Last updated on January 9th, 2025 at 01:05 am
It’s probably safe to say that the economy is becoming less and less predictable due to systemic fragility, technological progress, and geopolitical volatility.
Consequently, adaptability is more important than ever. Here are the three reasons why it’s the key to your business success…
Reason #1: Adaptability Can Help You Stay in Touch With Reality
People who are bad at business often struggle to differentiate between their imagination and reality.
They tend to get caught up in their heads, dreaming up business plans that aren’t based on any data.
Moreover, they seem to think that this is a productive use of their resources, failing to realize that they are just spinning their wheels.
After all, as the quote attributed to the 19th-century military strategist Helmuth von Moltke goes, no battle plan survives contact with the enemy.
Or, to put the same idea in the entrepreneurial context: no business plan survives contact with the market.
That’s why in order to succeed as an entrepreneur, you need to teach yourself to seek contact with the market immediately once you have a business idea.
Put the minimum viable version of your product or service in front of your dream customers as quickly as you can so that you can get market feedback.
Then, either drop that business idea if you realize that there’s no interest in it or start improving your product or service through the process called the “Build-Measure-Learn” feedback loop:
The more adaptable you are, the easier it will be for you to stay grounded in reality, create an offer that has demand, and build a sustainable business!
Reason #2: Adaptability Enables You to Capitalize on New Opportunities
If you take a closer look at the histories of some of the largest companies in the world, you’ll find that a lot of them didn’t start out selling whatever it is that turned them into globally recognized brands.
It’s often the case that these companies were initially either only adjacent to their current niche or doing something unrelated to it entirely.
For example, some of the most famous business pivots include:
- Nintendo – It was founded in 1889 and was doing all kinds of random stuff for three-quarters of a century until pivoting to producing game consoles and computer games in 1966.
- Nokia – It was founded in 1871 as a pulp mill operation. It then expanded into electricity generation, rubber products, consumer electronics, cable, and even forestry. Finally, in the early 1990s, Nokia pivoted into a “telecom oriented” company and made mobile phone production its primary focus, which eventually led to international acclaim in the 2000s.
- Starbucks – It was founded in 1971 and was initially supposed to be a high-end coffee machine and coffee bean wholesaler. The company only pivoted into the coffee shop chain that we are all familiar with in 1987 under the leadership of its then-new-now-legendary CEO Howard Shultz.
These companies became global successes because their leaders were adaptable enough to notice new opportunities and pivot in order to capitalize on them. This is something you want to emulate as an entrepreneur!
Reason #3: Adaptability Makes You More Likely to Survive Black Swan Events
Mathematical statistician and essayist Nassim Nicholas Taleb first introduced his highly influential Black Swan theory to the general public in his best-selling book “The Black Swan: The Impact of the Highly Improbable”.
According to him, rare, hard-to-predict events have a disproportional impact on history, economy, and culture.
Moreover, we humans are susceptible to various psychological biases which makes it difficult for us to navigate the uncertain world we live in and survive these events.
Perhaps the main such bias is our unexamined assumption that everything is going to continue as usual. While the “best predictor of future performance is past performance” adage is true, there’s always a possibility that something unexpected might happen.
Taleb uses this analogy to illustrate it: every day for its entire life, the turkey gets fed by the farmer, so based on “historical data”, it would be reasonable for the bird to expect that to continue in the future. But then Thanksgiving comes.
Arguably, the most recent global Black Swan event was the COVID-19 pandemic, which was completely unprecedented in its scale, disruptiveness, and effect on the economy.
We can probably safely assume that we are going to see more Black Swan events like that in the future. There are no guarantees in life, but the more adaptable you are, the more likely you will be to survive them!
How to Become More Adaptable as an Entrepreneur
Get Your Personal Life in Order
First of all, if you want to be adaptable as an entrepreneur, you need to get your personal life in order:
- Live way below your means and have an emergency fund with at least 6–12 months’ worth of expenses.
- Make sure that your significant other is on the same page regarding your business goals.
- Eliminate interpersonal drama by cutting out toxic people from your life.
All this is going to free up cognitive bandwidth that you can then use to closely observe the market and quickly adapt to any changes.
Build a War Chest for Your Business
A war chest is a pile of cash that you keep in your business account.
Its primary function is to be the business equivalent of an emergency fund that you can draw on to survive economic downturns. This is the best way to make your company more resilient to Black Swan events like the Covid-19 pandemic.
Its secondary function is to enable you to capitalize on new opportunities that require substantial investment. If you stumble upon something that seems really promising, you can use this money to pursue it.
Scale Slower Than You Think You Could
Here are the three things that you should keep in mind when it comes to scaling your business:
- Scaling is going to magnify both the good and the bad – Something that seems like a minor annoyance at 1x might snowball into a huge problem at 10x. Streamline everything as much as possible before you start scaling.
- Scaling doesn’t always work linearly, which is why it’s always best to scale gradually – For example, if you want to 10x your ad spend, don’t just 10x it overnight. Start with 2x, then 3x, then 4x, etc. It might turn out that your current ad campaign works well at 7x but stops being profitable at 8x for whatever reason. Had you gone straight from 1x to 10x, you would have ended up with a campaign that’s bleeding money and without a clue as to what the issue is.
- Scaling can destroy your company by causing irreparable brand damage – For example, if you have an e-commerce store and successfully 10x your sales, but then it turns out that your supplier cannot fulfill 10x order volume, you will have a lot of unhappy customers requesting refunds, leaving bad reviews and bashing you on social media.
That’s why it’s so important to temper your enthusiasm and scale slower than you think you could. It will enable you to spot potential problems and address them before they get out of control and wreck your business. As the Navy Seal saying goes, slow is smooth, and smooth is fast!
What is the Fastest Way to Test New Business Ideas?
We already explained the Build-Measure-Learn feedback loop. But what is the fastest way to put something new in front of your dream customers?
Simple: create a minimum viable offer, build a sales funnel for it as quickly as you can and start driving traffic to it with paid ads.
Once your ad campaign is up and running, wait for a few days to establish baseline conversion rates and then start optimizing your funnel with split testing (also known as A/B testing).
See if you can make your funnel profitable. Optimize the design, the copy, and the offer as much as you can.
Also, make sure that your ad targeting is on point. Are the people that you are showing ads to your dream customers?
If after a while, you feel like you gave it your best shot, but your funnel still isn’t profitable, it’s probably best to drop that idea, go back to the drawing board, and come up with something better.
Realistically speaking, you will probably need to test several offers before you find a winning one. Just keep experimenting until you stumble upon something that resonates with your target audience!
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