When the economy is down, unemployment is high, and business is weak, companies falter, and some fail. The best companies weather these down turns better because they have a mindset to succeed. They have a culture of creativity and innovation. They continuously reinvent themselves!
In a recent issue of Washington SmartCEO (April 2012), the idea of 'don't turnaround' was presented that notes that less than 10% of companies that face major growth issues fully recover (i.e., don't turnaround). Trying to turnaround a failing business is extremely difficult. It's tough on the leadership, the employees, the suppliers, and the customers. Importantly, once one's image of a successful enterprise is damaged, it is hard to repair. "Can I trust that this company will still be here when I need them?" 'Don't turnaround' suggests that it is best not to get into a position where growth stalls.
In a small way, I know the pain of a turnaround. I was once the executive of a small nonprofit association. When I took office, the association was not financially sound, but we were not fully aware of it. The problem was that the way membership fees were collected made it very difficult to know precisely how much money was available. Instead of an annual date for membership renewals, renewals were set based on when the member joined. Hence there could be 365 different dates when someone's membership was to be renewed! With this practice, budgeting on a calendar each year was, at best, a guess. Well, you might surmise that we could run out of the budgeted funds before the end of each year. In the first year I took office, we used up the year's budget within 6 months into the year! We then needed to borrow 'next year's' funds to continue running the office and the association for 6 months. At this juncture, we were $200,000 in the red and our association management firm stepped in and told us we needed to tell them how we were going to raise 50% of that in 30 days! Long story short, with a turnaround specialist 'on my hip' we completed the turnaround and in two years, we no longer had debt. In the midst of the crisis, there was fear (of failure), anger (of members), and embarrassment (from others looking in). What did I learn? It is definitely better to 'don't turnaround!'
How does one avoid the need for a turnaround? One way is for a company to 'reinvent' itself even before there is a need to take drastic recovery actions. In most organizations, there are a set of products or services that produce most of the revenues. In order to stay successful and competitive, it is important to 'reinvent' the products and services from time to time to avoid decreasing revenues due to competition or reduced interest of current customers. The creative maintenance wheel is a framing of this effort. The first step is to 'retreat' to reassess and rethink the products. An actual offsite creative work session is ideal. Beyond the retreat, one 'rethinks' the product and its new attributes to align with anticipated acceptance by customers and, finally, 'refresh' the product line. I have always liked what Microsoft did with its DOS operating system. When DOS was still the 'cash cow' for Microsoft, they came out with Windows. Thus rather than see the expected dip in revenues in the normal life-cycle of a product (as DOS users decreased), there was very little dip in revenues as the Windows operating system ramped up in sales. If an organization regularly uses a creative maintenance wheel approach -- retreat, rethink and refresh their products and services, their chances of having a strong positive revenue trajectory is enhanced. Hmmm, is this what Apple Computers is doing?
© Baldwin H. Tom CMC
www.tbgroupconsultants.com