Business Growth on The Edge: Which Edge, Depends on You
Dan Arens is an Indiana-based business growth advisor.
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowBy all accounts, P.R. Nelson was on top of his game within the music industry. Of the four edges in business development; the bleeding edge, leading edge, the edge, and lagging edge, he was clearly on the bleeding edge.
Prince Rogers Nelson (The Artist Formerly Known As Prince, or TAFKAP) was emblematic of the bleeding edge for change when it came to music. With his recent death still in the news, it does provide an opportunity to reflect and see that he was pushing his type or blend of music out to the bleeding edge of the industry. He was too late for Rock and Roll, but very creative with his blend of hip-hop, blues, jazz and rock.
History is full of cultural edge changes; slavery, women’s suffrage, and prohibition are but a few examples. Each cultural change was affected by someone or something leading the people into an era of change. From a business viewpoint, our country has experienced a technology revolution over the last several decades. How did it start? It could easily be attributed to the likes of Bill Gates and Steve Jobs. There is no question technology was and arguably still is, on the bleeding edge for leading the United States into an era of change.
Each edge for business development is a point of transition, a margin of superiority/inferiority, or an advantage/disadvantage, as the product or service traverses up or down the continuum. The risk is greater for businesses on the bleeding edge. Even so, the rewards can be far greater.
Typically, according to the Kauffman Foundation of Kansas City, a leading authority on entrepreneurship, the bleeding edge is indicative of lower profits at first because development costs, marketing costs, and the overall cost of production is much higher. Companies who deal with the bleeding edge need to be ever mindful of rapid market changes that are taking place. The areas of sales volumes, prices, and the timeframe in which the market is reacting to accepting your product or service can be problematic. The slightest change in an area might prompt you to pivot in another direction.
As your company gains acceptance in the marketplace, however, development transitions to the leading edge of growth. Your sales are increasing as demand increases. Cash flow and profit are maximized in this stage. In order for your business to grow, maintaining your sales and honing your competitive advantage is of paramount importance. You should be reaping the rewards of your or someone else’s bleeding edge efforts. Be certain to plan on new possibilities as the product or service begins to plateau.
The edge of business development is when your product or service is maturing. Sales are leveling or have leveled off and profits are less. If you can adapt or change to boost demand this is the time to try it. The edge is a good place to be if you can maintain it.
The lagging edge is when sales have dropped off and prices are falling. Sometimes new features or functions can transition you back to the leading edge, but usually, you need to be certain that your costs are not exceeding the sales of your product.
A perfect example of the lagging edge is a comment by IBM Senior Vice-President and Chief Financial Officer Martin Schroeter, when he said this past October “In the third quarter, we’re at the back end of the mainframe (sales) cycle, so we’d expect it to be down.”
How are your products or services positioned along the four edges? Have you ever thought about it? Do what you can to manage your edges. Analyze what you did going from edge to edge, either advancing or retreating.
Many companies just hop on and enjoy the ride along the various edges. They don’t tweak, pivot, or try to achieve any competitive advantage. Why not? Maybe they haven’t thought about it until now. Consider managing your market segments. Try expanding them to take you to another edge or help you stay in your current position.
Hindsight is 20/20. Overall, it will be up to you to determine how to manage where your company goes with regard to the edge continuum. As part of that determination, you should take a step back and look at your historical performance. Furthermore, an historical view could be helpful in determining whether you are an early adopter or a late adopter to market changes in your industry.
Dan Arens is an Indiana-based business growth advisor.