When you start a small business or launch a startup, the one thing you can count on is the unexpected. No matter how thoroughly you plan, forecast, and test, problems are bound to arise. This is why as an entrepreneur, you need to know how to solve business problems effectively.
What is problem solving in business?
Problem solving in business relates to establishing processes that mitigate or remove obstacles currently preventing you from reaching strategic goals. These are typically complex issues that create a gap between actual results and your desired outcome. They may be present in a single team, operational process, or throughout your entire organization, typically without an immediate or obvious solution.
To approach problem solving successfully, you need to establish consistent processes that help you evaluate, explore solutions, prioritize execution, and measure success. In many ways, it should be similar to how you review business performance through a monthly plan review. You work through the same documentation, look for gaps, dig deeper to identify the root cause, and hash out options. Without this process, you simply cannot expect to solve problems efficiently or effectively.
Why problem solving is important for your business
While some would say problem-solving comes naturally, it’s actually a skill you can grow and refine over time. Problem solving skills will help you and your team tackle critical issues and conflicts as they arise. It starts from the top. You as the business owner or CEO needing to display the type of level-headed problem solving that you expect to see from your employees.
Doing so will help you and your staff quickly deal with issues, establish and refine a problem solving process, turn challenges into opportunities, and generally keep a level head. Now, the best business leaders didn’t just find a magic solution to solve their problems, they built processes and leveraged tools to find success. And you can do the same.
By following this 10-step process, you can develop your problem-solving skills and approach any issue that arises with confidence.
1. Define the problem
When a problem arises, it can be very easy to jump right into creating a solution. However, if you don’t thoroughly examine what led to the problem in the first place, you may create a strategy that doesn’t actually solve it. You may just be treating the symptoms.
For instance, if you realize that your sales from new customers are dropping, your first inclination might be to rush into putting together a marketing plan to increase exposure. But what if decreasing sales are just a symptom of the real problem?
When you define the problem, you want to be sure you’re not missing the forest for the trees. If you have a large issue on your hands, you’ll want to look at it from several different angles:
Is a competitor’s promotion or pricing affecting your sales? Are there new entrants in your market? How are they marketing their product or business?
Is your business model sustainable? Is it realistic for how fast you want to grow? Should you explore different pricing or cost strategies?
How are world events and the nation’s economy affecting your customers and your sales?
Are there any issues affecting your team? Do they have the tools and resources they need to succeed?
Is everyone on your team working toward the same goal? Have you communicated your short-term and long-term business goals clearly and often?
There are a lot of ways to approach the issue when you’re facing a serious business problem. The key is to make sure you’re getting a full snapshot of what’s going on so you don’t waste money and resources on band-aid solutions.
Going back to our example, by looking at every facet of your business, you may discover that you’re spending more on advertising than your competitors already. And instead, there’s a communication gap within your team that’s leading to the mishandling of new customers and therefore lost sales.
If you jumped into fixing the exposure of your brand, you would have been dumping more money into an area you’re already winning. Potentially leading to greater losses as more and more new customers are dropped due to poor internal communication.
This is why it’s so vital that you explore your blind spots and track the problem to its source.
2. Conduct a SWOT analysis
All good businesses solve some sort of problem for customers. What if your particular business problem is actually an opportunity, or even a strength if considered from a different angle? This is when you’d want to conduct a SWOT analysis to determine if that is in fact the case.
SWOT is a great tool for strategic planning and bringing multiple viewpoints to the table when you’re looking at investing resources to solve a problem. This may even be incorporated in your attempts to identify the source of your problem, as it can quickly outline specific strengths and weaknesses of your business. And then by identifying any potential opportunities or threats, you can utilize your findings to kickstart a solution.
3. Identify multiple solutions with design thinking
As you approach solving your problem, you may want to consider using the design thinking approach. It’s often used by organizations looking to solve big, community-based problems. One of its strengths is that it requires involving a wide range of people in the problem-solving process. Which leads to multiple perspectives and solutions arising.
This approach—applying your company’s skills and expertise to a problem in the market—is the basis for design thinking.
It’s not about finding the most complex problems to solve, but about finding common needs within the organization and in the real world and coming up with solutions that fit those needs. When you’re solving business problems, this applies in the sense that you’re looking for solutions that address underlying issues—you’re looking at the big picture.
4. Conduct market research and customer outreach
Market research and customer outreach aren’t the sorts of things small business owners and startups can do once and then cross off the list. When you’re facing a roadblock, think back to the last time you did some solid market research or took a deep dive into understanding the competitive landscape.
