Small bets and super trends: business strategies for 2013.

Author:Stearns, Dennis
Position:PRIVATE COMPANIES
 
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The impact of the 2008-2009 Great Recession lingers on and many businesses have found it hard to maintain optimism, especially with the 24/7 media influence. Yet, there is good news. Many major risks are moving farther in the past, such as the potential for a Lehman Bros.-type event in Europe.

Most chief executives view their companies to be in better shape than the economy as a whole, and most are looking for ways to adapt to a changing world and succeed no matter what the future may bring.

Regardless of the uncertainty in the business environment, private companies have several things in common: they are resilient; they persevere to overcome setbacks; they find ways over, under and around challenges; and they look for seeds of opportunity in every crisis.

Navigating the Difficult Recovery

The most successful private companies around the United States are doing many things to navigate the difficult economic recovery including:

  1. Maintaining good expense controls;

  2. Taking steps to keep their top talent, and to leverage that talent as a way of encouraging other employees;

  3. Training their best people to have better leadership and communication skills;

  4. Staying close to their key customers so existing sales stay strong;

  5. Looking for ways to expand sales to existing customers, and;

  6. Making small bets in new areas to find new customers and markets.

The first points above are critically important--and ignoring them is likely not growing both the top and bottom line at the same time. If the core of the business is not running somewhat smoothly, it's best to not go off looking for new areas to find new customers and markets. Once the first five are under control, it may be time for the sixth--the small bets.

Private companies that have mastered the small bet approach regularly use a concept called "intentional congruence." This is the idea that anything beyond the core business has some level of congruence or synergy to what is already done well.

For example, a "bolt-on" acquisition would utilize some key strengths of the existing company, benefit from similar customers (potential cross-selling opportunities), have a low risk of polluting the core if it fails and would add some areas of strength to the core that it needs to enhance existing sales efforts.

So, for example, a midsize advertising agency may acquire a small public relations firm. The new company will add benefits to the ad agency, without straying from what the company is already doing.

If the endeavor fails it...

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