Did you stop and think whether you had any “darlings” in your business that should be murdered? You will recall from last week’s blog I used the writing advice “murder your darlings”, which is advice given to writers to remove any passage of writing that didn’t fit the story or style. It can be perfectly good writing, and treasured by the writer, but if it spoils the story it needs to go.
The metaphor for business was that there can come a time when products, services of even processes that may be treasured by the business, need to be killed off. The two classic case studies I quoted were Ford’s Model T, close to Henry’s heart, but kept in production for far too long, enabling the competition to catch and pass Ford; and Kodak, inventor of the digital camera, who clung to traditional film, leading to filing for bankruptcy.
Search the literature and there are many such stories, for example Nokia and Digital Equipment.
Even more prevalent today is the disruption caused by technology. Think Uber and AirBnB as I have written about a number of time; Disruption and the Gig Economy, More Disruption, But More Helpful, I don’t have the Answer , Three Sources of Business Disruption to Avoid
How do you identify, those “darlings” which need to be murdered, and make the decision to do so?
Here are eight things you can and should do.
Decisions - Making good decisions requires good information, then analysing and using that information. Making decisions on gut feeling and instincts is all very well, but you are far less likely to make the right decisions. Facts require a good information system providing accurate and timely information.
People are likely to make poor decisions without accurate and timely information that has been analysed and reported. And too many poor decisions will lead to business failure.
Mindset - Vince Barabba in “The Decision Loom” suggests businesses must have an enterprise mindset that is open to change. Unless those at the top are sufficiently open and willing to consider all options, the decision-making process soon gets distorted.
Whenever I’m consulting to or coaching a business and am told “We’ve always done it that way” alarm bells go off in my mind. I explained why last week.
Have a variety of tools you can call on when tackling complex business problems; tools such as brainstorming, scenario planning, being willing to ask and keep asking “What if?”, risk management, and regularly using the “80-20” tool. If Kodak had used some of these in the ten-year period they had to prepare for the arrival of digital photography, they might have made some different decisions.
Being flexible – both Ford and Kodak were inflexible. “We’re on the right path, and we’re not budging” appears to have been the approach. That doesn’t mean constantly changing direction like a hare, but it does mean having the ability to change when necessary. Nokia made a significant change when it moved into mobile phones, and it was innovative enough to become a market leader, but like Kodak, became fixated on the phones it was producing, and was overtaken and passed by ‘smart phones’.
Heraclitus, an ancient Greek philosopher, is quoted as saying "change is the only constant in life", so the idea that we have to keep changing has been around a long time. The marketplace we all operate in is changing even more rapidly, think disruption. Killing promising new businesses to maintain old ones doesn’t make a lot of sense. When will businesses learn that if you don't cannibalise your own business, competitors will do it for you?
Look at the trends. Much like “we’ve always done it this way”; resting on your laurels, ignoring viral trends and failing to innovate turns market leaders into history in the blink of a business cycle.
Not understanding the business you are in! Think of the Mission Statement in most business plans. They should provide a clear definition of the business you are in. Defining what business you are really in is a composite of three factors:
• Customer Groups - who is being satisfied
• Customer Needs - what is being satisfied
• Technologies and processes performed - how needs are being satisfied.
Kodak thought they were in the film business, when they were really in the business of satisfying the need for “images”. It is the end that is important, not the means. So many business failures come about through not clearly understanding this.
The status quo needs to be challenged on a regular basis. Many famous leaders have said it a lot of different ways, but it always comes down to the same message: when you stop challenging the status quo, you're dead. Few companies are great at constantly reinventing themselves and most get by one way or another. But the ones that resist change and try to hold onto what they were don’t find those fatal darlings.
When clients approach me for coaching, clients with businesses that are underperforming despite the crippling hours and effort the owner is putting into them, they usually have a profit leak, and often that profit leak, costing them cash and profits, is a “darling”. It may be a product, it may be a market, it may be a process. But its time has passed, and it needs to be killed off.
For more than 28 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows.
If you would like to discuss with me how you might do that, book a Strategy Consult here. http://www.profitsleakdetective.com/fast-track-to-cash-consult
© Copyright 2016 Adam Gordon, The Profits Leak Detective
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?