Best Business Expert

When the economy is strong, many businesses think about how they will to meet the next order with the resources and raw materials available. When the economy weakens, it sometimes becomes a question of survival. But, how matter what the economy is doing, our businesses are always at risk… even if you’re running a highly profitable business in an in-demand industry today, it could go sour tomorrow.

I’m not saying that to be negative, but rather to be realistic. Consider how the print industry has changed over the years and is now struggling to survive and find a new identity in the midst of web-based changed. Or, if you happen to read a book written pre-2000 about using the internet, you read about the "big names" in web search… none of which seem that big any more. (Who is Alta Vista?).

Business strategy guru Michael Porter developed a tool in the mid-eighties that helped to guide businesses to think about risks and threats to their survival. It was called the "Five Forces Model" and you can read about it here.

As good as Porter’s model is, I’ve become a fan of an updated model, called the "Corporate Survival Model" developed by A.S. Grove in the late nineties. Grove identifies 8 threats to corporate survival and each business would do well to review each of these threats and brainstorm ways to mitigate them.

In no particular order, the threats to corporate survival include:

1. Potential entrants – the threat that new businesses will come along which can out-compete for your customers. Example: Google.

2. Lobby groups – the threat that organizations can change attitudes and buying habits (or help to create legislation that do the same thing). Example: The increase of eco-awareness that has changed how many businesses do business.

3. Buyers – the threat that buyers will have a lot of power to demand increased service and/or lower prices. Example: We’re seeing this right now in the recession because businesses are desperate for buyers which give those buyers a lot of power

4. Complementors – the threat that your allies in business (i.e., businesses who sell complementary products) will continue to provide products that complement yours. An example might be VCR manufacturers. They made VCRs as long as the film industry puts movies on tape. But when that stopped, the market for VCRs diminished.

5. Substitutes – the threat that something better will replace your product. Specifically, this goes beyond the threat of potential entrants to include substitutes outside of merely buying from the competition. Example: If people take the bus to work instead of buy a car to drive to work.

6. Fashion and Fickleness – the threat that whatever you sell will become less popular (or even unpopular). Example: Today’s celebrity fashions are often tomorrow’s "Discount Bin" purchases.

7. Suppliers – the threat that suppliers will have a lot of power. This often happens in really good economies where their raw materials are in high demand. Example: Just look at what’s happening with the auto industry today. Car manufacturers have an abundance of cars that no one is buying, and the dealerships, who are down the supply chain, are suffering because of it. But in good economies, it works the other way!

8. Ideology and policy – the threat that the government will make legislative changes to positively or negatively impact business. Example: Legislation involving airlines in the wake of 9/11 was effective to help improve national security, but that people-focused legislation added another layer of challenge to couriers who shipped by air and require tight turnaround times on the ground.

This week, think about how each of these factors can threaten your business’ survival and consider what you need to do to reduce those threats.

Contemporary VA

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