Flexibility is vital to the success of any business turnaround strategy
One of the biggest problems in business is that just when you think you have a settled business model in a stable market, things change. This is particularly the case in these times of austerity and turbulent Global markets. There are two ways in which this can happen:
- A sudden shock as per the financial crisis in 2007/8 that affected us all, or sectoral shocks such as the dot com crash in 2000 or an outbreak of foot and mouth disease, as in 2001. This can change your business overnight.
Or.
- A slower, more incremental change to a product or service that gradually changes the market, and all who trade in it, forever. Or at least until the next new innovation!
Strangely the latter change can often be the more difficult to deal with for businesses. You establish your offering based on a set of established market dynamics that may have been in play for some time, and then a new innovation comes along that challenges the status quo. However, the challenger is not an instant agent of change, and the players all tend to say ‘it will never last, or ‘this will never take off’. This is often a mix of fear and complacency.
The advent of the computer and more recently the internet, and the speed with which we can communicate globally, are obviously examples that have affected us all in different ways. On a large scale the delay in getting into personal computers by IBM cost them dear. On a smaller scale the advent of, initially, Direct Line and then the various comparison sites, has forever changed the business of the office based insurance broker.
It is obviously easier for the smaller business to be flexible than the bigger guys where it can be like turning around an ocean liner.
1. Conduct regular reviews of your business model and market positioning
- Establish who your target customers are. For example are you aiming directly at consumers, retailers, other businesses or some form of wholesaler or aggregator?
- Establish what the key success factors are for this group. Is it price, service, quality, delivery, access to decision makers etc.
- Review your offering – be critical! Are you in the right place at the right time?
- What are the barriers to entry? Is everyone piling in to your market because the model can be set up on a laptop in a back bedroom?
- Are there substitute products that will change the market over the next few years? For example record shops have needed to change first to cassettes, then CDs and now their market has been completely changed by Apple with the iPod and iTunes.
- Is it time to change your business model?
- Do you have the right resources and capabilities for the new model?
- Are you paying for resources that could be used to create a new offering?
- Do you have capabilities that could provide your customers with additional value at no cost to you?
Once you have conducted the review you need to BE FLEXIBLE. Just because “it’s always been done this way” doesn’t mean it should continue that way forever. Keep all your business assets as flexible as possible, for example:
2. Employ and train your staff to be multi-skilled – The more flexibility you have in this respect the better. It is far better to pay a little more for someone who is able to cover a number of roles and who has the ability to learn new skills if and when you move your business model.
3. Property and asset commitments – Keep this all to a minimum and give yourself as much wiggle room as possible, ie a break clause in a lease in as short a time as possible is a good example of this.
4. Outsourcing – In today’s world you can outsource virtually every aspect of your business other than the particular (hopefully unique) offering that your business brings to the table. Payroll, IT, Accounts, Marketing and even Sales can now be outsourced!
5. Consultants – When you have one off projects, or a particular problem, use a specialist to deal with this. It will probably give you a quicker and better result than either doing it yourself or using one of your existing staff; or worse still taking on a new member of staff.
Summary
The ability of any business to be able to quickly change course and not be constrained by onerous fixed contacts and costs is valuable at any time. This is never more so than when you are planning a turnaround strategy – just look at how long it has taken some of the banks and other finance houses to implement effective business models.
As always, if you have any comments or any of your own experience you would like to share on this subject, please contact me at john.thompson@transcapital.co.uk or on 0845 689 8750.
Image by:khalid almasoud