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Friday, May 06, 2005
Using "Weak Signals" To Identify Opportunities
Editor's Note: We're very pleased to bring you this guest column from small business authority Steven Little. He talks about how successful small businesses grow through keeping their ears to the ground for "weak signals" about the first signs of emerging trends -- in other words, by trendspotting.

By Steven S. Little

Steven Little, Small Business ExpertIf you want to grow your business, you need to see the future.

If you want to know what's coming, you need "outstanding market intelligence." This is your organization's ability to first recognize and then adapt to fundamental change happening in your company, your industry, and your community. You need to take the time to regularly consider the macro forces of change in the world as a whole.

So what can you do to stay on top of the changes happening in your industry and your world?

Internal vs. external focus

Let's start with focus. Most business owners are great at internal focus. Knowing what is happening inside our own companies is one of the strengths that allow us to effectively compete with bigger businesses (because often, they aren't very good at this.)

However, we also tend to get mired within our insular view, and we ignore the importance of external focus. This is where big business, with their research budgets and market analysts, can often get the best of us.

Finding the right balance between internal and external focus is a common trait among smaller business that achieve sustained growth. It is especially true of successful service-based businesses, which understand not only their own world, but their customers' worlds as well.

Another common barrier to growth I see among privately-held businesses is the inability to recognize and act upon subtle (or micro) changes in markets that lead to macro changes. Experts call these subtle changes "weak signals." Even to the experienced owner or manager, these weak signals can often be dismissed as anomalies. To the growth-oriented manager who regularly considers the macro forces, these signals are seen as noteworthy data points. They represent potential opportunity and may require immediate action.

I knew one growth manager who understood these types of signals very well. My wife had an uncle who recently passed away. Uncle O, as we called him, was in the music recording industry for his entire career. He started out as a small owner and eventually became president of one of the world's largest recording labels. He had successfully navigated the turbulent and confusing world of pop music from the late '50s through the early '90s.

In the two years before he died, I spent considerable time with Uncle O. While he shared a lot of compelling stories, I was most interested in understanding his uncanny ability to capitalize on the rapid rate of change in his industry. More than any business I know, the pop music business is made up of seemingly well-entrenched "rules" of what makes money that are overthrown on a regular basis.

Consider the rapid rate of change in Uncle O's industry. Everything -- from the industry's distribution systems to the media formats sold to the styles of music people buy -- changes quickly and completely. The only thing that stays the same is the rapid rate of upheaval. Uncle O maintained that his success stemmed from an ability to see the periphery of a changing market more clearly than his competition.

Weak signal monitoring

Though he never used the term, Uncle O was an early practitioner of weak signal monitoring. Here are a few rules of weak signals that I learned from listening to Uncle O:
  • The more irreverent and upsetting a new idea is to the status quo, the more chance it has of reaching a level of macro importance.

  • The more often you hear, "That's just a fad," the more likely it's not.

  • Identifying and monitoring weak signals should be an ongoing, systematic process in any organization interested in sustained growth.

  • If you hear about a new "thing" in a popular magazine or on television, you are probably too late to capitalize on it.

  • Weak signals often grow by joining forces with other weak signals. Or, in other words, weak signals often need reinforcement from other ideas floating outside the established boundaries before they can be seen or heard.
As a manager and a business leader, Uncle O believed his focus should be on the future. He estimated that, in his most productive periods, he was spending 75 percent of his time on identifying, monitoring, developing and re-tooling initiatives designed to meet tomorrow's opportunities. Overseeing the issues surrounding the day-to-day activities of today's opportunity was something he could delegate with confidence.

Interestingly, it has been my experience that too many business owners spend the majority of their time on today's issues (or even yesterday issues), while managers of growth organizations always have their gaze firmly fixed on tomorrow.

To Uncle O, managing a current "hit" was relatively easy. Attempting to identify the next big thing is where he brought the most value to his organization.

* * * * *

Steven S. Little is a leading authority on business growth. Formerly president of three fast-growth companies, he is now a much sought-after speaker, writer and a Senior Consultant for Inc., the magazine for growing companies. His new book "The Seven Irrefutable Rules of Small Business Growth" was published by Wiley and Sons in February 2005. For more information, visit his unique website at www.stevenslittle.com.
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