Is it time to kill the business?
I am a firm believer that organisational transformation, not simply change, is a bad move. Overhauling business models will just unsettle your people and put your existing cash flows at risk. Swapping from a business that works, at least for now, to something else that might work is akin to betting the farm.
As I have mentioned many times, it is better to implement transformation by building parallel business models, such that your existing business / plan A becomes just one part of a portfolio of businesses, each representing a possible future destiny.
Thus, the risk of your current business model failing is offset with these parallel bets.
Should your plan A fail, plan G , K etc. can kick in as the primary business(es). Think polymodal business.
This raises the question of what we do with plan A. Plan B etc. are certainty more shiny and exciting. They are designed with the future in mind using the latest technologies and harnessing the latest trends.
The first point is to not ignore your existing business. It might have many years of life left in it; though it might not. GE got excited about transforming its business and consequently took its eye off the current business.
The new business wasn’t performing as well as the existing one was de-performing. Naturally the investors got jittery and thus the CEO was fired.
It would be foolish to let your existing cash flows dry up, particularly if you have not secured one or more new sources. Now is not the time to kill the business.
We need to talk about plan A
The question then arises as to whether you should minimise your plan A leadership investment. You do not want to neglect the present, but you don’t want to overinvest. I believe we must treat our plan A as if it is going to run forever, whilst knowing that it could be dead tomorrow. In essence, that means continuous improvement, rather than multi-year big bang strategic programmes.
Here are some ways in which you can tune your existing business:
Finance – Get comfortable with a more uncertain future. That means investing less for the long term. This will reduce liquidity pressure and thus enable you to invest more in future business models.
Risk – Accept the need to acquire risk to acquire value. You might choose to buy other companies with no other goal than to boost the existing business. Such purchases must deliver an instant yield.
Offerings – Consider how you can move from products to services, particularly services that can be charged on a utilisation / ‘pay as you go’ basis. This might not work if your business is centred on, say, wedding rings, but many products lend themselves to a consumption model.
Sales – The world is gravitating to a consumption model. This means that service is the new sales. It is no longer a case of sell and run. The size of the ‘sale’ is based on the extent to which your offering is consumed. This requires continuous attention. Each day we need to consider how can we stimulate the consumers’ appetite. Thus, your service people become more important to your cash flow than the sales staff. Adjust your headcount accordingly.
Marketing – Think how you could build a tribe around your existing offerings. Consider what is the true purpose of your organisation. Making the majority shareholders rich is not going to rouse the market, nor your people. Market tribal membership, rather than products and services.
People – Resist the urge to put all your plan A staff on a design thinking course. The chances are that you recruited them for their lack of creativity and process compliance. Such a move will be costly, disruptive (the wrong kind) and will simple disorient the staff. But by all means, let those with a creative orientation migrate to your fledgling businesses.
Don’t pretend that the robots aren’t coming.
Be truthful and explain that process work will be carried out by algorithms and robots where it makes sense. However also explain that you value your people. Create development programmes that give them an opportunity to raise their game and thus stay ahead of the technology stampede.
IT – Like products and services, technology lends itself to a consumption model. Migrate the IT function’s focus from technology management to turning data into value, capitalising on emerging technologies, as appropriate.
Innovation – This shouldn’t be constrained to your new business models. Innovation has a role to play in your plan A. But rather than creating an innovation centre staffed with a few creatives, start to harness the ideas your people might have in respect of process improvement à la Toyota.
If only disruption was linear
None of us knows when your plan A will become obsolete. The exponential nature of disruption is such that we only become aware of it when it is at its most threatening.
A faint sniff of smoke might be ignored. Before long the platform is ablaze and needs to be abandoned.
That is why it is so important to have more than one platform.
However, we must not become seduced by fashion. If your competitors are abandoning their business models, check to see if it is simply herd behaviour, perhaps triggered by the musings of established advisors. This may represent an opportunity to capture a greater share of the ‘old school’ market. Conversely, it may well be that they have better detection systems in place than you and have seen the incoming tsunami.
Are you a portfolio manager?
Your skill as a leader will be in knowing how to assign your resources across your existing and new / forthcoming businesses. In many respects you are like a fund manager, actively rebalancing your portfolio. But given that most fund managers underperform the market, you are likely better off with a more passive tracking of the underlying macroeconomic forces.
Leading in the digital age is less radical than some would have us believe.
Though the increasing clock speed will make it seem more frenetic. There really is no need to kill the business to be successful in the digital age.