In today’s business environment few businesses can expect to be doing the same as they did last year and increase sales and profits. On every front there are major changes and these affect almost every aspect of your business model. In this article I discuss the major business threats that companies face today
Technological innovation is a major business threat. We are in the heart of a business revolution as profound as the agricultural or industrial revolutions. The way that people work is changing faster and more radically than it has since people left the fields and headed to factories for the first time.
The reason is that with computers and the software developed in the 80’s and 90’s we are now able to start using information to transform the way that we work, manage and automate systems and processes.
If something can be turned into data or shows a pattern there are companies that are trying to extract new information, design new systems and automate entire types of work out of existence. As they do this they create incredibly valuable companies and existing business models have to change or fail
Technological innovation is the business threat that creates the most valuable new companies and dismisses once giant companies to inconsequentiality.
As markets change many companies see their own market becoming a red ocean of competition. It is hard to generate decent profits doing what they have always done. So they set out in search of new opportunity. So do thousands up thousands of new start-ups riding the technology wave.
In many cases they are entering your market. They are not all entrepreneurs. Amazon has entered the pharmacy and supermarket sectors. With a billion dollar budget a new entrant can be profoundly disruptive. At the same time start-ups can now do for $5,000 what they needed $500,000 a decade or two ago.
Small and apparently inconsequential they are niche focused and their numbers mean you can die by a thousand small cuts – even if they don’t grow as much as the entrepreneurs hope.
New entrants are the business threat that many established companies dread most
Governments, States and Cities are slow to keep up with all the change. They do respond and each year they create more rules and regulations. These are designed to protect incumbents, protect the state, protect citizens and protect the environment.
There are many many battles are pressure groups and lobbies seek to influence the outcome of regulation. Laws can curtail or open markets. The alcohol market in the US was closed under prohibition. The Cannabis market is now opening up. Uber disrupted Taxi regulations and is not finding it is becoming ever more regulated as the status of it’s own drivers becomes fixed.
Where there is a problem with many people or businesses being hurt or disrupted regulations start to trickle through -many being a threat to the way that you work.
New regulations are a business threat that large companies can take in their stride, with lower margins, but which can act as huge barriers to entry for smaller companies
Societies seem monolithic and unchanging. In reality they and the subgroups that make them up are in a constant state of change and flux as they respond to the world around them.
Women can drive cars and go to the cinema in Saudi Arabia. In the US they may lose the right to have an abortion. In Ireland they have just achieved hat. In Holland people have the right to die and in Singapore they march for Gay Pride.
In Turkey they become more conservative and in the Ukraine more corrupt. In Israel Arabs become disenfranchised and in Egypt increasing bars on religious belief.
Look back a few decades and see how your beliefs and your friends beliefs have change What did you tolerate and now accept. What was once tolerated that is now banned?
Social change is a business threat to every company as consumer behaviour changes making your value propositions less attractive
Are your markets getting older or younger? Does that matter to you? In Japan there are huge numbers of pensioners – and they don’t spend as much as younger people do., In the US the baby boomers are seen as a huge market full of potential as they spend their retirement savings.
In China a male-female imbalance caused by the one child policy distorts the millenials and no one can make families go back to having 2 children – a demographic disaster in decades to come.
In Africa and many developing countries almost 50% of the country can be under eighteen providing huge opportunities for education and cheap labour. In the US lack of skilled workers is pushing factories to spend ever more on automation
Demographic change is a business threat to everyone as entire sectors grow and shrink.