Market research and the insights you get from customer outreach aren’t a silver bullet. Many companies struggle with what they should do with conflicting data points. But it’s worth struggling through and gathering information that can help you better understand your target market. Plus, your customers can be one of the best sources of criticism. It’s actually a gift if you can avoid taking the negatives personally.
The worst thing you can do when you’re facing challenges is isolating yourself from your customers and ignore your competition. So survey your customers. Put together a competitive matrix.
5. Seek input from your team and your mentors
Don’t do your SWOT analysis or design thinking work by yourself. The freedom to express concerns, opinions, and ideas will allow people in an organization to speak up. Their feedback is going to help you move faster and more efficiently. If you have a team in place, bring them into the discussion. You hired them to be experts in their area; use their expertise to navigate and dig deeper into underlying causes of problems and potential solutions.
If you’re running your business solo, at least bring in a trusted mentor. SCORE offers a free business mentorship program if you don’t already have one. It can also be helpful to connect with a strategic business advisor, especially if business financials aren’t your strongest suit.
Quoting Stephen Covey, who said that “strength lies in differences, not in similarities,” speaking to the importance of diversity when it comes to problem-solving in business. The more diverse a team is, the more often innovative solutions to the problems faced by the organization appear.
In fact, it has been found that groups that show greater diversity were better at solving problems than groups made up specifically of highly skilled problem solvers. So whoever you bring in to help you problem-solve, resist the urge to surround yourself with people who already agree with you about everything.
6. Apply lean planning for nimble execution
So you do your SWOT analysis and your design thinking exercise. You come up with a set of strong, data-driven ideas. But implementing them requires you to adjust your budget, or your strategic plan, or even your understanding of your target market.
Are you willing to change course? Can you quickly make adjustments? Well in order to grow, you can’t be afraid to be nimble.
By adopting the lean business planning method—the process of revising your business strategy regularly—you’ll be able to shift your strategies more fluidly. You don’t want to change course every week, and you don’t want to fall victim to shiny object thinking. But you can strike a balance that allows you to reduce your business’s risk while keeping your team heading in the right direction.
Along the way, you’ll make strategic decisions that don’t pan out the way you hoped. The best thing you can do is test your ideas and iterate often so you’re not wasting money and resources on things that don’t work. That’s Lean Planning.
7. Model different financial scenarios
When you’re trying to solve a serious business problem, one of the best things you can do is build a few different financial forecasts so you can model different scenarios. You might find that the idea that seemed the strongest will take longer than you thought to reverse a negative financial trend. At the very least you’ll have better insight into the financial impact of moving in a different direction.
The real benefit here is looking at different tactical approaches to the same problem. Maybe instead of increasing sales right now, you’re better off in the long run if you adopt a strategy to reduce churn and retain your best customers. You won’t know unless you model a few different scenarios. You can do this by using spreadsheets, and a tool like LivePlan can make it easier and quicker.
8. Watch your cash flow
While you’re working to solve a challenging business problem, pay particular attention to your cash flow and your cash flow forecast. Understanding when your company is at risk of running out of cash in the bank can help you be proactive. It’s a lot easier to get a line of credit while your financials still look good and healthy, than when you’re one pay period away from ruin.
If you’re dealing with a serious issue, it’s easy to start to get tunnel vision. You’ll benefit from maintaining a little breathing room for your business as you figure out what to do next.
9. Use a decision-making framework
Once you’ve gathered all the information you need, generated a number of ideas, and done some financial modeling, you might still feel uncertain. It’s natural—you’re not a fortune-teller. You’re trying to make the best decision you can with the information you have.
This article offers a really useful approach to making decisions. It starts with putting your options into a matrix like this one:
Use this sort of framework to put everything you’ve learned out on the table. If you’re working with a bigger team, this sort of exercise can also bring the rest of your team to the table so they feel some ownership over the outcome.
10. Identify key metrics to track
How will you know your problem is solved? And not just the symptom—how will you know when you’ve addressed the underlying issues? Before you dive into enacting the solution, make sure you know what success looks like.
Decide on a few key performance indicators. Take a baseline measurement, and set a goal and a timeframe. You’re essentially translating your solution into a plan, complete with milestones and goals. Without these, you’ve simply made a blind decision with no way to track success. You need those goals and milestones to make your plan real.
Problem solving skills to improve
As you and your team work through this process, it’s worth keeping in mind specific problem solving skills you should continue to develop. Bolstering your ability, as well as your team, to solve problems effectively will only make this process more useful and efficient. Here are a few key skills to work on.
