Five small business strategic options to meet the challenge of change
The CEO of Theranos, a blood test company claims that having a backup plan amounts to planning to fail.
Her comment was picked and forwarded through social media landing in my inbox many times. It seemed to appeal to our grit, our toughness and our determination to see things through. We should never give up, always persevere – failure is a choice.
Except to believe this business owners and managers have to believe that they have perfect information about the market, today and in the future. These manager would know and understand everything that is going to happen to them, their business and their industry.
Adaption to change
But the reality is that nobody knows what the future holds and not being able to adapt to change is a major issue in business. In 2014 the Turnaround Management Society conducted a survey of turnaround specialists to understand why companies fail.
The top two reasons were: “management continued with a strategy that was no longer working for the company” and “management lost touch with the market and their customers and did not want to adapt to changes occurring around them”.
The challenge is that business leaders create static models of how the world works and operate according to these models even as the world changes.
Difficult market and weak economy – external factors
Rather than adjust business models managers see change as a market challenge to work through or survive until things get better. Slowing growth or decreasing profitability become a result of the difficult market and weak economy – external factors. This, in turn leads them to work harder on doing the same things rather than look for options and embrace change.
Managers caught in this challenge complain about the market. Last year I heard many times that the market was difficult. Raising money was difficult. Selling product was difficult. Growing a business was difficult.
But this was the same market in which Apple sold 230 million iPhones. Skyrocketing startup valuations so high that Mark Cuban from the Shark Tank declared that there was absolutely a bubble in startup values. The economy was adding jobs and spending was up.
Still, many companies felt the pinch not because the market was bad but because it had changed… and their business models had not. Slowing growth or declining sales is not a market problem. Growth slows and sales decline because a company’s offering is no longer attractive.
Whether the market is good or bad if a product or service is in demand it feels like a good market – if the product isn’t in demand it feels like a bad market.
Turning a company back to growth requires an honest look at the market, the business, and the plan for the future. This may involve restructuring the business model and it definitely involves developing multiple options for the future – including backups and alternatives.
Next- The 5 steps to small business change