Back then, carefully managing a few key metrics was usually enough to ensure the continued health of the business. As long as sales and revenues held steady or continued to grow, we could remain reasonably confident regarding the future of the business. And if we stayed current with emerging technologies and trends in our industries, we didn’t get blindsided by unexpected change.
Well, those days are long gone, and I don’t see them coming back anytime soon. In today’s uncertain business environment, tracking only internal metrics could lead to our demise due to unforeseen external events. The U.S. Postal Service, which currently stands poised on the brink of insolvency, offers a compelling example.
Over the past decade, the postal industry tracked a steady decline in the growth rate of the volume of mail it delivers. An obvious red flag for any business. But thanks to regular increases in the price of postage, revenues remained steady, leading those at the top to conclude that all remained well. Meanwhile, growth rates for email, texting and other communications technologies were exploding. While the Post Office struggled to keep up with traditional competitors like UPS and FedEx, it got totally blindsided by a different industry.
The music industry shares a similar story.
When growth in the total number of CDs sold began to level off earlier in this decade, higher retail prices kept revenue streams steady for a while. While music industry leaders focused on traditional sales and revenue metrics, digital music providers snuck in and not only stole large chunks of market share, they literally changed the way people buy music. Ask anyone under age 15 when they last purchased a music CD. They’ll look at you like you’re crazy!
It’s easy to say these industry leaders got complacent and quit paying attention, but I don’t agree. I think they were paying attention, just to the wrong things.
Obviously, we need to continue tracking traditional metrics such as sales, profit margins, and revenue streams. But in a world where business models can get “obsoleted” overnight, we need to do more than just track the data. We need to look beyond our own organizations to see where the next unexpected threats and/or disruptions might come from.
I suggest looking in three specific areas:
Our own industry. Where do we stand in relation to our competitors? Are we growing faster or slower? Of the companies growing faster, what are they doing new, different, or better than us? Are they merely improving the status quo, or are they looking to transform our industry?
Adjacent industries. Which companies that serve our industry are growing fastest, and why? If they decided to enter our industry, what barriers would they face? Do they have the people, technology, and resources to overcome those barriers? Will new technology or ways of working eliminate the barriers in place today? Do they have the potential to introduce disruptive innovation into our industry?
The world at large. What companies/industries currently enjoy the most explosive growth rates? What issues and problems do they solve for their customers? Are those solutions likely to impact our industry or our business?
Most companies ask these questions once a year, during strategic planning, if at all. To avoid getting blindsided by unexpected competitors or events, we need to make them a regular part of how we review and analyze data.
For example, consider setting up a “We Refuse to Get Blindsided” team that meets at least once a quarter, and task them with researching emerging products, technologies, demographics, and trends in the three areas listed above. Or, if you have enough people, consider establishing a separate team for each area. Make the teams as diverse as possible. Not just in terms of job skills and responsibilities, but also in personality, thinking, and decision-making styles. The more perspectives you have on the team, the broader the net it will cast.
At the same time, constantly challenge your beliefs and assumptions about the traditional metrics you measure. Ask questions like, “Do we accept the data at face value or do we dig deeper to identify what’s driving the numbers? What is the data telling us that we might be missing? What changes in our industry could the data be causing us to overlook? What if we’re wrong about what we think the data is telling us? Is there anything we are missing from the bigger picture trends and happenings in the world?”
It’s easy to say the Postal Service and music industry should have seen it coming. But without a process in place for looking beyond the data, any business can fall victim to external circumstances and get stuck in doing the things that made them successful in the first place.
What will you do to ensure you don’t get blinded by your own data?