development, empowering employees to make decisions, and fostering a positive, inclusive, and supportive workplace culture.

Overall, the concept of growing a business to "make magic happen" requires a combination of strategic thinking, a laser customer focus, agility, and a strong team culture that is aligned with the company’s vision and strategic priorities.

So, what is the definition of strategic thinking?

Strategic thinking can be defined as the ability to think creatively and critically about the future, in order to develop a clear vision and direction for an organisation. It involves analysing complex situations, identifying opportunities and risks, and developing innovative and targeted solutions to achieve long-term goals.

Strategic thinking is not just about creating a plan, but also about being able to adapt to changing circumstances, to be proactive and make informed decisions in a rapidly changing environment. It requires the ability to consider multiple perspectives, anticipate future trends, and assess the potential impact of decisions on different stakeholders.

Strategic thinking is an essential skill for business owners, leaders, and managers who need to navigate the complexity of an uncertain future, and to make decisions that will help their organisation thrive in the long run. It can be developed through experience, exposure to diverse perspectives (an advisory board or business coach), and by practicing structured approaches to problem-solving and decision-making.

The most important aspect of strategic planning though, is the actual implementation and execution of the plan. This is where over 60% of organisations large or small fail and get it wrong.

Here is a table outlining some of the consequences of poor strategy execution:

It's worth noting that these consequences are not exhaustive and may vary depending on the specific industry, market, and size of the company in question. However, they provide a good overview of some of the most common risks associated with poor strategy execution.

Here is a simple diagram showing the necessary processes required to  ensure strategic success, the four key elements include strategy development, implementation, monitoring, and reporting elements:

This strategic planning process starts with strategy development through stakeholder consultation, where a company determines its goals and objectives, and formulates a plan for achieving them. It is imperative that strategic objectives align with the organisations vision and are supported by the enlivenment of the organisations core values. This process may involve conducting market research, analysing your competition, identifying opportunities, assessing viability, and identifying internal strengths and weaknesses.

Once the strategic priorities have been developed, the plan is assessed for potential risks, and an implementation (operational) plan is created. This involves identifying how the plan will be put into action, which may involve making changes to existing business processes, hiring new staff, or investing in new technologies.

To ensure that the strategy is working effectively, the third and often overlooked element is the importance of monitoring the plans progress. This may involve collecting and analysing data on key performance metrics such as sales figures, customer satisfaction ratings, employee satisfaction, and productivity.

Finally, the results of the monitoring process are used to create reports that provide insight into the effectiveness of the strategy. These reports may also be used to identify areas for improvement, adjust the strategy as needed, and communicate progress to employees and stakeholders.

There are several reasons why many small to medium-sized enterprises (SMEs) may not engage in strategic planning as frequently as larger organisations, however statistically it is proven that those business that invest time and resources in planning have a much higher success rate than their peers. Typical excuses for not planning include:

1.   Limited Resources: SMEs often have limited financial and human resources, which means that they may not have the time or expertise to dedicate to strategic planning. Instead, they may focus on day-to-day operations and short-term goals to ensure their survival.

2.   Lack of Awareness: Some SMEs may not fully understand the benefits of strategic planning or may believe that it is only relevant for larger organisations with complex operations. As a result, they may not prioritize it in their business strategy.

3.   Short-term Focus: SMEs are often more focused on short-term results, such as generating revenue and meeting immediate customer needs. They tend to have a shorter day to day operational focus and are often in survival mode, meaning that they do not always see the value of investing time and resources into long-term strategic planning.

4.   Informal Culture: Many SMEs have an informal culture, with decision-making often done on an ad hoc basis, with the owner operator wearing many hats and also being the key decision-maker. This can make it difficult to implement a structured strategic planning process, which requires clear roles and responsibilities, may involve change management, and having other stakeholders involved.

5.   Lack of External Pressure and Influences: Unlike larger organisations, SMEs may not face the same external pressures to engage in strategic planning, such as compliance with regulatory requirements, meeting shareholder expectations, or pressure from competitors. This may make it easier to focus on day-to-day operations without considering longer-term goals and risks.

It's important to note that these reasons are not definitive and may vary depending on the specific SME and its circumstances. However, they provide some insight into why strategic planning may be less common among SMEs compared to larger organisations. It might also represent the well-known statistics that up to 50% of small businesses fail in their first two years, and over 60% never realise five years.

I penned the saying “make the magic happen” as a metaphor and call to action! There exists a lot of research providing anecdotal evidence supporting the notion that organisations with a clearly defined strategic plan and model for execution, almost always out-perform their industry peers and competitors.

Three such research summaries include:

1.  Harvard Business Review Study: In a study conducted by Harvard Business Review, researchers surveyed more than 400 global executives to assess their organisations' strategic execution capabilities. The study found that organisations that effectively executed their strategies had a 97% chance of outperforming their industry peers.

2.  Balanced Scorecard Collaborative Study: The Balanced Scorecard Collaborative, a research and consulting organisation, conducted a study involving over 250 organisations. They found that companies that effectively communicated and translated their strategies into actionable objectives and initiatives were three times more likely to achieve their financial targets compared to those with poor strategic execution.

3.  PricewaterhouseCoopers (PwC) Study: PwC conducted a global survey involving senior executives across different sectors. Their survey found that 93% of executives considered strategy execution as crucial to their organisation's long-term success. Furthermore, the found that organisations who were effective at executing their strategies were twice as likely to be the top performers withing their industry sector.

Looking at the above data, it truly highlights the importance of having a clearly defined strategic focus, but more importantly having an actionable operational plan that enables the facilitation and execution of the plan. So, my closing thoughts here suggest that regardless of the size of your business, whether it has less than 10 employees or has over 10,000, there is much value to be gained from having a strategic focus, that is strategic conversations that are regularly on the agenda and used to guide all business activity and key decisions in respect to long-term growth and sustainability.

If you want to improve your organisations triple bottom line, enjoy the spoils of your hard work, and ‘make the magic happen’ in the pursuit of your aspirational goals, a strategic focus and culture is the answer!

If you would like to have a deeper dive and explore a 30-minute complimentary conversation around your organisations Strategic Planning and Strategy Execution processes, tap into my Calendly diary here to lock in a time. Mark Jones Calendar 

Direct Contact details are:

Mark Jones on Phone: +61 (0) 428 727 076 or email mark@jenarkbusinesssolutions.com.au