Every product, every service, every business, every company will eventually mature and go into decline. This maturity or decline will bring you to a decision that many leaders hope to avoid what to do with a business that is no longer as relevant and vital as it once was.
All products, services and lines of business have a life cycle. Businesses are launched, some survive and some die, quickly arose that survive grow modestly or spectacularly and then inevitably mature. Some remain mature for a long time while others pass into decline more quickly. Managers tend to think of the business life cycle as a fixed path that can be stretched but not fundamentally altered. They think that once a business starts its decline, the good times have come to an end.
But what if you looked on the mature phase of the lifecycle as an opportunity? What if you could see this as a point of significant renewal and the creation of a successful
new future?
There are endless streams of ideas about how to run mature product lines, businesses and companies. From line extensions to geographic expansion, continuous improvement to six sigma to lean – there is no shortage of suggestions about how to make these businesses more efficient and effective in order to extend their useful life.
Surprisingly, however, there is comparatively little guidance as to how to rethink, reinvent and reposition an ongoing business. That underserved topic is the focus of
this series.
Renewal efforts
This series of articles beginning today will help leaders who will be driving renewal efforts. You might be a CEO renewing a company, a senior manager renewing a division, a production manager renewing a product line. Or you might be a small- or medium-sized business owner who has to do the heavy lifting by yourself. Whatever the case, the responsibility for renewal rests with you and
your team.
Renewal can’t be done part-time. It cannot be handed to a team of lower-level managers. Either you are going to lead the effort or it’s not going to get done. In this series we will arm you with the tools and processes
you require.
Leaders know when their businesses are not performing at the level required. They feel something should be done but few have the will, the clarity and the alignment to truly renew their company, division and business unit or product line. So, while some leaders successfully renew their business and others try and fail, most never even make the attempt. They keep operating their businesses as they have always done and sentence them to inevitable decline.
Seven warning signs of a declining business
What are the obvious symptoms of a failing business?
This is the most obvious sign of a declining business. Why? Because sales is the lifeblood of every business. Without sales, there is no cash flow and without cash flow, there is no business continuity. So, when you begin to notice a period of low sales in your business, be on the alert, your business may
be declining!
Your business will always be at the front of your customer’s mind if you regularly innovate –come up with new things. Ask yourself, when was the last time we introduced something new [product/service] into the market?
To remain in business, you can’t afford to rely on past glory alone. You’ve got to keep reinventing yourself through innovation. All of us know what happened to IBM. When there’s nothing new about your business, you bore the existing customers and discourage the potential new ones.
When you list out all the characteristics of your business, product or service and compare it with that of others in your industry, differentiation is those attributes of your business, product or service that isn’t on any of your competitor’s list of attributes.
Differentiation is about having a competitive edge above your industry peers. Differentiation is about focusing on a specific point of uniqueness separate from your industry peers. Businesses that last will stand the test of time because they are different from others in the same industry. Customers treat you like others when there’s nothing unique about you.
So ask yourself, what’s unique about us in comparison to our competitors?
- No positive word of mouth
Are people talking positively about your business, product or service? If no, then you are as good as dead. When customers no longer talk about your business, then you don’t exist in
their minds.
If they are making adverse comments, it’s worse than the people not talking about you. To make them talk favourably, you have to give them something worth talking about –innovate, differentiate, blow their mind!
Until now, the four warning signs discussed above focus mainly on your business’ relationship with your customers. That is, what customers expect from your business and what you expect from them. Now it’s time to shift the focus to the people who make the products/services you sell to customers –your employees!
How are they? How is your relationship with them? They are the first customers of every business. They greatly determine the success of your business because the products/services you offer for sale in the market come from their collective efforts.
So ask yourself, how well are we paying attention to our people? How well are we taking care of them? Are they working with a clear unity of purpose? Are they at their best possible self ever? Are they working as one –
a team?
A business with high employee morale is a healthy business. So to know how well your business is doing, check how well your people are doing.
- Poor cash flow management
After sales, the next financial indicator of a healthy business, is how well they manage their cash flow. Oftentimes a profit and loss (P&L) statement may show that a company is profitable, yet the company is struggling to survive.
Why? The answer lies in their cash flow. Successful small businesses become successful large businesses when they understand that cash is king and actually focus their business on generating and preserving, cash.
Cash flow refers to the inflow and outflow of cash within a business. That is, the flow of money– where is it coming in from [account receivables] and where is it going out from [account payables]? Managing your cash flow properly is ensuring you never run out of the financial resources necessary to sustain your business. A business that runs out of cash is a dying business!
So, ask yourself, how smooth is the flow of cash in and out of
our business?
To accurately answer that question, below are two key indicators of poor cash flow management. Both must be avoided to keep your business
healthy financially.
Having stock that you cannot sell quickly is a serious waste of funds and points towards poor cash flow management. Cash is tied up in inventory, the less stock the better. So only order what you can sell: you can always order more as
demand increases.
Do you meticulously keep detailed invoices and accounts, outlining who has bought what, when they bought it, how much they owe and whether or not they have paid yet? If not, fix it quickly.
- No learning and development
Innovate or die. Differentiate or die. Change and grow or die. To remain relevant in the market, you need to keep changing and keep growing. Your capacity to innovate is dependent on how much you learn and develop. Your capacity to differentiate is dependent on how much you learn and develop.
(Lionel Wijesiri is a retired corporate director counting three decades of senior management experience. He is now an independent consultant and a freelance journalist. He may be contacted on lionwije@live.com)
