How do you define a “turn-around”? In my experience, a turn-around is achieved when management creates and sustains positive performance for a business over time. But what exactly takes place before that? This article is about all the work that has to be done to accomplish a turn-around.
What do IBM, Apple, Priceline and eBay all have in common? Each of their management teams have navigated their companies back from the edge of bankruptcy. What was the magic recipe that they concocted to resurrect their businesses? How did they decide what and where they were lacking?
Here are my top 5 recommendations for you to consider as you create an actionable plan to change direction and rebuild your company… like a phoenix!
What is the Current Market Need for Your Product?
Identify the core market need and make satisfying it the mainstay of your business. Some ventures lose sight of this fact and diverge from their original concept launch as they proceed into market. Companies may miss market opportunities or changes in market conditions. They might also have have a strong management direction or even external pressure from financiers or partners that push the venture in a certain direction.
Regardless of the circumstances, it is important to go back to where you started and ask yourself what need you are satisfying in the market. Refocus your venture on this in terms of your full product or service suite, as this is often the fastest way to recover from a misstep in the market. If you are not sure what to do to make your customer feel like they’re #1, simply ask them. Word to the wise: When you actually HEAR what your customers are saying and TAKE ACTION based on that feedback and input, it can often make the difference between success and failure.
What do you do if you hear harsh words from some of your customers about your products and services? If you have a larger organization that is unable, unwilling or defensive when these frank conversations occur, this can be a problem. Prepare your team for this potential blow-back and reassure them that their follow-up actions will most likely result in righting your ship. Don’t take it personally. Your customers can help take the guesswork out of the equation. Use that information to your advantage!
Another tactic is to examine the areas of your venture where customers spend the most time interacting. This could products, people, processes or other aspects of your venture. This may also end up being a completely different area of your business then you’d ever thought or planned on when you launched this exercise. These areas represent opportunities to enhance, step-up and re-engage to win back your customers.
These could be areas of unrealized value, meaning you could monetize these engagements and find a brand-new product or service-line that is highly desirable and it may even supplant the original direction that your venture is headed. This is often referred to as a pivot. For more information on pivoting, read my blog on that topic here. In any case, it is important to take notice of the areas of interaction that need improvement because they are creating roadblocks to success and may be causing customer frustrations. If they are addressed, your customers may come back quickly and in greater numbers than they left.
Finally, let’s consider what else your customers may need that you may not be providing. Consider vertical and horizontal integrations or extensions of your products and services. It could be that your customers’ needs may have shifted and your venture may not have shifted along with them and, as a result, it’s not where it needs to be to succeed in market.
Another option is to look outside of your venture to potentially acquire a company that is already in the market. For example, Facebook paid what some considered to be incredibly large amounts of money for WhatsApp and Instagram – only to be proven right in its decisions given the movement to mobile for social media. The same can be said for Google’s purchase of YouTube – as smart move given the criticality of video in the marketplace today.
Next Let’s Evaluate Your Product Mix
Ventures launch products to meet perceived market needs, or, in ventures like Apple, they created the need
in a new market with new customers. This strategy has led to wild success but also abysmal failure, for example Facebook and Myspace. Myspace introduced us to the concept of social networking but Facebook perfected it and continues to listen to its customers and make changes accordingly. Product mix can make all the difference!
In terms of product mix, start by looking at how your customer base has shifted in its consumption of your venture’s products. Does this shift point to a new development or “pivot” in your industry or your sector of the market? Take that input and tweak your products to create greater market demand and make your venture more relevant moving forward. The predictive value of gauging customer reaction based on analysis of their response to your venture’s current offerings may even be more important than any focus group.
Alternatively, consider migrating customers up the value chain of products and services. How do you do that? By driving down the marginal cost for delivery of products and services, which enables your customers to more easily, quickly and cost effectively moving up the value chain of your products. This creates larger barriers of entry for competitors and “buttresses the moat” around your business and its products and services versus competitors in the market.
Finally, think about how some of your products or services can be recombined into a “new and improved” versions that you can take to market. What you want to do is create an enticing new offering that customers flock to as a result of a combined value proposition that is larger than one individual product. The consumer-packaged goods (CPG) industry is famous for doing this quite successfully. For example, P&G took Tide laundry detergent and combined it with Downy fabric softener to create a combined product that has the benefits of both. This created a new category and customer demand based on convenience and cost to combat the lower market products, house brands and potentially fragile customer loyalty in its market.
Investigate and Exploit Your Venture’s Core Competencies
A venture’s success, or lack thereof, can often be directly linked to its leadership team’s ability to execute and deliver in market. The reality is that no venture succeeds without adapting to the rapidly changing business environment. And that requires having the right team and identifying its best core competencies. How do you know what your core competencies are?
