Unscrew the back of a watch. If you’re not handy at pulling things apart and putting them back together again, don’t try this with your watch. The workings of a watch are fascinating, a centre wheel, an outer wheel, a spring, bridge, pallet and balance are just a few of the bits making a watch tick. If you take any one piece away, say the spring the watch stops working, if the pieces are worn or dirty the watch will work, but it will not be reliable, then again if you loose the crown, the watch will work, but it just doesn’t look right.
Like watches, businesses are is multi faceted and layered with interconnecting parts. Part of the challenge in business survival is to recognise the various components of a business and how they interact.
I am often asked what the main causes of business failure are. Whilst each case has its own tale to tell, poor management ranks the highest. I agree, poor management is a broad reason. It includes lack of planning, budgeting, failure to monitor or review a business or to look at strategies to meet market changes and developments. Not anticipating change is another.
Those who try and stick by the principle of ‘if it ain’t broke, don’t fix it‘ are unwittingly starting to walk down the path of business failure. Just like a watch which is slowly losing time needs a service, so it is with a business. It is important to recognize that nothing stays the same. Change is always around us and to do nothing because everything seems ok is to invite failure. Part of the trick is to scan and identify trends that may have an impact on your business.
In my experience, those business managers that stay on top or anticipate change will have a higher probability of preventing change from adversely impacting on their business.
In the ever-changing economy, the factors that can impact the viability of a business can be gradual or sudden. There is no pattern. In a global sense, think of a change in oil prices, a currency change or a decline in the Chinese economy. Locally, factors may include a change in legislation, a new competitor entering the market, or a loss of a major contract or customer.
I’ve picked some obvious ones to start you thinking:
6 things you can’t control
# 1 Environmental
A business may be susceptible to adverse environmental factors such as climate change and drought. Change the lens, whilst climate change may present challenges for some businesses, it may also present new opportunities, remember there are always winners and losers.
# 2 Economic
This may include interest rate changes, a change in the price of oil, currency fluctuations or a correction in international markets.
# 3 Change in legislation
These are generally industry specific changes which can adversely affect a business. For example water restrictions, carbon omissions and anti-smoking laws.
# 4 Technological Change
The big ticket item – digital disruption. Whilst some industries are more susceptible to technological changes than others, all businesses are impacted by advancements in technology at some level. At one end this may simply be an improvement in accounting, payroll, stock control or point of sale systems whilst at the other this could involve a new manufacturing or processing technology revolutionising a particular industry, Paypal, Uber or AirBnB.
What’s the internet done to your business?
At various times I have come across business managers who have persisted with old systems which are either not being used to their full potential or are no longer supported by the original developer. Missing out on productivity gains, means competitors will take the lead.
# 5 Social Factors
Social trends can adversely affect sales if a business is unable to keep up with the latest fashions and consumer demands. Anthony Robbins talks about missing a cultural change will lead to business failure. Think iPod.
# 6 Market Changes
Competition presents a challenge for any business. Business managers need to be aware of their competitors, possible mergers, new product offerings and new business models within their market in order to retain their market share. Why didn’t the taxi or hotel industries see Uber or AirBnB coming?
the 5 things you can control these
# 1 Loss of Key Customer/ Contract
No business manager likes losing a customer or contract. However, this should not result in the demise of your business. Good management would be to employ risk minimisation strategies to ensure you can deal with theses losses.
# 2 Loss of key personnel
The loss of key personnel may destablise a business and lead to the loss of other staff. In addition, skills shortages in certain industries can make retaining or replacing valuable personnel extremely difficult.
# 3 Fraud
Business managers need to have adequate controls in place to manage the risk of fraud within their business. These controls need to address both internal and external fraud possibilities.
# 4 Poor pricing
Increases or changes in business costs can easily impact the profitability of a business if such costs are not monitored and pricing adjusted accordingly.
# 5 Data
Whether it is a short-term problem resulting in some ‘downtime’ or a major crash causing the loss of data IT failure in today’s business environment is serious.
The wrap up
Good management has the ability to not only identify the current position of a business but also anticipate changes that threaten the business. Unfortunately, sometimes even the best prepared can get this wrong.
The key is to identify the warning signs, get involved, talk to people and seek professional advice.
I helped a business that was experiencing a down turn. It wasn’t the business so much but more what had happened around the business and the effect these changes had on the business as a result. The biggest change was in technology; there were also environmental and legislative changes. We had to ensure we complied with the the law. So this was prioritised. In doing so we effectively caused an audit of the operations to be undertaken. We used the information from the audit to then prioritise technology, followed by the environmental issues.
Staff where challenged by the advancement in technology, they were no longer seen as the keeper of information, the go to people that could provide answers and solutions. Like buying a used car. We can gather up more information about cars before we walk onto a car yard, and car dealers who are not transparent are found out, very quickly.
Somewhere along the way, someone had changed the way the game was played. No longer did we answer questions; there was a movement away from ‘teaching’ to understanding how we learn.
To successfully turn this business around staff had to be engaged and take control. Staff help develop a new business plan. Consultations took place with key stakeholders. Motivated staff with high energy and an improving business is now the situation.
What this case study demonstrates is that the business environment is as complex as your standard Rolex watch movement.
Whilst you can keep the watch working by winding the crown, a series of interlocking mechanisms keeps the time on track. Speaking of Rolex, the famous Sea Dweller and Submariner are two of Rolex’s most popular pieces. James Bond made Rolex famous in the 60’s.
If you have a good look at the beautiful 1960’s Sea Dweller and compare it to the modern day one (have a look at the ceramic bezel to start with), with slight changes on the face, its compound, make up and technological differences are astounding; but it’s still a Sea Dweller after 40 years.