You have your business strategy all laid out, and you feel like things are looking up, but will it always be that way? You started up your business based on some assumptions, but what if things change? What if a new technology comes along and makes the widgets your company produces obsolete? To be successful in small business, you need to be able to assess the strengths and weaknesses of your business strategy accurately, but how?
Lay Out the Assumptions
According to a survey in McKinsey’s Quarterly, most executives said their company’s strategy passed less than 40% of the tests. Business strategy is all based on a particular set of factors, or assumptions, that are made about the industry at a given time. It’s important to recognize those assumptions for what they are – assumptions. These assumptions are generally accepted as the trajectory based on current industry trends, but as we all know sometimes we miss the mark.
Plan for the Worst
What is the worst that could happen? Have a scenario in mind? Good. Now, let’s assume that this scenario is a reality. Think about what your business can do to prevent to at least mitigate the adverse outcomes in that situation. Look similar industries and research their evolution, using that data brainstorm several scenarios that could occur in your industry.
How Bad Will It Be and Will It Really Happen
Now that you have an idea of the different scenarios that could play out for your industry and company, use a graph and plot out a) how much impact it will have on your current strategy and company and b) how likely is that scenario to become reality.
Once you have those two factors graphed out you will have visual that allows you to look for capability gaps. When you see areas of your business that struggle in multiple scenarios, those are the areas you want to prioritize your focus on and maybe even invest strategically in those areas.
Don’t Forget the Positives
It’s not all gloom and doom. Working through the stress-testing process not only helps you discern the challenges you may face, but it also allows for the discovery of unidentified growth opportunities or new investments. Keep an eye out for ways to gain a competitive advantage. You may just find new things to incorporate into your company’s business strategy.
Moving forward after stress-testing your strategy, continue monitoring trends in the industry and the capability gaps you identified. It’s also important to remember that stress-testing is not a once and done process. You will want to revisit this process on an annual basis to ensure the long term health of your company’s business strategy.