Cutting Costs is Not a Sustainable Strategy: Five truths about business

December is always a time of reflection for me. I especially thank all of my customers and personal relationships for their commitment, ability to drive me with challenges, input into my thinking and most of all friendship.

I also think about what I’ve learned. After thinking about the last couple years, I ask what are the factors that make some businesses thrive, while others barely survive. Below are five things I have learned about business.

1. The customer must be the priority – without customers, there is no business. It’s surprising how many organizations focus internally and forget about the customer. Having witnessed this in many organizations, I committed myself to a customer-first approach. If what you’re doing is not good for the customer, it’s not worth doing!
2. The Top Line matters – Top line revenue growth is the lifeline in any business. If you do not have a good strategic plan that can deliver the needed revenue, your business will suffer and die. I witnessed a CEO who altered the business strategy three times in one year. To compensate for the inability to get top-line growth, it was necessary for him to make massive cuts in the business, lose the talent that made the business a success and attempt to cut his way to profitability. Cutting costs is not a sustainable strategy.
3. Innovation drives competitive advantage – If you are not reconfiguring your business and creating change on a regular basis, you will fall far behind your competition. Long gone are the days where an organization can become complacent and live on the activities and products of the past. Many businesses have fallen victim to innovative disruption in their businesses unfortunately, they are now extinct or dying. Change, new products and innovation drive competitive advantage.
4. The best talent provides the best solutions – The organization that can attract and retain the best talent will win the market. People that are analytical, hard-driving smart loyal, logical, and challenged will continually refresh their market offering, understand the markets they operate in and offer the best products and solutions. Without energetic, creative teams, the business will lose the competitive race, the best talent brings the best ideas.
5. Focus on the external environment – Market changes, disruption, and agility will keep your company in the game. When companies are internally focused, they miss the significant opportunities that will propel them into new markets, acquisitions, and products.

These are things that I have learned in over 25 years of building or running businesses. Some I have learned through my education in business and others the hard way. I hope that they add value to someone that may be starting a career running a business or in a position to influence.

Best wishes for a Happy and healthy New Year!