Factors That Contribute to Business Success
The Challenge of Creating Success
Just yesterday, I learned that a major business venture that has been up and running for about 5 years is closing its doors. It was an important source of income for about twenty colleagues and friends. Ninety-five percent of new businesses fail in the first five years. In this economy, many older businesses are failing, as well.
That's pretty grim news. It means a clear knowledge of the factors that contribute to business success is more essential to business than ever before. When we face a challenge, discovering the Critical Success Factor (CSF) related to that challenge, and making the right change quickly, is essential to success and growth. It may be essential to survival.
In my fifteen years as a business consultant and bestselling author on business success, I've studied and shared the key factors that contribute to business success. Now, it seems we need to pay attention to them more than ever.
You can use this list to evaluate your business as you build a success plan, or as you launch a project to solve a crucial problem.
What Are the Most Important Factors to Business Success?
The short answer to the question is:
- Great decisions
- A great team
- Good work
But we need to define "good" and "great" to make this clear and usable. That's what this article is all about.
A List of Success Factors
The success factors are same for the one-person business (solopreneur) all the way up to the top of the Fortune 500. Large businesses have teams of experts to do all this. But in a small business, each person must wear many hats - fulfill many roles - well.
Here is the list of business success factors:
- Leadership. Capable people who are able to focus on the big picture while directing the small picture. They must neither be lost in the trenches; nor consumed with putting out fires; nor grinding their own axes. They must be there for the business, and able to guide in powerful and sensitive ways.
- Strategic and tactical plans. Businesses do not succeed flying by the seat of their pants. We want to write and execute five plans to achieve success.
- Powerful decisions. Realistic decisions that choose real goals and solve real problems are made clearly, and lead to prompt action.
- Effective communications. Making the right decision is no good at all if the managers and workers are still doing the wrong thing!
- Continuous quality improvement. Customer demands are always changing, and the competition is improving. If we don't get better, we will be left behind.
- Efficient production. As business guru Peter Drucker once said, "It all comes down to work!"
- Great marketing and customer service. Find your customers, bring them in, and delight them—or lose them forever!
Let's look more closely at these seven business success factors.
Gordon Bethune, the CEO who pulled Continental Airlines out of crashing into bankruptcy in 1994 and made it the best, most financially successful airline for the next five years, says that a leader does four things: "Your real job as boss" is "to assemble the right team, set the big-picture direction, communicate that, and then get out of the way."
When I talk about leaders focusing on the big picture, I'm including both keeping track of fundamental business basics and also realistic industry events. This includes:
- Knowing that, while profitability is the goal, a company must spend money wisely to make money, not pinch pennies.
- Understanding changes in the industry, and staying ahead of the competition in key areas, such as customer service, technology, and efficiency.
- Leveraging all corporate assets - including the greatest asset of all, team commitment and talent - for success.
When I say that leaders must not be lost in the trenches, I'm talking about how few business executives ever get out of their own self-image and grow as leaders. I've seen great salespeople who thought they were ready to launch a business. They had a great idea, and everything that it would take to succeed. But they could never picture themselves as doing anything other than sales. They are lost in the trenches. So are Chief Financial Officers - bean counters - who try to be CEO's. They focus so much on the money that they miss the big picture.That was the problem with the CEO's before Continental that put the airline through two bankruptcies - they were saving money, losing customers, and crashing the company.
When I say that a leader can't be putting out fires, I mean that, in a big company, he or she can't be focused on quarterly earnings. In a small company, the leader must set up a business that runs smoothly without depending on him or herself. And the solopreneur must make routine things efficient and hassle-free so that he or she can focus on important work. The solopreneur must also take time - at least once a week or once a month - to step back from working in his business to get the big picture and work on his business, making the company better.
When I say that a leader must not have an ax to grind, I am saying that leaders must put the company first, and not run things to protect their golden parachutes or prove someone else wrong.
It takes a great deal of honesty - often painful honesty - and self-awareness to be a true leader in business.
2. Strategic and Tactical Plans
Imagine sitting down to relax on a long airplane flight. The speaker blares, "This is your captain, Will Reck, speaking from the flight deck. I can't tell you how long we'll be in the air, because I didn't bother to file a flight plan. But we did put a bit of fuel in the tanks - not as much as usual, because we were running late - and we're on our way. We should be just fine. Relax and enjoy the flight!"
Would you be relaxed? I wouldn't! And I feel the same way when a small business owner says he doesn't have a business plan. In fact, real business success requires five business plans:
- The Strategic Plan sets purpose and direction. It also says what the company will, and will not do. It is a tool to guide decisions. As tactical decisions - such as hiring, mergers, and retaining major services - come up, the executives ask, "What action on this decision is most likely to achieve the goals in our strategic plan?"
- The Business Financial Plan says where money will come from (investment, loans, or earnings) and how it will be used, which is called use of funds. Investors and banks require a business financial plan (often just called a business plan), but it is really an important tool for the business owner, too. We measure the success of our business by planning net revenue, and then tracking actual results. Net revenue is equal to the total money earned minus the total money spent in a given time period. In launching a business, or when the business is going through crucial changes, tracking actual net revenue against the plan monthly or more often is essential.
- The Marketing Plan defines our target market and explains how we will reach them, get them in the door, sell our products and services, and close the deal.
- The Operations Plan lays out how we will run the company. It defines the standard operating procedures (SOP) for all product and service development, client services, and other functions that maintain the company and keep the customers happy.
- A Project Plan puts everything on a timeline, making it clear what will be done each week, and what goals must be achieved to stay in business and succeed.
