Yet, there is good news. Many major risks are moving farther in the past, such as the potential for a Lehman Bros.-type event in Europe.
Most chief executives view their companies to be in better shape than the economy as a whole, and most are looking for ways to adapt to a changing world and succeed no matter what the future may bring.
Regardless of the uncertainty in the business environment, private companies have several things in common: they are resilient; they persevere to overcome setbacks; they find ways over, under and around challenges; and they look for seeds of opportunity in every crisis.
Navigating the Difficult Recovery
The most successful private companies around the United States are doing many things to navigate the difficult economic recovery including:
1. Maintaining good expense controls;
2. Taking steps to keep their top talent, and to leverage that talent as a way of encouraging other employees;
3. Training their best people to have better leadership and communication skills;
4. Staying close to their key customers so existing sales stay strong;
5. Looking for ways to expand sales to existing customers, and;
6. Making small bets in new areas to find new customers and markets.
The first points above are critically important — and ignoring them is likely not growing both the top and bottom line at the same time. If the core of the business is not running somewhat smoothly, it’s best to not go off looking for new areas to find new customers and markets. Once the first five are under control, it may be time for the sixth — the small bets.
Private companies that have mastered the small bet approach regularly use a concept called “intentional congruence.” This is the idea that anything beyond the core business has some level of congruence or synergy to what is already done well.
For example, a “bolt-on” acquisition would utilize some key strengths of the existing company, benefit from similar customers (potential cross-selling opportunities), have a low risk of polluting the core if it fails and would add some areas of strength to the core that it needs to enhance existing sales efforts.
So, for example, a midsize advertising agency may acquire a small public relations firm. The new company will add benefits to the ad agency, without straying from what the company is already doing.
If the endeavor fails it will not put the agency out of business; in fact, it may teach the firm how to perform better and prepare itself for the next small bet.
Most successful businesses experiment with small bets, rather than bet the farm on one big idea. They find small bets by looking at big “super trend” ideas.
Looking at ‘Super Trends’ to Place Small Bets On
The three super trends that will drive change, both good and bad, in the next 10 years are globalization, technology accelerators and the “global age” wave. The first trend — globalization — refers to the processes that promote global connections of national and cultural resources.
The second, technology accelerators, are those innovations that drastically change the way we think and go about business.
The third trend, the global age wave, is represented in the U.S. by the massive group of 70 million-plus baby boomers that have built fortunes for business that have figured out how to best serve this complex group.
Those that follow these trends closely are more likely to spot opportunities as they arise, unlike companies that are unaware and lose ground when a trend takes off.
Each of the powerful super trends will have a major impact on private companies throughout the next decade. The three are converging at this point in history to create the proverbial perfect storm of both opportunities and threats.
For those businesses that prepare in advance, the convergence may mean accelerating sales and profits. For others — who are focused too much on politics and the crisis-du-jour touted by the 24/7 media-magnifying machine — these trends may capsize the ship.
Dennis Stearns ([email protected]), president of Stearns Financial Group (www.StearnsFinancial.com ), a fee-only business planning, financial planning and investment planning firm with offices in Chapel Hill and Greensboro, N.C., was cited by The Financial Planning Association as “one of the leading scenario experts and futurists in the financial industry.”