Knowing how to transform your business has never been more important, and Innovation can help your brand to adapt in order to both survive and thrive.
It’s no secret that Covid-19 has had a negative effect on business on a global scale, but it’s small scale operators who have found navigating the virus particularly tough. In June 2020, the Australian Bureau of Statistics reported that around 70% of all businesses in Australia reported a decline in revenue, but this was twice as likely to be the case for small business owners. Virtually overnight, businesses around the world had to adapt to trading in this new era. Those that couldn’t - or wouldn’t - had to close their doors.
However, it’s important to note that business transformation is more than just forming a strategy for growth or improvement. By embracing things like product or service improvements, advances in technology or even new market opportunities, it’s about getting creative - and innovative - in regards to how you do business. So where do you get started?
Transform Your Business Using The Three Horizons Model
Based on research into how companies sustain growth, McKinsey’s Three Horizons Model outlines how businesses can manage for current performance, while maximizing future opportunities for growth. It’s long been regarded as a reliable concept for harnessing innovation in business.
Horizon 1 - Defend And Extend Core Business
This section contains the fundamentals of your business that generates profits and cash flow today, or the “bread and butter”. This may still have some growth potential, but in time it will inevitably “flatten” or decline. Innovation in Horizon 1 is about finding better ways to deliver the current core deliverables of your business, such as aiming to secure your competitive position and unlock the remaining potential. Spend no more than 85% of your budget in Horizon 1, as this leaves resources to invest in future growth opportunities.
Horizon 2 - Build Momentum Of Emerging New Business
This section contains activities that are designed to enhance or grow your business over the medium term. However, it’s important to note that this may or may not generate any revenue in the short term. It includes fast-moving, entrepreneurial ventures that need continued investment to finance rollouts. The additions of Horizon 2 into your business are expected to become significant profit generators over the medium term. Innovation during this stage is designed to bring new ideas to fruition, and brands usually spend around 12.5% of their budget resources.
Horizon 3 - Create Options For Future Business
This section is about seeding options today for the future, some of which will prove to be successful and ideally contribute significant profits in the long term. Examples of this may include undertaking or partnering in research activities, pilot projects or even possible start up ventures. While innovation in Horizon 3 is all about identifying and nurturing long term options for your brand’s future, businesses will only spend around 2.5% of their financial resources derived from their budget here.
Sourcing Advice On How To Transform Your Business
Innovation is not just about new ideas, but also about new ways of applying old ideas. A fresh perspective can prove to be a game changer if you’re looking for ways to transform your business, which is why it’s crucial to foster a workplace culture that both fosters and supports this practice. Not only will it help your business stay relevant, meet challenges, stay competitive and increase profits - but it also goes a long way in regards to staff retention and employee satisfaction. After all, happy staff create happy customers.
However, did you know that more than 60% of small businesses cease operations entirely within their first three years of trading? One of the most common reasons that they fail is due to a lack of cash available to meet their expenses, particularly within the first six to twelve months - and these figures were issued before the arrival of Covid-19.
If understanding your finances or the in’s and outs of doing business isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many brands (big and small) enlist the services of an accountant and business coach in order to free up their time, while knowing that their financial obligations are already taken care of by the professionals.
At Muro, we are more than just accountants - we offer our clients strategic business advice and ongoing support to help them reach their business and financial goals. Get in touch with us at Muro today to ensure that you’re on the right path for success in starting a business in 2021.