Growing your company can be an incredibly exciting experience. While it may pose many challenges, if managed well, the growth of a company leads to professional and personal development for everyone involved. It provides you with the opportunity to learn new skills and ways of thinking, and your staff members will also have access to great opportunities for growth within their own careers.
Knowing when your business is ready for significant growth is key – but how do you decide what elements of your current offer to expand, or if introducing new products or services to your ecosystem might be better? With so much at stake when expanding any business, it can be daunting. Fortunately, there are five tests you can use as indicators of whether taking those next steps is right for both you and your company.
In this article, we will look at each one so that you have a clearer understanding of whether your current strategy, staff, and resources are primed for expansion or in need of some extra attention first.
First test: Desirability – Will someone want it?
The very first test is always to validate that a need exists to begin with. This includes testing if your current or potential customers are willing to pay for a product or service to help them make progress in whatever it is they are trying to achieve.
It is not so much about the specific need, but more so about what resolving that need will help them realize. What are they trying to achieve? How do they want to feel? Who are they trying to become? Does your solution solve the real problem? Are any changes required to your attraction and retention processes? The focus of this test is to get a better understanding of whether your solution is a ‘nice-to-have’ (want) or a must-have (need) for your customer.
A common example is comparing vitamins and painkillers. While one is (generally) a ‘nice-to-have’, eliminating pain tends to rank high on the list of people’s priorities. In your context, what is the equivalent of vitamins? And what is the equivalent of painkillers? What elements of your product or offer could be introduced, redesigned, or removed to help with that positioning in your customers’ minds?
Remember that if there is no audience or market with a problem to be solved in the way that you are planning to solve it, then there is no long-term viability to get a return on the initial investment required. While this may sound obvious, it is not always so, because people often fall into the trap of being guided by feasibility first. Always start with desirability to confirm a market, a need, and buying intent all exist before investing to make it happen.
Second test: Feasibility – Will you be able to do it well?
While the first test involved looking out, feasibility requires you to look in. A test for feasibility helps you understand how your existing operational capabilities can be harnessed and leveraged in order to build upon an already solid foundation, as well as what changes might be required. This means enhancing core capabilities in a way that enables growth without putting at risk the existing business.
On the other side, constructing completely new capabilities poses an increased level of risk when considering investments. In this case, additional resources must be committed for implementation, in addition to potentially impacting market perception about the company’s branding. Will your move make sense for your current customers? How far from the core are you stretching to?
Beyond the technical elements of feasibility, you should also consider the types of new or modified activities that your teams will need to incorporate into their operations. Do you need any new partners in your supply chain or your channels? What changes will you need to make to adapt your value chain and how might those changes impact your current relationships and operations?
How can you take the next step in your growth journey in a way that strengthens your business? What percentage of your existing processes and systems will you be able to leverage from? Will this change make your business more complex to run? If so, how will you manage the increased complexity?
Third test: Viability – Will you be able to profit?
The previous test confirmed that you have (or can easily access) the capabilities, resources, and processes for your new or expanded offer to deliver value to your customers. But just because you can do it, does not necessarily mean you should. This is where the viability test comes in.
Viability looks at whether you can profitably sustain the new operation. What changes might be required to your supplier, partnerships, or channel models, your revenue streams, your cost structures, your processes, and the systems that support them? You can simply look at this from two angles: the cost side, and the revenue and pricing side.
From your customers’ perspective, what is the premium they might be willing to pay for the enhanced offer? How will they perceive this change in relation to your brand promise? From a financial perspective, what are the short-term implementation costs? How might they affect your cashflow? What margins will you be looking at post-implementation? These are only some of the considerations to keep in mind.
These are the three classic lenses of human centred design, which have been traditionally described as the sweet spot for innovation. How can this model be enhanced for the fast-changing times we live in? In his book Pirates in the Navy, Tendayi Viki makes the case for a fourth category to be added to this model: adaptability.
Fourth test: Adaptability – Will you be able to sustain it?
Paraphrasing Mr Viki, adaptability is about testing that the new model can adapt to a changing operational environment and that you time these changes correctly in the search for scalability. From my perspective, this speaks to the potential rigidity of your systems, processes, and policies to adapt to changing external conditions.
Where are the bottlenecks in your current processes? Do you have any single points of failure? Have you optimized to the point of fragility? Are you relying too heavily in any specific person, entity, or external condition to remain unchanged for your business to thrive? What area of your business are you most concerned about and what could you do to make it more adaptable?
In my experience, after having facilitated hundreds of hours on different elements of this model, I realized it could be augmented by adding an overlay across them all: defensibility.
Fifth test: Defensibility – Will you be able to maintain an advantage?
Consider this scenario: you confirmed desirability and have people ready to pay, confirmed feasibility and have all internal processes ready to go, confirmed viability and have the business model sorted, and you even designed adaptability into the system so that you could move with the times. Now the question is, how long until it can be replicated by others and your margins begin to drop, limiting growth and challenging all four of these categories?
The defensibility test is an overlay on the previous four. It determines how rare or hard to imitate your business model is. For each of the previous four tests, go back and ask: how hard will it be for any of my competitors to replicate or improve upon my position in this test?
There may be a couple of things that they could do, but the intention is to make your entire system your competitive advantage. With that in mind, look across all of them and ask again in this way: how hard will it be for any of my competitors to replicate or improve upon the combined results of my whole ecosystem?
If all your processes, systems, policies, resources, and priorities work cohesively, it is the entire combination that should be extremely hard to replicate. This is what we refer to as a true competitive advantage, as it would require current and potential competitors to invest time, resources, and focus to even begin to try to imitate you.
Putting it all together
Is your business ready to grow? The Desirability, Feasibility, and Viability model has passed the test of time as a highly effective model to assess the potential of any business idea prior to implementation. I believe the addition of Adaptability as a category has strengthened the model by making you consider the everchanging elements of your operational environment.
I hope my humble contribution of the Defensibility overlay reminds you to always consider your competitors’ potential responses. This in turn can help guide your investment and efforts towards a superior strategy with greater odds of long-term success.
Taking the time to go through these tests, whether on your own as a mental exercise or with your leadership team in a facilitated workshop, can help you get clarity early on your growth journey about the potential direction you may take. This in turn will help you define your priorities, structure, resources, and all other elements of a well-defined growth plan.
What is one action you can implement this week as a result of reading this article? Give it a go and let me know how you go!
