Warning: Use of undefined constant title1 - assumed 'title1' (this will throw an Error in a future version of PHP) in /home/magneti5/public_html/blog-details.php on line 22 5 Biggest Business Challenges Entrepreneurs Face - Strategy & Leadership| Magnetic Alliance
In our last blog ("5 Biggest Challenges Entrepreneurs Face 1/2"), we covered 3 of the 5 biggest problems entrepreneurs face when running a business: Sales, People and Financial Challenges. In Part 2 of this series, we cover the final 2 problems: Strategy and Leadership.
Before we jump into Part 2, here's a quick recap of the 5 Biggest Challenges:
How to get more customers or how to increase sales with existing customers
How to hire, manage, train and retain staff
How to gain control of business finances
What is it? How is it done? How to build a good strategy?
How to become a better CEO & become a better leader?
Let's get started!
From our experience, this is one of the most important areas in a business that needs to be done right from the outset.
Why? Because it sets the direction and roadmap to everything else a business does or doesn't do!
What is the price of getting this wrong? We all know that around 50% of businesses fail by year one and a staggering 90% by year 5, but what's the main reason why?
According to insolvency reports, one of the biggest reasons why businesses fail is due to poor strategy, which accounts for 40- 45% of business failures. That's almost half of the businesses failing due to poor strategy.
This is no different for existing businesses or start-ups. The larger a business grows, the more important business strategy becomes.
So why do business owners, CEO's and boards find strategy tough?
1. They Don't Understand How To Develop Strategy
First of all, you have to understand how to develop strategy and that alone is not as straightforward as it sounds. What does developing a strategy involve?
A very good understanding of the external forces shaping the world for one.
Look at what is happening to technology right now. The speed of change and disruption in the market is increasing exponentially. Who would have thought that the taxi industry would be turned upside down by a mobile app? Not those poor taxi companies who paid $400,000 for their license in my city... they didn't see that one coming! It got so bad that in some countries like France, taxi drivers were having huge fights with Uber drivers and burning Uber cars on the road in protest!
So if you're a business owner or leader, what do you need to think about in developing or reviewing your strategy?
Some of the broad considerations include understanding:
The macro factors affecting your business and your industry
The different facets of your industry, its competitive factors, profitability, substitutes, supply chain dynamics (most business owners - even large companies, find supply chains very, very difficult!)
All of the internal business functions that need to be integrated into strategy, from sales and marketing to finance, ops, people, risk and tech; to name a few...
2. Business Owners Aren't Documenting Their Strategic Plans
Ok, so let's say you've thought the above through. A very common pattern we've found is business owners aren't documenting their strategy on paper, which makes it really difficult to figure out what they actually set out to do in the first place!
Business is already tough enough to run in the first place, with owners having to deal with so many different issues on a daily basis. However, without a documented strategic plan, it's even harder to compare and measure what you're doing, against a plan that's in your head -- Which you might have forgotten all about because you're too busy trying to handle the everyday running of your business!
Now let's assume you take the time to or spend the money documenting your strategy. How do you know if you've developed a good strategy? Will it work? Is your strategy strong enough to make your business win?
3. Implementing Strategy Can Be Really Tough!
There is one more "Make or Break" factor which can make it really tough for businesses to understand whether their strategy is working or not.
Implementing and making sure that your business continues working towards its strategy, and not becoming distracted is something that business owners find really tough. There are so many shiny distractions out there and so many issues facing entrepreneurs that it can be really difficult to stick to the strategy.
There's this one saying: "A simple strategy well executed, is better than the best strategy poorly executed" Or something like that...however it is you phrase it, executing strategy is something many business owners, directors and CEOs find extremely tough to do.
"Why?" you ask? In our experience there are 2 major reasons why implementing strategy is so difficult:
The culture in your business can act as a major barrier to implementing a strategy. Staff need to be able to understand the strategy and that is a big enough challenge in itself.
Think of it like this, if a business owner, who knows what they want to do and thinks about their business 24-7, still finds it hard to implement the strategy; how difficult would it be for a team member who is mainly concerned with working 9-5, before logging off so they can get to their yoga class, or make it home in time to watch Game of Thrones?
They're likely to be implementing things that are not part of the strategy or not even a priority; especially if they don't clearly understand what the business owner is trying to do and why they're trying to it. It may even go as far as making their job difficult or unpleasant or even worse threatening their job or their career, especially if there are efficiencies and headcount reduction involved.
We have found that "Culture" can be a huge obstruction to strategy because in many workplaces staff have their own agenda, their own fears and their own interpretation or lack of understanding or willingness to implement the strategy.
