It is a truism among seasoned entrepreneurs that the business you plan to launch is never the business you will be running in three years time. Despite the countless hours you invest understanding the market, your product and the opportunity, and analysing how the competitive landscape might change once you enter the affray, there will always be issues that blindside you – and could potentially scuttle your business.
Investors are much attuned to this reality, and examine business plans for indications that entrepreneurs have prepared for all possible eventualities. In mature industries, or with traditional enterprises, it might be suffi cient to document the results of some ‘what if’ scenarios, changing inputs for different market scenarios to test the impact on the bottom line.
But in the case of a new technology, or an innovative product or service entering an emerging or growth market, scenarios based purely on financial inputs will often be insufficient. Why? There are two forces at play that will impact your business venture from day one, and which should be reflected in your forecasting:
ACCELERATING CHANGE
Thanks to a range of factors spawned by increasing connectivity and globalisation, including real-time global communications, an internationally mobile workforce and swift cultural interchange, the pace of change in the business environment across all industries is accelerating (due to the rapid transmission of ideas), and the volatility this change brings has increased (due to the inter-connectedness of businesses, industry sectors and economies).
CYCLICAL CHANGE
We all keep an eye on economic cycles and how they may impact our businesses, but mainly in macro and micro terms. Few, however, pay close attention to structural economic change – and change is now afoot. The effect of the move from an agrarian to a manufacturing economy is well documented, and, in recent times, we have witnessed the impact of the transition from the manufacturing economy to a service economy. The current ‘knowledge economy’, while generating significant new wealth, is already in flux, shifting towards the ‘molecular economy’ (think biotech and nanotech).
This trifecta of accelerating change, growing volatility and a shifting economic structure will deliver unprecedented challenges in the near future. With each passing day, the fundamentals of your current or future business venture will be disrupted by emerging (or as yet undiscovered) technologies based upon entirely different scientific principles, and which will produce a more elegant, effective or efficient solution to that which you have or are planning to bring to market.
Perhaps an apocryphal story, but one that makes a telling point: an engineer was commissioned to invent a lawnmower that required minimal manual labour. He unsuccessfully tried a range of different solutions – robotics, remote controls, infra-red tracking, even satellite guidance. One morning, he complained to his neighbour: “I’ve tried every conceivable technology, and nothing works, or, if it works, it will cost 10 times what the market will pay”. His neighbour, a molecular chemist, shocked the engineer with his solution: “Why not simply grow shorter grass?”
The engineer had ignored other (newer) scientific approaches that provided a simple, elegant (and cheaper) solution: grass that is genetically engineered to never grow taller than the desired height.
As noted, the impacts of such new approaches to your current or proposed product/service cannot be forecast (or defended against) merely by stress testing your financial models. Instead, it requires that you build adaptability into your business planning from day one, so that the structure of your organisation, its products, even its business model, can be changed – in response to market, technology, economic or other factors – without significant delay or ramifications.
Next issue, we examine how you can do this.
Mark Neely is a lawyer, technology commercialisation consultant and author of 10 books, including The Business Internet Companion.Email mpn [at] infolution.com.au
