In the January-February 2011 Harvard Business Review, the article, Reinvent your Business Before It’s Too Late, claims that “things often look rosiest just before a company heads into decline.” When we think of the standard bell curve of a business cycle, we understand that revenue and profit is often maximized as the company edges closer to maturity at the top of the curve, just before they accelerate quickly on the downward slope of decline. Today, the pace of decline can be very rapid indeed. Disturbing, I know, to think everything is looking so good only to be reminded about what lies ahead. There IS good news. You are in the best spot to do something about it–now, right now, before things get out of control and you reach a crisis or as many put it today–survival mode.
So where to start? Since evaluating financials just doesn’t tell the full story, the numbers need to be connected to market trends and business processes. Perform a granular dissection of current business to determine the expected pace of change. Secondly, evaluate what might be a viable next growth curve that leverages your relationships with customers, operating capabilites, or business model. Here are some of the key things to consider:
- Where are you on the growth curve? Collect information on the growth rates of the industry; what sectors are still growing, is a new segment emerging and are growths rates increasing but at a declining pace?
- What do you do well that could form your next growth curve? Understand the positioning of the company vis a vis its competitors; does this company offer a value proposition that is unique enough to differentiate itself from the pack as opposed to compete on price and relationships (both of which change over time and can be attacked or eroded)? How can those unique qualities be extended to another related category just as effectively? Think Ipod to Iphone to Ipad.
- Get the most profit out of core business now. Evaluate the customer list; allocate customers to four quadrants—new, lost, growing and declining. The greatest danger is too much attention (and corresponding resource focus) on new business if there is significant erosion through order volume declines. Manage business to maximize top customer retention and increase orders of existing customers.
- Begin to creatively consider the range of current and potential products along with their target markets; be sure there is a strong and healthy market for each major potential product category into the foreseeable future as well as appropriate R & D levels to successfully enter new products into the market.
- Does the organization have a purposeful and positive culture? We know that often the organizations best able to transition from one core business to the next curve are very clear about what they do as well as who they are. Of all the variables that matter, people are the ones that drive passion, productivity and performance. They are a priority. Some clues come in the form of employee surveys, customer satisfaction ratings, turnover rates and training investments. Be sure they are a part of the change.
- Stay aligned. How is the organization structured and resourced to execute the evolving? Under allocating resources and lack of effective leadership are the chief causes of under performing potential. It is often said that “strategy is how you spend your money”, which is just another way of saying it is not what we say, but what we do that counts. Cross reference organization structure and resource allocation with plans to ensure that the initiatives intended to drive the future are enabled to accomplish the goals.
Managing to high performance is a journey not a destination. Planning is never over. Strategy is vital to sustained growth, and keeping it dynamic in response to the stage of business and the market place changes are key.