Last week, we reviewed three types of zones on business renewal: Anticipation, Adaptation, and Reaction. This week also we continue on the same point.
Inertia is a powerful force that pushes against rethinking of business renewal. Many things - whether processes or procedures - work the way they do because that is the way they have always worked. But in the reaction zone, you must formulate questions to break out of inertia, because it’s here that you can most clearly see that things don’t stay the same:
Does your business cater to youth? We don’t know how long this generation will continue to buy like crazy, but we do know that it’s not forever. In fact, during the last decade we saw the youth begining to save at unprecedented rates. They are planning to invest on fixed assets, land or properties. If your business is built on the assumption that youth spending will continue indefinitely, you may be in for an unpleasant surprise.
Are you a upmarket product dealer?
What will happen to your buyers for mega luxury products in a climate where interest rates are increasing continuously? Have you thought about that? If you’ve built a business on an assumption about what your customers want but now becoming no longer valid, you need to rethink about your business model. It is in the reaction zone that you find out if long-standing assumptions about your business still stand.
Radar screen adaptation zone
Are you responding to the changes you can already see? Sometimes we see change coming, but we wait too long to act. The introduction of new technologies is a perennial example. It is always tempting to wait until the technology is totally ready to go. If you do so, you will lag behind those who jumped earlier. Are you a Private hospital administrator trying to decide whether to switch to electronic record keeping? It certainly is the coming trend. The old doctors fear it; the new doctors won’t practice without it. What should you do? Isn’t it better to ask yourself who will most likely still be practicing medicine in ten years?
Are you a retailer that expects customers to walk into your showroom without having already researched pricing and features! If your business hasn’t adapted to the growing sophistication of its customers, now’s the time to think about business renewal.
Radar screen anticipation zone
What’s on the edge and moving in fast? It’s hard to see the future because it seems so unformed. You can see glimpses of pieces, but not the whole. Furthermore, some of the things you see now will never become significant or may fade away. Nonetheless, to avoid being surprised you have to keep your eyes on the horizon.
Are you a local photo printing shop owner? If so, have you embraced digital fast enough? If you have done so, have you stocked the software that amateur photographers might use to alter the digital photos? Did you consider adapting to consumer needs by expanding the range of products to include software and home printers! The speed of technology evolution is generally overestimated by the early adopters and underestimated by the holders of incumbent technology.
The long view
The point here is that for your business to survive and not enter into an irreversible decline, you have to consider the full range of problems and opportunities facing your business.
Using the mental radar screen and its zones allows you regularly to take the time to seek for surprises. “You want us to look for surprises?” you might ask. “Yes, I do. In fact, the more you allow yourself to besurprised the better you will become at seeing the future.”
Three decades ago, a futurist named Joel Barker began researching what he termed “paradigm shifts”—a way of explaining how and why things change. He said that the role of leadership is to find, recognize and secure the future. Barker’s ability to recognize what the future held was based on his understanding of fundamental shifts in industries. These shifts often take established companies by surprise.
For example, Barker spoke of the Swiss watch industry, which prided itself on its ability to design and manufacture precision mechanical movements. The industry leaders saw the invention and development of quartz watch movements as interesting but irrelevant to their lead in mechanical design. They clung to this belief until most of the Swiss watch manufacturers had disappeared.
The moral of the story is that you can see clues to the future and anticipate their implications if you invest in the effort to try and do so.
Consider our previous example of the digitization of medical records. You can’t say with certainty when the transition will take place or what the winning technology and processes will be. But you can say with some confidence that ten years from now digitization in medicine will be the norm just as it is in virtually every other industry. You know the direction of the change, and you canevaluate how well your plans would fare as the world moves in this direction.
Start from the foundation of your business: What will your future customers want and how will you serve those needs!
Remember the classic movie Casablanca? A crime is committed early in the movie and the prefect of police instructs the policemen to “round up the usual suspects.” We have a list of ‘usual suspects’ to look at when you think about strategic changes to your business.
Use your mental radar screen to look for the usual suspects:
Customers: Who are leaving you! Who are new? How is your customer-base changing? What do your customers want that surprises you? Are customers frustrated because neither you nor your competitors can give them products and services they really want? Have you had success connecting with new customer segments?
Products and services: Are the sales trends for your most popular products and services moving up or are they moving down! Is the competition coming out with a simpler version of your offerings? Do customers complain about the complexity of your current offerings?
People and organization: Who are leaving your organization and why? Are most of your managers close to retirement? Do new comers consider your business “old-style”? Do you speak the language or know the customs of your newest workers, whether here or offshore! What portion of your workforce is offsite.’ Is that portion growing?
Resources: Are your fixed assets dedicated to one purpose or can they be used in other ways? Are your people cross-trained and up-to-date? What do you know about resources needed for the future? How will you use your knowledge of customers and suppliers to produce competitive advantage?
Location: Are you located in the “hot” part of the city, country, or world? Are you bound by ownership of land and buildings? Does your business depend on a localized customer base? What is the price of labor and rent where you are located, relative to other possible locations? How competitive are your transport costs?
Information and Communication Technology: Do you have reasonably complete and accurate information about your customers? Can your employees access the customer data they need in real-time? What do you know about your customers that your competitors do not know? What do your competitors know that you don’t?
Policies and procedures: Are you easy to do business with? What industry truths need to be challenged? (Not Sure what we mean by industry truths? Go study the rise of Japanese manufacturing in the 1980s. Their ascendance came from breaking the industry accepted “norms”, about inventory and quality.)
Metrics: What metrics are you using to determine the success of your product or service? Are these the same metrics used by your competitors? Are these the same metrics used by your customers? What metrics do you monitor other than financial measures of past performance?
Suppliers: How much power do suppliers have over you? Over time are they obtaining more or less control of your business? Do your suppliers like doing business with you, or do they simply tolerate you because they need your money? Are your suppliers facing economic difficulties? Is the number and quality of your potential suppliers increasing or decreasing?
Competitors: Which competitors are new to the industry? Who is considering entering that might compete in a very different way? Who is getting out of the business and why? What are competitors doing that seems foolish to you, and why might they be doing this?