To thrive in the dynamic world of commerce, it is important for entrepreneurs and business leaders to recognize the warning signs that their current business model may no longer be sustainable. What are the crucial indicators that should not be ignored, signaling the urgent need for a strategic pivot?
In this article, Work It Daily experts from Vistage discuss practical insights and practical tips for navigating uncertainty and thriving through change. Read on to learn about real examples of businesses that have successfully turned themselves around.
Axis! A word that conjures up the image of a couple of young people swapping out a couch to install a sturdy ladder.
How does this image apply to business?
Often in business, we have a target—a customer need, a social problem to solve, a future state to achieve—and determining the best way to achieve our goal requires us to design our business around them.
We rotate in areas such as what? we do and how we do it. But never in why we do what we do – our purpose. The goal of our company remains the same.
I believe that companies that adopt an “innovation attitude” are winning the key war. When employees are rewarded for new ideas, trying something, even failing, as a normal course of action, when it comes time to “BIG PIVOT”, say…Netflix style, it will be easy for the company.
There will be many reasons to PIVOT throughout the life of your business, but if your workforce isn’t ready, prepared and feels safe to lead with you as a leader, it won’t matter if you have the next big idea. your organization Your inability to perform will make you relevant.
Kirsten Jurich is the former CEO and current Vistage Chair. As a clinician, professor, author, and executive, she harnesses this unique blend and creates learning environments for managers to become better leaders, spouses, and parents.
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Most business owners/CEOs know their basic metrics (usually in their head vs. a dashboard), but they still intuitively know what the warning signs are and when it’s time to “turn around.”
Below are four common structural ones.
- Declining incomes/changing consumer behavior
- Reduced profit margin (change in product/service mix, customer shifts)
- Slowing AR (possible financial problems of the customer)
- General order flow (competition, market movements)
My experience is that despite knowing what the cause of the problem is, SMB owners play firefighter and react against. getting in front of them. Why? The most important step is to admit that there is a problem to be solved. Fear of being judged/emotional. you as a leader know in your heart that something is missing. It’s a very short distance from your heart/gut (emotions) to your brain (logic), but it’s the longest and most difficult journey for a leader. Pick yourself up and ask for help. Seriously, the organization was created to help you navigate this, and in times like these, they step up. Empower them!
Here are some initial thoughts on what might happen.
- Consumer behavior – Online Vs. brick and mortar or remote workers vs. office (local printing/restaurant/cafe etc.). Have consumer preferences changed? Experiences vs. the latest things.
- Market research (real or just talk to your consumers/customers).
- Something is happening geographically.
- Profitability Challenges – Declining or stagnant profit margins, increasing operating costs (no pricing power) or decreasing cash flow, days sales outstanding. OR your suppliers cut your deadlines. Has the customer mix changed? Product mix?
- Competitive threats – Is your value proposition still relevant?
- Spend time with your customers and suppliers to explain problems or challenges, and you’ll likely get their support to help you. See it as a connection discussion vs. confrontation They NEED YOU as much as you NEED them. Build a roadmap with all input costs and see where there is room for improvement.
Bottom line. Make sure you always “KNOW YOUR 5 Cs” – what is happening to our spend, circumstances (consumer/customer/competitor) and capital, capacity, conversion (cash DSO, inventory turns, etc.).
Mike Thorne is the former CEO and current Vistage Chair. He leads and facilitates a group of trusted consulting entrepreneurs and CEO partners in New Hampshire and Maine.
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Simply put, it’s time to pivot when your product/service is misaligned with your chosen market. Since there are two sides to this equation: the product/service and the market, you can choose to tilt both sides of the equation. Target your product/service to fit a market, or target a different market to fit your product/service.
Blockbuster’s failure is a classic example of not bypassing your product/service. The market was stable, home movie viewing. Blockbuster was a brick-and-mortar company. Customers came to them. Netflix innovated DVDs by mail, just a new delivery method. Customers didn’t have to leave their home. Same market, different product/service. Blockbuster’s sales have declined as DVD shipping has taken market share. They had plenty of time to see this and start turning around. Netflix then innovated again with online/instant delivery. It should have been child’s play, not rocket science for Blockbuster. Not only did they have to match the DVD delivery method, but also innovate for online delivery. Blockbuster watched with flat feet. Netflix just crushed them. The loss of sales was an obvious warning sign. What killed blockbusters was the loss of their creativity and courage to innovate.
Another example, a more accessible example, and certainly a more subtle example, was my company. I started selling software engineering services to defense contractors, a single market compliant service. But I wanted to grow, so I increased sales to trading companies. I headed to the new market. Same service, new market. A few years later, I added hardware engineering services. I rolled with the new service. Same market, new service. Pay attention to ping pong approaches. You can focus on either product/service or market. I went on forever tinkering or innovating as I like to call it. The warning sign for me was stagnation. If I felt stagnant, it was time to pivot, it was time to innovate.
The difference between Blockbuster and my story is stagnation versus innovation. My advice is to 1) scan the horizon and 2) never stop spinning. Never stop innovating.
Mark Feckler is a retired CEO and currently chairs the Vistage CEO Group, of which he was a member from 1991-2002. He is passionate about generating great ROI for his member CEOs.
What are additional warning signs that your business should turn around? Join the conversation inside! Work It Daily executive program.
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