How Should We Define A Good Business?
Defining something that everyone will feel differently about is a futile task by default. Mostly a simple truth of life, how do we business?
Are our ways of doing business bad or good when compared to the broader business scene? Or how our environments mold the way we do business every day change the questions of facts surrounding it.
But if we look at elements that make businesses successful, we can see the common characteristics that many would fall into or even follow.
Does a business have to have all the elements to consider itself good or successful? No, it largely depends on the goals and the underlying culture.
Through the elements that we’ll discuss in this article, you, as the entrepreneur or part of a business, will discover ideas on how to improve your business, whether your goals would be growth, sustainability, or impact.
Look at these steps and see if they have a role in the business decisions making process or whether its underlying culture acts around the elements.
Good Business Elements
- Value and respect stakeholders
- Yearly Growth rate
- Powerful structures for teams and leadership
- Good product and service
- Innovation and research and development
- Growth-oriented marketing and sales processes
Value And Respect Stakeholders
Not every stakeholder is equally valuable for a company, and understanding that pleasing every stakeholder regardless of their level of impact devalues other stakeholders.
Whether that’s balancing external and internal stakeholders, you as the business have to decide what stakeholders truly matter to your company and emphasize those who matter.
Because while it may seem that, in theory, the larger a company gets, the more resources a company would have to produce value for every stakeholder.
But prioritizing the main stakeholders always is better instead of devaluing the whole group.
It usually comes down to a culture question. Through the company culture, you set the main stakeholders from where all the business decisions are based.
For example, if you believe that the customer and their satisfaction are the most crucial aspect of your company’s success, you have to embrace it in your company’s culture.
Yearly Growth rate
Growth is good, and business growth is a matter of success or failure.
A company that cannot keep its growth rate positive throughout the years will eventually fail. Of course, growing yearly might not be realistic in reality, but we need to think in averages.
Does a business achieve average yearly growth in 10 years, for example?
How fast can a company fail without growth?
It depends on the goals of a business. A large company with a large chest of funds to carry it around through the difficult years can sustain itself during the years of decline but eventually fail.
The amount of money only buys you time before you need to start growing yet again.
A stagnating business will have a growth rate lower than the inflation rates surrounding it, meaning you have to achieve at least a growth rate beyond your market’s inflation rate.
But barely growing beyond inflation is not good business, as you would only break even year after year.
The yearly growth rate element in this list is that it’s a metric to benchmark the other elements and their impact and effectiveness.
So in a sense, if you achieve a positive yearly growth rate, everything is probably fine. And if you didn’t achieve the growth rate, you would have to make a hard second look at how the elements impact the way you do business every day.
Powerful Collaborative Structures For Teams
A good business will have suitable structures for how different teams can work together to achieve a greater goal.
To some extent, every company will have teams that touch many industries within the primary sector.
Whether that’s directly (a business relies on a multi-industry approach to create its product or services) or indirect (a business would depend on external industries/services to grow its market share in its primary industry like marketing).
In the bigger picture, it’s crucial how teams across industries can work together efficiently to achieve the primary goals.
For example, a good business can increase teams’ collaboration by choosing a less strict and hierarchical management and leadership style or establishing independent teams that only serve their primary goal.
It’s easier to imagine how a larger company can achieve this, as they can assign teams with an independent task and have individuals that again have separate tasks.
But for a small company, it’s more challenging, as many employees will have to play many roles. For example, can a small business CEO realistically only think about growth strategies (link) without implementing the strategies themselves?
A good company can break down the business processes into steps and see how every step is related to its other phases.
By evaluating relatedness, you could see how you could concretely increase collaborative measures between various steps in most cases.
Through team collaboration, a business can achieve higher returns on whatever the teams are trying to achieve.
A Good Product or Service
A good business will have good products and services, pretty straightforward. But how do we measure what’s a good product or service?
First, answer this, does your product or service provide the value it would say on its tin?
While it’s easy to say when a product is a scam, it’s harder to tell when a product produces enough value to become excellent and profitable.
When we look at the product value, consider these core question to evaluate if your product is good:
- Does it solve a problem, or does it provide value to your customers?
- Or does the product provide value to other stakeholders?
