5 Questions Every Business Needs to Answer

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5 Questions Every Business Needs to Answer

The world of business is in love with strategy, and rightly so. A company ideally starts out with a vision, sets a strategy to achieve it and then executes it meticulously. In reality, though, many businesses — big and small — struggle with every part from vision to strategy to execution. They'll undergo many shakeups, realignments and facilitated sessions to get them back to focusing on what's important. And what is important? Although there are endless ways to reframe and rephrase them, there are only really five important questions that every business needs to answer.

Where Does the Business Compete?
The question of where a business competes establishes the market. The answer works on a few different levels. The market can be geographical as in "the U.S. market" or "Long Beach, Calif.", but it also refers to the industry and possibly right down to the product line. For example, Ford competes in the global auto industry whereas Michelin competes in the tire business. Knowing the market fleshes out the reality around a business — whether it is a mature market, a new market, a growing market or a shrinking one. There are ways to profit in every market, which is why the next question has to do with value.

What Unique Value Does the Business Offer?
The idea of a value proposition has suffered a bit from overexposure in the business lexicon, but it boils down to the combination of factors that nudge a customer to choose one business's product or services over a competitor's. In some businesses, it all comes down to cost. The lowest cost producer wins because the product or service has essentially become a commodity. In other businesses, the differentiation matters, whether that is branding, design, quality, etc. To be effective, a company needs to understand why the customer buys its products or services and expand that edge as much as possible. (For more, see What Are the Elements of an Effective Value Proposition?)

What Resources or Capabilities Does the Business Depend On?
Resources is another word for the inputs a business cannot operate without. For manufacturing businesses, resources include the parts and people needed to build the product as well as the capital cushion to pay for all this in advance of sales. Other businesses are more about the capabilities of their staff as, for example, a professional firm like an accounting or law firm depends largely on the people it hires to create the value for the customer. The critical resources and capabilities need to be protected and, if possible, grown. For example, an oil company controls some number of the finite global hydrocarbon deposits, but it can still add more by buying those of competitors and bringing superior extraction capabilities to bear on the new reserves.


How Can the Business Keep It All Going?
Being competitive and successful at the moment does not mean that success will continue indefinitely. To keep a competitive edge, a business needs to take the answers to the previous three questions and build on them. This means keeping on top of the market trends and changes, strengthening the value proposition and securing the critical resources and capabilities needed to keep growing. Businesses that continually ask and answer these questions of themselves can maintain a competitive edge.

Where Can the Business Go As the Market Changes?
The last question a business needs to answer is what other markets can be opened by the resources and capabilities it controls. Even when a business is dominant in its market, it is critical to look at new markets even if there isn't an immediate need for change. There are many case studies of what happens to a major business when the market moves. Companies like Xerox and Kodak are prime examples of this case, and avoiding that fate is more attentiveness than foresight. If a business is continually assessing its place in the market and the direction of the market, on the whole, then it can usually stay ahead and stay profitable through these shifts. (For further reading, check out 4 Steps To Creating A Stellar Business Plan.)

Source: http://www.investopedia.com/articles/personal-finance/122815/5-questions-every-business-needs-answer.asp#ixzz4esHKDxQT