What Will Put You Out of Business?

I have asked hundreds of businesses and organizations this question as the starting point in planning for the future, and I always find it fascinating that a majority of leaders have never asked it of themselves. In fact, when the question is raised, I am usually met by blank stares. Make no mistakes, this is one of the most thought-provoking questions that a leader must ask themselves.

Have you ever asked yourself, “What will put me out of business?” What is the first thing that comes to mind? An untimely death of the leader? The loss of a major client? A production line failure? A product recall?

I am always intrigued and curious as to why businesses fail. What happened? Was it a catastrophic event or did the business die a slow and painful death? It could be that the business didn’t have a viable product or service to begin with. I admire ambitious entrepreneurs, but some simply overreach. On the other hand, what happened to those viable businesses that fail? What put them out of business?

There are plenty of major failures that become college research material and case studies. It is always easy to look back and see where the mistakes were made or the series of events that unfolded causing the businesses to fail. I recall sitting at my desk the day the news came out that employees at Arthur Anderson, one of the largest accounting firms in the world, had shredded documents related to their financial audit of Enron, one of the largest bankruptcies in history. It was sadly prophetic as I immediately uttered that Arthur Anderson was going to go out of business. The bad judgment and decisions of a small number of Arthur Anderson employees brought down one of the world’s largest accounting firms.

But what about that small coffee shop that opened down the street from your house and only survived for eighteen months? What caused them to fail? Was it the competition from the national chain that opened across the street? Was it the fact they didn’t have a drive-thru? Or maybe it was because the owner was rude to all the customers and didn’t realize the stress of running the business manifested in rude interactions between the owner and her customers.

All businesses have a LifelineTM that is a reflection and accumulation of all of the decisions of the business. The business’ Lifeline is either positive, which I call the Driving Zone, or negative, which I call the Drama Zone.

Performance and Time ChartIn general, businesses in the Driving Zone are more likely to survive compared to those in the Drama Zone. Those in the Drama Zone must make key decisions and moves to propel them back into the Driving Zone. However, those in the Driving Zone also face situations that can put them out of business. For example, Arthur Anderson was most likely in the Driving Zone but a catastrophic event put them out of business. As for the Coffee Shop, they were most likely in a Drama Zone and slowly died from lack of sales and cash flow.

The key is to strategically think and ask, “What will put us out of business?” Will it be disruptive technology, government regulations, or simply lack of planning?

Pull your management team together and pose this question. Fight to live and prosper!

First featured on ForbesBooks.com