Once again, think about how your venture engages with its customers. Think about the individuals who are leading those particular parts of your business. Are they able to provide the guidance and the leadership necessary to succeed in those areas? Do your customers feel the same way? Do these leaders have the ability to respond to market demands and needs quickly…. both now and in the future?
Are they thinking proactively about the business or reacting to changes being thrown at them? If the leadership of a venture and its particular parts is not responding to market changes in a productive and proactive fashion, then that is a true cause for concern.
How to you identify the key talent that may not be delivering what the venture leadership needs? Candidly, identifying these individuals is difficult because of the potential relationship they may have with the venture leadership. They may even be part of the leadership itself. The easiest way to determine who not performing at the level of their peers is to ask others in your organization for feedback.
If you’re able to get honest responses from them, you’ll find that they always know who is carrying their water and weight and who is not. If someone isn’t up to par, you can decide whether they require training or they just aren’t a good fit for your organization. Fixing core competencies and core leadership team issues is one of the fastest and surest way to get your venture back on track.
Examine the Balance Sheet and Embrace the Numbers Game!
Finance, money, and revenue are the lifeblood of your business. In the current era of corporate governance,
with substantial dollars flowing through the venture community, paying close attention to this side of your business behooves not only the officers of the company but the board as well. A company’s financials can often behave like a compass pointing directly to the key problem areas. While they may not tell you exactly what is wrong, they will give you a good idea of where to look.
For example, an upside-down balance sheet where costs exceed revenues is hard to ignore. Now I understand that in startup ventures this is common, but even that train can’t be out-run forever… just look at Twitter or Snapchat. Cost and margin ratios are like beacons in the dark. For those with the intestinal fortitude to look and figure out what they mean for your business, they can sometimes “clear the fog” and open a path to greater success.
Key financial metrics or KPIs for the business, as mapped out by venture leadership and standard industry practices, often can indicate core problem areas as well. One benefit of examining the KPIs and finding an issue is that the resolution for these types of issues is often readily apparent and fairly straightforward. However, that doesn’t mean implementing or executing the solution will be easy.
Word to the wise: It is extremely difficult to let people go, obsolete products and/or reduce services to remedy financial situations. Remember no one said pivoting or bringing the phoenix back to life would be easy; they just said it could be done. Having the willingness and ability to do what is required to save your business requires true leadership.
Review and Assess the Competitive Landscape
Believe it or not, your competition can often be your friend. I recognize that this is an unorthodox point of view, but I want to assure you that what I am saying is true. Let me explain what I mean. New ventures often find themselves in difficult situations in the market. Here are a few –
- Untested business models
- New product offerings
- Evolving technologies
- Changing market dynamics
- Disruptive environments
- Larger macro-economic changes
- Fast-moving consumer tastes
The likelihood of success for any new venture is not high. MANY, MANY things have to go right for your venture to be successful. The good news is that this isn’t just true for the venture that you’re leading, it’s also true for ALL the other ventures in the market. That means that even the ventures that are direct competitors to you or in ancillary or complimentary markets also share these risks and challenges.
Performing a complete competitive market analysis can help you understand which other ventures are out in the marketplace and where they are struggling or succeeding. Pay particular attention to both of these factors. Successful vertical or geographical markets will provide guidance for your venture on where to focus your efforts.
Conversely, be mindful of where these competitors are failing. This may highlight a pitfall to avoid, or perhaps provide an opportunity for you to “do it right” and win market share. For example, Facebook saw what Snapchat was doing and has steadily, over time enabled equal and similar functionality in its Instagram product, which was not an accident.
If there are many players in a small or consolidating space, then perhaps a consolidation play would be best. On the other hand, if there is a rapidly expanding market with a lot of players, perhaps selling out to a larger venture is the right move.
Finally, a market with many overlaps may lead to partnerships with competitors (coopetition) which can help create a better market for all involved. Regardless of the specific set of circumstances that emerge, looking at the market and figure out where others are going and what they are doing and use it to your advantage. Your competitors are inadvertently give you directions on where to go and what to avoid. Use that information!
Clearly every company and its set of circumstances/issues are unique, however by examining the above set of common principles, I hope a plan emerges that will help lead your team through your turnaround.
I hope you enjoyed this blog. Please let me know your comments, questions, feedback and insights below or feel free to email me directly here. Please Read and Share all my blogs at LeadingVentures.com.
About this blog – The goal of this blog is to share my experiences, to capture and reveal valuable insights, and to draw from my serial entrepreneur-ship through 7 ventures over the past 20 years. I have encountered many impressive entrepreneurs along the way and I hope to share our collective experience with you to help teach and perhaps motivate you to launch your own B2B or B2C enterprise.
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