Let's assume for a moment that all staff are on board and excited to implement the strategy.
The other big issue obstructing the execution of a strategy is the organisation's capability to implement. Staff might be willing, but not able to implement because of a number of things the business lacks.
For example, one of the most memorable failures in strategy I've personally experienced, was when I worked for a company who spent over $40+ million dollars on strategic development. They enlisted the world's best strategy consulting firm to help them create a strategy to grow and take their business into the future. Unfortunately, whether or not people were on board with the strategy, there were so many other factors preventing them from implementing, that they just couldn't do it.
The company didn't have the right type of people, the right knowledge, skills, tools, systems, measurement, incentives, processes... plus a whole bunch of other factors creating noise and barriers towards implementation!
The company had many staff members who were good at running the business on a day-to-day level and could maintain the status quo, but they didn't have the type of staff who were able to create new things and take the company forward. They didn't have the right people who could influence at different levels and communicate across the organisation, the right people who were good at problem-solving, or the right people who could dig down into the detail and face the devil!
It was almost (and when I say almost, I mean totally) assumed by the strategists that the company had everything it needed to be able to implement and clean-up the mess when in actual fact, the company was very far from being able to do this.
What made things worse was that the strategy was far too advanced for the company's infrastructure and capability to deliver anywhere near the plan. It was like putting a brand new Ferrari engine into an old broken down 40-year-old School Bus!
The company actually had a strong brand and a solid reputation, which was why I think it was able to stay alive (barely) throughout that whole ordeal.
They simply weren't ready and didn't 'pre-invest' in enough internal development so that they could implement a sophisticated strategy with the existing resources at their disposal.
These lessons have really taught us that the way to create strategy should be made very simple, highly actionable and pitched at what the company can stretch itself to do - not kill itself to do.
Staff also need to understand strategy. Its not just for the top level leaders, but for the whole company. Staff need to know what the strategy is at a basic level because they are more than likely to be the ones implementing the strategy!
If staff aren't able to understand what they're doing and why they're doing it, their ability to contribute in a meaningful way is hindered. Each staff member should be able to recite the main aspects of the company strategy off by heart and they need to be able to clearly articulate how they 'fit' in that strategy.
Strategy is all about setting the right direction and positioning your business to win. If you don't get it right, guess what? It makes it easier to lose!
And that is why almost half of business fail because of it!
Leadership is perhaps one of the most important and difficult concepts to grasp and turn into reality for most business owners. Leadership is one of those skills or qualities people say "You either have it or you don't". Another school of thought says "Leadership can be developed".
For myself, the latter is true. Coming from a very low base and humble beginnings, I had no leadership qualities or attributes, until I consciously put effort into learning about leadership.
So what is leadership all about and why is it a problem faced by businesses large and small alike?
Leadership is about being an example to the people who follow you, to move a group of people towards a common objective. I'm not talking about "Authority" here, where someone is in a position of authority but is not actually a leader. People often confuse 'authority' and 'leadership', because they can be intertwined in most cases. A person who is the 'Boss', who is in a position of authority and is responsible for making decisions, doesn't necessarily make a good leader. Anyone could be placed in a position of authority, but it doesn't mean they will be good leaders. Anyone can start a business up and be the CEO of their company, but they can totally suck at leading it.
So why do people find it difficult to lead?
Leadership Requires 'Awareness'.
Most people lack awareness, at a deep level anyway. It's hard to lead when one is not aware of oneself.
Soft Skills and People Skills.
This is more to do with EQ than IQ.
Strategic & Big Picture Thinker...
...But still needs enough detail to be effective
No information, no clear answers, both choices seem wrong
Many people find it difficult to see things from other peoples perspectives
People don't like uncertainty. Leaders must be bold and venture into uncharted territories. Boldness is what makes a leader different from a Manager. A manager maintains, a leader pushes through boundaries. They take risks and do the uncomfortable.
Leaders must be willing to make sacrifices and do it in a way which pushes the whole group forward. These may be sacrifices which are hard to swallow, like letting a colleague go for the business to survive. This person could be someone who may have been with the company for a long time, is well respected and liked by the group, and has become close friends with the leader. Most people find this very uncomfortable.
Leaders need to be influential or they're not a leader. If nobody follows you, then you aren't really leading. Someone may work for you, but not follow you. They turn up, collect their money and go home. Good leaders have great followers.
The list could go on.
These are some of the immediate things that come to mind in my own experience and leadership journey. I found myself learning how to lead by being thrown into the deep end. Being in a business which was suffering and on the verge of collapse. There was no time to waste.
Connect the dots...
Good quality businesses take time, success takes time