Your Philosophy of Business
is Critical to Your Success
This article was originally published as a "Guest Commentary" in the Albuquerque Journal.
In a story titled "New Market, New Strategy" in the September 26th edition of "Business Outlook," Rosalie Rayburn reported that the profitability of the wholesale power market has declined precipitously from last year. Companies "whose chief business was trading and who didn't have a retail business to fall back on" unlike our own PNM have endured credit problems and widespread layoffs as a result.
Is your business stagnating or declining in a similar fashion? Or is your firm growing so rapidly that chaos seems the norm rather than the rule? Are you using a band-aid approach to problem solving with no, or less than desired, results?
You may have outgrown the "philosophy of your business"! Your philosophy of business (an idea discussed by Peter Drucker, 1994) deals with the basic assumptions you make about your enterprise and the environment in which it operates. You and every other business owner operate under such assumptions, whether you have a well-thought-out philosophy on paper, or an outline of one in your mind.
When a business gets into difficulty, even after having achieved a good measure of success, the reasons offered up include: the firm has taken for granted its market and/or its customers; the organization has become too large and unwieldy; the competition has increased; or the economy has slowed and no one else is any better off.
There may be degrees of truth in all of these reasons, but the real truth is more fundamental: the world in which you operate your business has changed, but your assumptions about that world have not.
THE ASSUMPTIONS
The philosophy of any business is composed of a set of three
basic assumptions:
- The environment in which your business will operate: This environment comprises your market; the structure of society (its demographics, values, behavior); your target customers; and technology.
- The mission of your business: What it is you stand for and what it is you will achieve.
- The specific skills the business will need to realize its mission, and succeed.
REQUIREMENTS FOR A SOUND PHILOSOPHY
The first requirement for a sound philosophy is that the three
assumptions noted above must fit reality. You must clearly
understand the make-up of the market in which you operate and the
specific capabilities you need to succeed in that environment.
The second requirement is that all three assumptions must be integrated. Each must build upon and support the other.
The final requirement is that the philosophy has to be examined regularly. The business environment can change rapidly, which may radically alter your assumptions.
WARNING SIGNS
What are the key signals that will warn you that the philosophy
of your business is "out of sync" with reality, and has outlived its
usefulness?
- Rapid growth, especially if your firm has doubled or tripled in size in a very short period of time. Failure to reexamine your original assumptions risks disorganization and fragmentation of your efforts, which could eventually result in loss of business.
- Achieving the objectives you originally set for your business, especially if you met your goals sooner than you expected.
- Unexpected successes or failures. It's time to pay attention if a competitor appears to operate as you do, and experiences success that you do not - or if you achieve a success that you did not foresee or expect.
PRE-EMPTING FAILURE OR THE UNEXPECTED
When things start to go wrong, the normal reaction is to deny
it, or to say, let's wait and see. When the truth does sink in, the
next reaction is to put band-aids on the problem and continue to do
so as crises arise. The result is a patchwork of solutions that will
miss the root of the problem.
Just as with a piece of machinery, you need to practice preventive maintenance on your business to avert serious failures. Extending this concept to the philosophy of your business means doing two basic things:
- Question every service, every practice, every product, every belief and every behavior. Ask yourself this: if we were not already providing this service, or making this product, or following this practice, would we start it now? You will be pushed into examining closely why something did not work. Were you doing or going about something incorrectly, or were you doing the right things based upon wrong assumptions? If what is in place is not working and cannot stand up under scrutiny, throw it away and rework your philosophy.
- Find out what your "non-customers" are doing. It is one thing to survey your own customers; but, if you can discover what your non-customers are doing, what they think, where they are going, and how they are doing it, you will be well on your way to producing a sound philosophy of your business. If you lack the time or expertise to conduct this type of research, there are professional marketing consultants who can help you.
The philosophy of your business is the foundation of your business, and it takes time and effort to build a solid one. Keep testing it, take the time and effort to get it right, and you will have built the basic structural framework for success.