It can be very easy to make quick, emotional responses in a time of crisis or when discussing something you’re passionate about. To avoid making assumptions and letting your emotions get the best of you, you need to focus on empathizing with others. This involves understanding your own emotional state, reactions and listening carefully to the responses of your team. The more you’re able to listen carefully, the better you’ll be at asking for and taking advice that actually leads to effective problem solving.
Jumping right into a solution can immediately kill the possibility of solving your problem. Just like when you start a business, you need to do the research into what the problem you’re solving actually is. Luckily, you can embed research into your problem solving by holding active reviews of financial performance and team processes. Simply asking “What? Where? When? How?” can lead to more in-depth explorations of potential issues.
The best thing you can do to grow your research abilities is to encourage and practice curiosity. Look at every problem as an opportunity. Something that may be trouble now, but is worth exploring and finding the right solution. You’ll pick up best practices, useful tools and fine-tune your own research process the more you’re willing to explore.
Creatively brainstorming with your team is somewhat of an art form. There needs to be a willingness to throw everything at the wall and act as if nothing is a bad idea at the start. This style of collaboration encourages participation without fear of rejection. It also helps outline potential solutions outside of your current scope, that you can refine and turn into realistic action.
Work on breaking down problems and try to give everyone in the room a voice. The more input you allow, the greater potential you have for finding the best solution.
One thing that can drag out acting upon a potential solution, is being indecisive. If you aren’t willing to state when the final cutoff for deliberation is, you simply won’t take steps quickly enough. This is when having a process for problem solving comes in handy, as it purposefully outlines when you should start taking action.
Work on choosing decision-makers, identify necessary results and be prepared to analyze and adjust if necessary. You don’t have to get it right every time, but taking action at the right time, even if it fails, is almost more vital than never taking a step.
Stemming off failure, you need to learn to be resilient. Again, no one gets it perfect every single time. There are so many factors in play to consider and sometimes even the most well-thought-out solution doesn’t stick. Instead of being down on yourself or your team, look to separate yourself from the problem and continue to think of it as a puzzle worth solving. Every failure is a learning opportunity and it only helps you further refine and eliminate issues in your strategy.
Problem solving is a process
The key to effective problem-solving in business is the ability to adapt. You can waste a lot of resources on staying the wrong course for too long. So make a plan to reduce your risk now. Think about what you’d do if you were faced with a problem large enough to sink your business. Be as proactive as you can.
Editor’s note: This article was originally published in 2016. It was updated in 2021.
Harriet Genever is a freelance writer and copyeditor, specializing in blog posts, research articles and customer case studies. As the founder of her Australian-based business, Write Beyond, she works with B2B companies and small business, developing compelling content to attract customers and keep them engaged.With a background in Human Resource Management, Harriet enjoys the personal interaction with clients and their customers when working on writing projects. She is also a true believer that the key to success in any business is its people.
Posted in Management
- Define the problem. Ask yourself what the problem is. ...
- Understand the root cause(s) of the problem. ...
- List possible solutions to the problem(s) ...
- Select the best possible solution. ...
- Make a decision to take action.
Examples of Problem Solving Scenarios in the Workplace
Solving any problems related to money, customer billing, accounting and bookkeeping, etc. Finding a way to make the company more profitable through new service or product offerings, new pricing ideas, promotion and sale ideas, etc.
- Define the problem.
- Identify possible causes.
- Brainstorm options to solve the problem.
- Select an option.
- Create an implementation plan.
- Execute the plan and monitor the results.
- Evaluate the solution.
Those with good problem solving ability will move the business forward more effectively. Those lacking problem solving ability will inevitably recommend ineffective solutions to key business issues, solutions which will either fail to resolve the underlying issue or indeed exasperate it.What is effective problem-solving? ›
Problem solving is the act of defining a problem; determining the cause of the problem; identifying, prioritizing, and selecting alternatives for a solution; and implementing a solution.What are the steps in problem-solving and decision making? ›
- Develop evidence to support views.
- Analyze situations carefully.
- Discuss subjects in an organized way.
- Predict the consequences of actions.
- Weigh alternatives.
- Generate and organize ideas.
- Form and apply concepts.
- Design systematic plans of action.