- Does the product’s marketing efforts emphasize the right value instead of false advertising?
- Does the service or product align with the underlying goals of your business?
- Is your product developing to become better?
With these example questions, you can determine more quickly whether a product is good.
We want to highlight the process of developing products a bit. Today, a product that enters the market won’t necessarily have to be the best, to be good essentially.
In such cases, it becomes vital to develop a product for the future and the surrounding communication that explains its development.
A good business won’t stagnate through its offerings. And it can be simple as small increments to the product or significant changes that overhaul the product.
Which one depends on the goal you want to achieve with the product.
For example, an online product uses web analytics to discover user behaviors from where it finds the inspiration for the development of becoming a better product.
Innovation and Research and Development
As in the last section, we started discussing how product development can drive a product to become better. Overall, a good business will have a separate way of doing innovation and research and development (R&D).
No matter how important a product may seem to your business today, every product will eventually lose its traction.
Through innovation and R&D, a good business will bring the next cycle of growth to its bottom line. It’s crucial to be ahead of times, even if it may not seem so today.
For example, in 2018, the average spend on R&D spending was 13.06% of revenue and the average revenue for the companies on the list was for the year 2018 111.2 billion USD.
Of course, the cycle and speed of innovation are highly dependent on the industries and their complexities. Still, all businesses will have the rhythm of innovation and can produce good products to the market at a sustainable rate.
The key is to discover the rhythm of innovation as fast as possible. You need to know whether it takes three months or five years to take the product to market.
The core thing to realize early on is that R & D itself doesn’t have to be separate from the companies’ daily activities. You can increase openness on how everyone can discover problems and solutions and fund the best ideas accordingly.
Through that, you increase your business’s innovation potential drastically as when you let new ideas floating around the main decisions every day.
But ideas are just that ideas.
Only through execution and experimentation can an idea become a potential innovative product for your company in the future.
If you let bad ideas go extinct fast through real-world experimentation in the marketplace, you’ll eventually find good marketable ideas that take you to the next level.
Growth-oriented Marketing And Sales Processes
The methods a business uses to deliver its brand message and how it decides to advertise and on which channels are critical elements for any company, especially in the context of what is good business.
Because without defining a marketing strategy, the chances of achieving growth for a business is low.
Every great company discovers winning marketing channels to find the optimal way of increasing its brand awareness and communication between the customer and other stakeholders.
A good company will have a growth-oriented marketing and sales process by default, and the marketing processes should be implemented and intertwined between all elements of the business.
New marketing ideas lead to unique product ideas, which leads to new growth opportunities and vice versa.
Keeping marketing and sales separate from the rest of the company will lead to worsened strategies as marketing data tells us a lot about how people and, crucially, customers perceive our businesses.
If we understand others’ perceptions, we are more likely to communicate in better ways to attract growth to our businesses.
A great growth-orientated marketing process always begins defining its marketing goals, which align with the broader business goals. The many modern marketing methods that utilize increasingly more data can help us develop even better marketing strategies to increase growth.
And marketing has somewhat democratized and become available to companies of all sizes. Companies small and large can utilize similar strategies to discover new growth channels through fast experimentation.
For example, in the list of 12 digital marketing strategies, we look at common but effective marketing strategies that companies of all sizes can use.
Conclusion
Through these six steps or elements, we can try to understand the core factors that make business good or successful.
All of them work together instead of being standalone ideas to improve a business. For example:
- A good product can’t drive growth alone
- A great marketing strategy with inferior products can’t achieve long-term growth
- A stagnating business will eventually fail as fewer resources are invested in innovation
- Teams that collaborate across their main stacks discover more opportunities and can optimize more
- Yearly sustainable growth rates can’t be reached without effective sales strategies
- and so on.
Are these the only ways to measure business success or whether it’s good or not? Of course not, as it largely depends on the nature of the business, its goals, and its environment.
But these are commonalities you can find in good businesses worldwide and offer a starting point for measuring that.
As we mentioned in the beginning, look again at what your company does already and what capacity.
Do you feel like it’s enough, and the efforts fit the bill? Or are there more you could do to make the business better and grow it further.
Take these elements as a first step; start observing, and build around it until an actionable plan comes forward.