Business is so simple – it’s just an exchange of value between a willing seller and a willing buyer. Every day on auction sites like TradeMe, people do business.
But organising a business to keep on delivering that value, day in and day out for many years, is hard – especially when the marketplace for your products or services is also in flux.
Smart companies will have some form of market intelligence in place so they get early warning of changes and can respond. But human nature being what it is, the reality is that when you’re flourishing, you stop looking and just expect the good times to continue.
When firms begin to struggle they may at first double down on what has worked in the past, to get them out of a hole. This is also human nature and often it works. If it doesn’t work they sometimes seek help straightaway. But mostly they begin panicking and blaming each other.
From this point on there are three main issues that can lead to a company’s ultimate demise.
1. Failure to Diagnose the Problem
Market researchers are often called upon at this point to come up with some new insight that will help get them back on track. They go and talk to customers and potential customers and come back with findings and recommendations.
Most of these recommendations are just best guesses. Either they are based on what customers say they want – which is often only partially true – or – if the researcher is more savvy – what they interpret from the customer responses, but have not personally experienced.
It’s important to nail down what customers are really doing. Have the ground rules changed? Are they being affected by someone further up the food chain? Has someone offered them a significantly better deal? Have you annoyed them in some way or become difficult to deal with compared to other firms?
But equally, you need to understand the ‘why’ – the big picture. Are your competitors also struggling? Have market conditions changed – subtly or dramatically?
And you need to look at yourselves. Have you lost focus? Has the day to day overwhelmed the longer view? Have you lost key staff or key clients?
Market research doesn’t usually cover big picture trends and internal issues. But in my strategic work I find these two sources of insight to be invaluable.
2. Failure to Implement Recommendations
Often there is a huge mismatch between what we think is possible and what can actually be implemented. Even assuming your research findings are incontrovertible and the recommendations quite straightforward, companies often get in their own way.
Sometimes it’s because of individual ‘blockers’ who, for whatever reason, [strategic, conceptual, emotional, or just practical], need to stop things happening or to stave off having to change. You can identify struggling firms with blockers by the fact that though they have lots of ideas and plans, strangely nothing ever changes.
But mostly it’s collective or systemic factors that prevent coherent responses to business threats. . . Messages that get lost in translation as they travel from the ‘planners’ to the ‘doers’ . . . an internal focus that doesn’t easily look outwards . . . competing priorities – too many agendas or too little focus . . . . an embedded way of doing things that doesn’t sit well with the recommended improvements . . . inadequate tools that make change hard to implement . . . a failure to make anyone accountable. . . payments or rewards that incentivise other outcomes. . . . a high staff turnover . . . or worst of all, the departure of the person who was responsible for implementation at a critical time.
It’s amazing that change ever happens.
3. Failure to Implement Well
As a rule, people under stress do what is easy – regardless of how important it is in the scheme of things.
Sadly, if you’re part of a company that’s struggling to make progress, or falling behind competitors, the things that are easiest for you to do may be the least useful when it comes to solving your underlying market problems.
There’s never just one simple intervention that will solve everything. Many possible actions – such as restructuring or rebranding – make things worse. They can create so much distraction internally, they may disrupt your recovery.
Even when facing impending doom, a stressed out maladaptive company will have difficulty wholeheartedly buying in to a change of emphasis. That takes courage and focus, and the ability to dispassionately prioritise changes to ensure survival.
Solution: Make It Insanely Easy To Succeed
Most struggling firms have a few key strengths they can build on, but also some major deficiencies. Sometimes they’re trying to do things [or meet the needs of clients] they just aren’t suited to. Often they just haven’t been able to adapt fast enough to innovation or disruption.
They will feel disheartened and risk-averse, so it’s very important that the implementation of their revised strategy feels like a positive experience.
Under the circumstances, and given what we know about people in struggling firms, the only way to guarantee their future success is to come back to the core of business and help them find a sweet spot where it becomes insanely easy for them to fulfil client expectations and attract new ones.
This solution has several important qualities:
1. It helps to build a common frame of reference between a company and its clients – whether these relate to shared values, desired outcomes or performance standards – to encourage retention and referral.
So, for example, at the simplest level, a struggling fish and chip shop might begin by acknowledging that their customers want fast, crisp, non-greasy, well-cooked food and resetting its systems and processes to achieve that every time.
Or a struggling accounting firm might recognise that it needs to rebuild some of its relationships with customers and develop a more practical and non-judgemental way of dealing with them.
2. It is based on a common understanding between the firm’s staff and its leaders – so that staff feel the leaders are supporting their efforts, rather than getting in the way.
When you consult staff, and include their insights and recommendations in revised operational or marketing strategies, they can suddenly feel a lot more connected to the business and ready to go beyond.
But the common understanding needs to do more than that. It needs to express a shared view how the firm does business, the desired outcomes, the kind of behaviour that will be rewarded and the best kinds of new business the firm is seeking. It’s the basis of culture and, especially in a service business, it is the basis of branding.
3. It identifies necessary actions to support the solution and prioritises the most important.
Above all else, a struggling firm needs to focus on the factors that will make the most difference to their future. They need to grown profitable customers – that’s priority one. But creating streamlined practices is also important. It makes it easy for staff to do their job and for customers to say yes.
The leaders of the firm need to get out there, be seen. They must call on customers and build alliances, because activity increases positive perceptions. That’s also why it’s important to update what needs updating. But not at the expense of the company’s financial health.
But unless new money is coming into the firm, financial investments need to be modest and targeted to critical success areas. Creativity is important and so is effective use of staff time. Experiments and pilot projects are encouraged, putting all your eggs in one basket is not.
Helping a struggling business to recover is, above all else an exercise in psychology. It’s about helping people, with egos and possibly also livelihood on the line, to absorb bad news, improve their relationships, regain their confidence, up-skill where necessary, develop an experimental mindset and perform the delicate task of focusing on what matters while avoiding tunnel vision.
It’s one of the most magical things you can do.