All five plans are essential. Almost no one knows this. If you make all five plans and use them, you will be in the 5% of new businesses that survive five years, or, if your company is older than that already, you are poised to thrive in difficult times.
For example, few start up companies have a project plan, even if they have the other four. So they move ahead. But their first hire for operations manager doesn't work out, and they spend two months looking for a replacement. Then an executive has a family emergency and misses a crucial meeting. He thinks, "I was just out two hours; I'll make it up this evening." But the reality is that a team of ten people needed his input on a crucial decision, and they spend a week twiddling their thumbs waiting for the next meeting. And another little delay comes, and another. Three months later, the company is still running in the red. According to the business financial plan, the company was supposed to go into the black. The investor gets the quarterly report, panics, and stops all further funding. Next week, the company closes it's doors. Without a project plan, none of the dates for the goals on the financial timelines or marketing campaigns are realistic: They aren't worth a losing lottery ticket!
3. Powerful Decisions
Powerful decisions have two qualities. First, they address and solve the real problem. This means:
- Do not avoid the 800-pound gorilla in the room.
- Think diagnostically - perform root cause analysis.
- Don't just put out the fire, install a sprinkler system: Come up with permanent preventative solutions for problems and sure-fire techniques for success.
Second, they are clearly defined. The acronym SMART helps with this one. All decisions and goals should be: Specific, Measurable, Achievable, Realistic, and Time-bound.
Governor, Watch the News!
I rarely include comments that are critical of any particular person in my articles. But, in this case, the story must be told. My wife was trapped in the Superdome in New Orleans (uncomfortable but safe) for six days as Hurricane Katrina passed through in 2005. I was in Texas, and anxiously watching the news. I knew, from news shows, that 10,000 other people were waiting to be evacuated at the Civic Center. The governor of Louisiana and her staff gave a press conference.
The first question after the formal presentation was, "Governor, why are you not sending drinking water into New Orleans."
She replied that they did not want to encourage people to stay in the city.
"A follow-up question: What about the 10,000 people waiting to be evacuated and dying of thirst and heat prostration?"
Every face on the stage—every face on the Governor's emergency team—turned white with shock. They did not know. The Governor did not have one person watching the news and telling her what was happening.
Please listen. Tune in! People's lives may not be at stake, but the life of your company is!
4. Effective Communications
Communications has two sides: expression and listening.
- Effective expression, our outbound communications, ensures that all those great plans and decisions we made above reach the managers, workers, and supervisors. We must translate the high-level, strategic goals and thinking in those plans into clear directions for step-by-step action. And we must make sure that everyone knows what matters and why it matters. That's a key part of motivation.
- Effective listening is the second side of communications. We must engage our team and create an environment where our staff tells us what is wrong and counts on us to lead the way, and to fix whatever they can't fix. If we are not hearing about problems, we are not listening well, and our team does not trust us. On the other hand, when we listen, empower our team to solve their own problems, then solve the ones they can't solve, we will hear all we need to know to succeed.
We need to listen to more than our team. We need to listen to, and then reach out to, our customers. We also need to watch the news and keep an eye on our competitors and on changes in technology that affect our business. For an example of a disastrous failure of listening, see the sidebar: Governor, Watch the News!
5. Continuous Quality Improvement
We can't stand still. Our products will become obsolete. If we don't make them obsolete by coming out with something better, our competitors will do it for us - and take our customers.
If we don't continuously eliminate errors and defects, our customers will be disappointed and our costs will go up.
If we don't reduce costs while maintaining quality, our competitors will have a higher profit margin. They will use it to either improve their products or boost their market share. Either way, we're shrinking.
Every member of the team, from the janitor to the CEO, should be encouraged to be part of a continuous improvement effort every day of the year.
6. Efficient Production
Quality and effectiveness come first, but we can't ignore efficiency. We must find ways to reduce waste. The premiere method for this is lean manufacturing. Here's a quick story to illustrate how lean manufacturing works.
A Japanese company wanted to start competing with a famous German manufacturer of precision equipment. Confident that they would remain the best in the world, the Germans allowed the Japanese executives a site visit. The Japanese observed, went home, and, on the first day of opening their assembly line, had it running faster - producing more each day - than the Germans could manage.
The Germans asked the Japanese how they did it. A Japanese executive replied, "It was very simple. One of our people observed and timed each of the five stations on each of the three assembly lines. We came home and compared notes. We then created a single assembly line, using the method from the fastest station of each of your three lines."
By the way, Japanese lean manufacturing experts measure production time in units 0.6 seconds long. If you can make a change that saves 0.6 seconds, it's worth making. Why? All those little changes add up - to continuous improvement and world leadership.
7. Great Marketing and Customer Service
The greatest products in the world are never sold, because no one knows they are there. We need to define our target market, reach them, and motivate them to give us a try.
And people won't come back to a restaurant with the best food they've ever tasted if they get bad service. In fact, my wife and I had a favorite restaurant around the corner. We got bad service twice, and I wrote a letter to the manager letting him know of the problem. I got no response. We didn't go back for over a year. We just went back last week, and we met a fine young waiter who'd been working there for just under a year. Maybe the manager listened to my letter—but he should have told me!
Which Factor for You?
Which of these Success Factors is the solution to your problems and key to your growth?
Courage: The Key to Success!
Peter F. Drucker once said, "Whenever you see a successful business someone once made a courageous decision." Actually, a business is composed of at least one courageous decision, and a thousand clear, committed, SMART decisions. They won't always be right choices, but that is okay. We need only to make our decisions well, be honest about the results, and keep moving forward in the spirit of continuous improvement. After all, as Duke Ellington once said, "a problem is a chance for you to do your best."
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.