By Alastair Drysburgh, Akenhurst Consultants
Earlier this year telecoms company Cable & Wireless announced that it was to cut off 90% of its corporate customers.
Why ? Because they were unprofitable, and C&W wanted to concentrate on the 10% of customers who did make money.
As part of its bid to regain profitability it also planned to shed 50% of its UK workforce. Did these radical steps convince observers ?
Hardly. One newspaper commented sarcastically "It's amazing that no-one else has thought of targetting profitable customers. No wait, they have. The entire telecoms industry is doing it, and several (such as Thus and Colt) have better networks to do it with."
Let me make it clear here that I have never advised Cable & Wireless, and doubt that I would if they asked. However it is interesting to speculate about how they went so wrong. We can often learn something from other people's mistakes.
Cable & Wireless's problems didn't arise from unique bad luck or incompetence. They came about because of an unlucky combination of quite common problems. C&W are in such desperate straits because of what has happened in the telecoms industry in the last 10 years: rapid change, an expectation of rapid growth, and the perceived attractiveness of the industry leading to a flood of new competitors.
It is unlikely that your business will suffer the disaster that C&W suffered, but how sure are you that some of the same problems are not lurking beneath the surface, imperceptibly pulling your profitability down and waiting for the moment circumstances change so that they can do some serious damage ?
If you would like to be sure that your business is not about to hit an iceberg, this is what you could do:
Alastair Dryburgh is a consultant who helps companies find the great business hidden inside their existing business. http://www.akenhurst.com/
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?