This article first appeared in the July, 2002 edition of the Jacksonville Business Journal
There was a time when business seemed stable. You developed your products, built your customer base, served them well. Life was pretty predictable. If you did everything well, you were sailing on a calm sea.
Not any more. The business environment has radically changed. Business today is more like white-water rafting. You are always adapting - adjusting course, shifting weight, paddling from a different side of the boat - modifying your direction. Your goals remain the same. But how you achieve them is affected by the changes in the environment.
Responding to these changes is your fundamental leadership responsibility. Here are three conditions that indicate it might be time to consider a major business change.
Three Conditions That Signal Change
Condition One: low blood sugar. If you have ever had low blood sugar you know that you just don't seem to have any energy. It takes a lot of effort just to get through the day. Your business is fine on the surface but you think you should be doing better. Quality is okay, but not great. You can't seem to deliver projects on time. Profitability is less than expected. Cycle time just doesn't improve. When you get a new customer you also lose one. Initiatives work, but only for a short period of time. You run like crazy but you're stuck in neutral.
Condition Two: the boiled frog. If you put a frog in a pot of boiling water the frog will jump right out. Too hot. But if you put the frog in a pot of lukewarm water the frog will happily swim around. Then raise the temperature of the water just one degree. The frog will barely notice and keep swimming around. Add another degree. Frog keeps swimming. When does the frog jump out? Never. No single change is big enough to cause the frog to jump. By the time the frog realizes that the water is too hot its energy is drained and we have frog legs for dinner.
That describes the second condition. Squeeze prices just a little more. Cut margins just a bit. Hold on capital investments one more year. Cut the advertising budget. Reduce the travel allowance. Degree by degree, we become boiled frogs.
Condition Three: terrorist attack. This is also called a "business discontinuity." You are confronted with an inescapable new situation.
Technology changes are the most obvious example. ATMs in the banking industry. PCs in the computer industry. Shopping over the web. But technology is not the only source of discontinuities. A key person leaves and starts a competitive business. A major vendor or distributor goes out of business. You lose your biggest account.and you didn't even know they were dissatisfied. These examples represent sudden changes that indicate business is different and won't be the same again.
Analyzing Your Symptoms
How do you decide if you have reached the time for significant change?
Condition three is easiest. It cannot be denied. Condition two requires analysis and proof that your business situation is eroding. For example, one company had a new manager take over a region. After one year his operation had grown 25% and he proudly told senior management that he had "lapped the field." On analysis however, his region had grown 35% and his office had actually lost relative market share! He was becoming a boiled frog, but didn't know it.
Condition one is the toughest. How do you create the energy for change when there does not seem to be any compelling reason? How do you convince people that they need a weight loss program before they have a heart attack?
The first step is to get alignment among your key team that change may be necessary. This cannot be mandated. You need to build commitment. Here are a few techniques.
- Involve your key team in the process.
- Ask the question: What would happen to our business over the next five years if we did nothing? Would we be doing just as well as we are today?
- Create a four quadrant grid with Internal and External across the horizontal axis and Opportunities and Threats along the vertical axis. Fill in the four quadrants together. See what you are facing both inside and outside your organization.
- Get objective data. Survey your customers. Survey your employees. Study your competitors. Look at your company as if you were an outsider considering buying it. What do you like and not like?
This analysis will help determine whether your company faces condition one, two or three. If any of these conditions fit, change may be in order. In my next article I will talk about how to get started.
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