This is the first in a series of five articles about Regenerating Your Business from the team at ShopAbility. Our first article centres on what ‘Business Regeneration’ is, how it differs from improving your everyday operations, and the types of areas Business Regeneration considers.
Future articles will cover:
2. Tell Tale Signs of a Business in Crisis
3. Avoiding meteorites – Risk Management
4. Putting the ladder against the right wall – getting your core proposition right
5. How are we doing? – Scoring your business.
Rather than tweaking yesterday’s results or fighting today’s fires, Business Regeneration is about future proofing your business for long term sustainable growth.
Why Business Regeneration?
“In the past 12 months, around 8898 companies have been placed in administration, liquidation or receivership. Also a concern is the number of big brands that have collapsed, including household names such as ABC Learning, Kleins, Kleenmaid, Strathfield and Midas.” (Reference Smart company, James Thompson,12 February 2009)
Could this be you?
What is Business regeneration?
In simple terms, Business Regeneration is about revamping your entire business.
Now is a good time to do this, as the nature and balance of economic and retail markets is changing, and old business models won’t necessarily hold up in the future.
What’s your diagnosis?
An equivalent analogy is going to the doctor for the annual health check. It’s important to have the independent opinion! None of us ever want to believe we eat and drink too much, and should exercise more!
Business is no different, as it is the same human beings leading and making decisions. We can get too close and become blinded.
Once you’ve worked out what’s wrong, or how fantastic you’re feeling – the ‘diagnostic’ – then you can decide next steps. In business this equates to what you need to do, or where you must improve, or what strategies you need to realign, to either cost reduce and/or grow your business.
What needs curing?
Recognising when change is required is probably one of the toughest decisions a leader has to make. Every successful company firstly “has”, and secondly “operates”, with a well proven business model. Recognition of when the model needs to change is the tough part, and is what Business Regeneration is all about. Execution and ‘doing’ is then the easy part, putting the plans and measurable actions in place, and getting on with it. Figuring out what needs to change first up puts the ‘doing’ in perspective.
Don’t waste an endemic business crisis. This is the ideal time for change and taking the lead on your competitors. There is no better time than now, for action. Your staff understands the need for change, as does the entire supply chain, as they too are operating in these challenging times.
Figuring out where your business is vs where it needs to be
Inaction is not the solution, nor is an uncoordinated or disorganised approach – in these times of uncertainty this could quickly destabilise any business. Be careful not to unnecessarily scare the horses.
Many companies fail to take advantage of the opportunities presented in a crisis, or use the external environment to be the catalyst for much needed change. The best companies are using the current global financial crisis to position themselves for the future, and remain sustainable for the longer term.
All too often businesses get caught “in” the business and forget about the helicopter view “of the business”. A diagnostic or health check, coupled with the CEO leadership and clear and focussed strategic goals enable a business to put together a prioritised action plan.
Some key questions to ask yourself of your business:
1. What is the single minded purpose of your business? Why do you exist?
2. What is your unique point of difference – why will your customers buy your products or services?
3. What is your proven business model? Eg. Quality, lean, service
4. What has driven your success or failure to date? What makes it work, or detracts from improving?
5. What insures you from future risk? How sustainable is your business in the longer term? Can someone or something take you out? Eg. Ipod
Once you’re clear on your purpose, then you need to work out how you’re going. What are your exposures, your risks and your opportunities?
A simple high level tool to match the strategy to the situation is the STARS model (courtesy of Michael Watkins, The First 90 Days, page 63).
Is your business in Start-Up, Turnaround, Realignment or Sustaining success? The real test here is reality vs belief or opinion.
Once the situation is clear, there needs to be a structured process to review each function and key drivers of the business and in turn the P&L shape. Using diagnostic checklists across Finance, Human Resources, Supply chain, Sales and Marketing and in particular your growth pipeline, this will allow prioritising your focus for quick wins.
Business Regeneration helps improve performance
Through the following means:
Is your strategic plan clear and focussed to keep you growing even through the tough times?
Do you understand what it will take to have a clear and competitive position and competitor strategy?
Are your objectives, goals, strategies and measures in place?
2. Business Models
In any change management program, clarity of the goals, transparent communication and demonstrating quick wins and early results is essential to staff morale and leadership confidence.
Here are some warning signs that your business model needs to change, or you need to revamp your business:
* Growth has slowed, and your costs are rising at a faster rate than growth
* Staff morale and productivity is deteriorating
* You spend your time worrying more about your what your competitors are doing than your own progress
* Cash flow is an issue
* Marketing and advertising budgets are slashed on a continuous basis
* Your innovation pipeline is empty, and you’re not sure where your future growth will come from
* The list that keeps you awake at night is growing
* Your time is spent on fire fighting and actions rather than strategy and thinking.
3. Financials – Are the results you have the ones you want?
Any diagnostic must start with the financial shape and drivers of the business:
* Making sure your cash position is sound
* Understanding whether your immediate focus is cost control or growth
* Are your sales and marketing budgets intact or slashed?
* Are you attempting to ‘save yourself rich’?
Will you regret in times to come the opportunity cost of the investments you didn’t make, because you were not sure what the real problems were, and how you should prioritise your resources?
4. New Products, Services and Markets
* Is your pipeline full, do you have enough regrowth to generate stronger growth than costs?
* Do you have a process to grow your business?
* Do you know where and who your target market is?
5. Processes and structures
Do your processes and structures match your business model, and are they fit for the future? A sustainable business is all about removing waste, and making sure everything that counts, is counted. Businesses have limited resources and energy it is important that what gets done, adds value.
End to end application is essential.
6. Culture and Communication
Change is a constant.
Is the organisation structure right? How many layers from top to bottom, is the reporting structure built for management decisiveness and clarity?
Restructuring whilst painful, at times can be the most effective tool to unblock and free an organisation. How effective is your organisation?
Is the culture one that you’re proud of, that is aligned to the strategies of your unique point of difference and your single minded business purpose. Are your staff adding value or detracting?
It is critical that in any change management strategy that the organisation and staff move with the change. To do this, open communication and transparency are essential. This will allow open discussion and engage the staff to speed the process, not become road blocks. A well thought-through communication plan, that is shared to allow feedback and input, will enable quick wins, and early successes.
7. Reporting – The leaders’ eyes must be on the numbers and trends at all times
If it’s worth measuring it’s worth reporting.
Reporting is key to open communication, signalling the progress and the trends, to motivate an organisation in to change, or recognition of either a job well done, or one that involves commitment and all hands to the deck, to turn the results around.
Your financials are like the thermometer, guiding you on what to do next.
When the going gets tough, the tough get going
Business regeneration is about, working out what’s working, or not working, in your business. The ever painful diagnostic, that look in the mirror.
Remember the toughest decision to make is to know you need to change, and doing something about it.
With the right strategy and business model, together with the right people in the right jobs, using the right processes, with commitment and clarity of direction, the business will deliver the right rewards.
Next time: Tell Tale Signs of a Business in Crisis. In the meantime, we welcome feedback from you. Email us at email@example.com
Seize Advantage in a Downturn, by David Rhodes and Daniel Stelter. HBR Feb 2009
Reinventing your business model. Mark Johnson, Clayton Christensen, Henning Kagerman, HBR Dec 2008.