reinventing your business to stay in business
11 April 2008

In addition to focusing on the revenue generating activities, there are a plethora of other areas that need to be monitored to ensure the business does not go into decline and reach a 'burning platform'.  This will assist to hone their competitive edge, allowing them to continue on a growth path that is clear and unhindered by misleading indicators that can lull them into a false sense of security, such as financials.

In addition, sales targets are being met, the company's debtors' start increasing, often at a higher rate than creditors. Cash flow is usually looking good and at this point and money is taken out of the business. Although these indicators might seem positive, they often have a more ominous meaning. Another sure sign is when valuable staff leave, seeking more challenges. As per the axiom, 'the only constant is change', the good times too shift to darker periods in a business. This forces businesses to reinvent themselves to remain ahead of the pack.

We need to go back to the business lifecycle to understand how and when this decline happens.

When a business opens, its value increases as the growth curve escalates over time. However, once the challenging and growth phases have been achieved and the optimal phase is reached where business is profitable and doing well, there is inevitably a decline. Once a business goes into decline it can reach the 'burning platform' rather rapidly and, if a 'rescue' embarked upon, it means that driving the business forward is neglected to provide time and focus for the rescue operation.

Bad management is not always the reason for a decline in business. Not having the vision and foresight to move the business forward is a significant contributing factor. A visionary or leader is required to steer the company forward whilst ensuring the targets and goals are being met. Sometimes market influences or a product lifespan can affect a business, forcing it to rethink its business model and sometimes, its core business. Nokia is a prime example of this. The company started out in the business of jewellery and watches and saw a gap in the telecommunications market. As they say, the rest is history.

However, if a change of plan is not formulated and executed quickly enough, a company can face the challenge of new competitors entering their previous stronghold.  Mr Swanepoel advises: "In order to reinvent the business, companies need to continuously reset and redefine the company goals, taking shifting market influences into consideration. This allows businesses to prepare for the next 'wave' rather than deal with a decline in the business lifecycle after the optimal phase is reached.Continuous or rolling budgets and forecasts can assist to prevent a decline in business. It is crucial to plot the future of your business as looking at historical information that reflects targets that have been met will lead to complacency. Budgets should be reviewed on a quarterly basis and if targets have been met, new goals and plans should be set which will impact the budget. Companies make the fatal error of relying on annual budgets as it is regarded as a laborious exercise. However, having the right tools in place will ensure that information is available and accurate, shortening the time to set the budget."

Many companies look at strategy sessions every five years. This too should be shortened, allowing the business to ensure a plan is not driven by assumptions about the market place but by more accurate observations. And, most importantly, keep in touch with the workforce. Obtaining feedback about the company from the people at the coal face of the business is the fasted way of gaining insight into the state of a business.

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