What is problem solving in business? Problem solving in business relates to establishing processes that mitigate or remove obstacles currently preventing you from reaching strategic goals. These are typically complex issues that create a gap between actual results and your desired outcome.Why is problem solving important? ›
Problem-solving enables us to identify and exploit opportunities in the environment and exert (some level of) control over the future. Problem solving skills and the problem-solving process are a critical part of daily life both as individuals and organizations.How do you answer Good problem-solving skills? ›
- Analyze the factors that caused the problem.
- Brainstorm possible solutions.
- Evaluate the cost and potential viability of these solutions.
- Implement a plan.
- Evaluate the effectiveness of your intervention.
- Trial and error. One of the most common problem-solving strategies is trial and error. ...
- Heuristics. Sometimes, it's more effective to solve a problem based on a formula than to try different solutions blindly. ...
- Gut instincts (insight problem-solving) ...
- Working backward. ...
- Means-end analysis.
- Assess the Situation. Take the time to identify the situation clearly and then organize the issues that need to be addressed. ...
- Take a Fresh Perspective. ...
- Consider Your Options. ...
- Analyze Each Option. ...
- Get Unstuck. ...
- Make the Decision. ...
- Define an Action Plan. ...
- Communicate Your Decision.
- Define Problem or Mission. If I had an hour to save the world. ...
- Define Objectives. Objectives are goals that you derive from your problem or mission. ...
- Prioritize Objectives. ...
- Brainstorm Alternatives. ...
- Evaluate Alternatives. ...
- Choose Tentative Decision. ...
- Evaluate Tentative Decision. ...
- Make Decision.
A Lack Of Value In The Product Or Service
Plummeting profits are a noteworthy business problem example. There are significant contributors to this challenge. One of these is the possibility that your business is not providing your customers with the same, or a higher, value as its competitors are.
- Fishbone diagrams.
- Strategy maps.
- Mental maps.
- Idea maps.
- Concept maps.
- Layered process audit software.
- Charting software.
Having a step by step process to solve organizational problems allows you to go through each stage methodically and ensure you are trying to solve the right problems and select the most appropriate, effective solutions.What is the most important factor needed for problem-solving? ›
Understanding the problem
The most important factor in solving a problem is to first fully understand it. This includes understanding the bigger picture it sits within, the factors and stakeholders involved, the causes of the problem and any potential solutions.
The eight-step problem-solving process is an expanded version of the Plan, Do, Check, Act cycle. The first five steps of the 8-step process fall under the planning step, while steps six, seven and eight all correspond to the do, check and act steps.What are the five 5 most common methods in problem-solving? ›
- Step 1: Pin the Problem. ...
- Step 2: Identify the Issues. ...
- Step 3: Generate Hypotheses and Prioritize Proving Them. ...
- Step 4: Conduct Your Analysis. ...
- Step 5: Advance Your Answer.
Problem Solving (PSA) - 9th Class
Able to assess student's ability to process, interpret and use information. The Assessment contain items that assess written expression, including grammar and usage, vocabulary in context and passage-completion.
- Identity and understand the right problem. ...
- Research the systems and practices behind the problem. ...
- Visualise the problem. ...
- Brainstorm creative solutions. ...
- Identify the best answer.
- Identify the issues. • ...
- Understand everyone's interests. • ...
- List the possible solutions (options) • ...
- Evaluate the options. • ...
- Select an option or options. • ...
- Document the agreement(s). • ...
- Agree on contingencies, monitoring, and evaluation. •
Book Review: Four Types of Problems
- Type 1: Troubleshooting. ...
- Type 2: Gap from standard. ...
- Type 3: Target condition. ...
- Type 4: Open-ended.
Problem Solving Method Definition
Problem solving is the process of identifying an existing problem, determining the root cause or causes of the problem, deciding the best course of action in order to solve the problem, and then finally implementing it to solve the problem.
- STEP 1: The Right Problem to Solve. ...
- STEP 2: Analyse the Problem. ...
- STEP 3: Define the Problem. ...
- STEP 4: Develop Opportunities (Possible Solutions) ...
- STEP 5: Select the Best Solution. ...
- STEP 6: Implement the Solution. ...
- STEP 7: Evaluate and Learn.
Why is it important? Employers like to see good problem solving skills because it also helps to show them you have a range of other competencies such as logic, creativity, resilience, imagination, lateral thinking and determination. It is a vital skills for your professional and personal life.What are the steps involved in problem analysis class 11? ›
Analyzing the problem or analysis involves identifying the following: Inputs, i.e. the data you have to work with. Outputs i.e. the desired results. Any additional requirements on the solutions. solving problems which is, used specific step-by-step instructions.