Many businesses lose their competitive advantage as a result of new developments and competition. Markets and technologies change. Smaller business can suffer from a lack of product diversity to carry them though these changes, and often rely on only a few products and or customers and or suppliers. Any form of high dependency is very risky. This struggle for survival is strategic and ongoing. However, independent of size, the ‘boiled frog’ often tricks us into complacency, and short-term objectives are the focus.
When the risks of decline become obvious there are 3 major considerations you should look at first.
- Theodore Levitt’s Marketing Myopia highlights the insulated ‘fixed’ perspective that leads to problems. The culture which becomes self-directed, sales and profit oriented is short-term driven and has an operational perspective. Adding value to the customer has to be the prime consideration. This is the difference between selling and marketing. The real message however is to know what business you are in. Understanding your core competencies and how these can meet customer needs is the backbone to innovation. When you start losing customers, or staff, you have to find out why. Often these are neglected but offer the best feedback. You don’t want confirmation of what you are doing right, but rather what you are doing wrong! (Paradox of deception)
- The next is to re-look at differentiation. In my opinion, this is one of the most overlooked aspects of innovation that is usually relatively inexpensive. A good problem solving model to do this is SCAMPER, but use two models to cover most angles. Always test your changes on a few customers before implementing!
- The last is ‘re-engineering’ the business. This does not mean ‘rearranging your sock drawer’, making arbitrary structural changes, cutting expenses or bringing in an axe-man. (Believe me these happen all the time!) A mature business however will likely have many unproductive staff. It has been estimated that 20% of the people do 80% of the real work. Bureaucracies grow and feed themselves. Do not bring in outside consultants to do this weeding for you. Your ‘A’ management members, given strategic guidelines, will identify the slackers. So the first step here is to simplify down to those who really add-value to the organization and customers. This applies to staff and systems. Many businesses have huge unnecessary structural overheads. Then you can begin to re-identify who you are and where you are going next. (Redefine your 1st Quadrant)
Objectivity is key in these situations, so need I recommend a qualified facilitator? An alternative is to get key stakeholders and major customers involved.
Caveat! Many organizations do not look at organic growth but rather plan to diversify into new markets. This is highly risky. Using Anshoff’s Growth Matrix, it has been shown that increasing product range (innovation) is the least risky, then entering new markets, but never both at the same time. Market penetration is of course the best option and should be pursued, but in a declining business this may not be feasible.
Change is often avoided, and perceived outside change is seldom seen in time from ‘inside the box’. This may then be too late to look at options, hence the boiled frog. The need for strategic thinking continues … but the truth remains, prosper (growth mindset) or suffer the consequences (fixed mindset)!