Amidst the daily social feeds, news stories and business conversations I observe, one aspect of business is masterfully concealed. Cognizant it is a side of business that’s not so ‘grammable’, but the reality is that each quarter over 1,800 businesses in Australia become insolvent. Very few people are willing to admit business hardship and standing on the brink of failure – and it’s this very admission that can enable a business to turn around.
Every day we see start-ups and ventures that quickly rise to success, founders on the speaking circuit and rounds of cash injected into businesses through hopeful investors. But there comes a time where every organisation will face its tipping point that will question the very future of that venture. More entrepreneurs could be speaking about this – it’s a natural evolution for any business. Through admission and successful management, owners can win back employees, guide learning and enable the business to ride this cycle. Every business will face its edge on the brink of failure. It’s those that prepare, and the business response that determines who comes out of it. Rather than ignore the situation or hide it from employees, its critical to face the brutal facts – it’s time to transform.
What we are seeing is blind-sighted failings. Entrepreneurs who have turned their brilliant idea to a lucrative commercial venture, expanded rapidly or monopolised a market position – ill-prepared or inadequately skilled within the larger-scaled enterprise, they are taken by surprise when the success bubble bursts. Silo thinking is another barrier to corporate evolution; this is where individuals and teams undertake their tasks without question or interaction because ‘that’s how we have always done it’. Enabling a culture of innovative thinking is critical to sustained success. Strategy – no strategy or one strategy can also bring down a once successful operation. Contingency strategies are crucial to prepare the organisation for times like the loss of core clients, new competitive market entrants and products. This prevents ‘panic’ in the organisation and supports a quick recovery.
Toys R Us is an example of a business that became too comfortable in its success that it didn’t prepare for changing consumer preferences and market shifts. Relying on its exclusive distribution with Amazon, the organisation hadn’t set themselves up for ecommerce and from 2004 the market became more accessible for players who swept in on their market share. Borders Bookshop – set up by two passionate brothers who were avid readers didn’t prepare for technological shifts and the entry of ebooks. The juggernaut, had just under 20,000 employees when it went into administration in 2011.
As a business owner, I can vouch as an authentic authority, as not only do I work with business CEOs directly facing this, my own business experienced the brink of failure.
The signals every business (and investor) should carefully observe are not just the financial focus of the business. If there is an obsession on growth forecasts and cash injections rather than putting your customers, employees and services at the centre of your business model and decisions, then you may set your business up for a volatile future. Secondly, a business with a Teflon strategy – where nothing sticks and decisions are made on a whim is another red flag. A simple example is observing a competitor undertaking a marketing initiative and then adopting a copycat approach with a short-term focus, with “gut reaction” only and no data driven decision-making. Thirdly, a review of employee and customer engagement and retention, will always act as a good indicator on the confidence in your organisation. If these are all trending downwards then this is a valid indicator to act now.
In transforming your business the key steps are to:
- Build a transformation plan – making sure that you have built in contingencies, so that it is flexible to be able to navigate and foresee both internal/external market conditions.
- Communicate – this is key. Take your team on the journey, giving them confidence on the business rationale and how it affects the organisation, creating an acceptance to change.
- Centre decisions on data – always make sure that decisions are driven by data rather than reactions.
- Set out critical success factors based on leveraging key KPIs – these KPI’s should be aligned to each business unit – giving your team an insight, deliverable and ownership into the overall transformation outcomes.
- Assess the current organisation capabilities – consider People, Process and Technology to ensure that the transformation outcomes are sustainable.
- Build the future organisation – plan for skills, roles, structure and capability.
- Make decisions – difficult decisions will always be necessary in any transformation, make and execute these in a humble and considered way.
- Build the transformed organisation – ensure this is undertaken with sustainability at its heart.
Transformation takes time. For us, we commenced the journey two years ago. We went from an entrepreneurial award-winning organisation that was completely dependent on two core clients, with siloed product offerings, that forced us to build an aggressive transformation plan that was focused on delivering a fundamental change in our business paradigm, product offering and customer base, a revived business culture with international expansion, creating partnerships with our clients, implementing a bold risk-based model that centred on our client’s success and adopting a diversity and flexibility within our international teams. Today we have transformed to operate within a global customer base and workforce, have opened in London and the Middle East and now taking our Australian business product around the world. Our transformation will not stop, we have ensured that we have a culture embedded across all our operations to ensure that we sustain our competitive position and have the flexibility in our strategy and operating plans to “take action” not “reaction”.
No business is immune to change. If you can survive a fail, then you set your business and employees up towards a more resilient future.
Alan Moore, Digital Expert, International Business Transformation Leader and Director of RANDEM.