Digital transformation. – It’s a concept that’s talked about a lot but often misunderstood. For any business going digital, it’s not just about the tech, your online presence, or in-house software. Instead it’s about using the technology to develop new business strategies, to make them customer-focused, fast to react, and to enable constant innovation.
Immediate benefits can accrue through automation, from flexible online accounting systems, payroll processing, booking systems, staff rostering etc. Beyond those immediate benefits, longer term benefits come from improved customer communication and support, with outcomes such as reduced customer churn, higher average spend etc.
However, for many business owners, the benefits are not immediately clear, or they don’t have the skills to assess what part of their processes can be effectively digitised, or how to do it.
That’s where I come in.
With my background in business turnaround and performance improvement, I’ll assess the impact of digitisation on your industry and work with you to develop a strategy for change.
That will include the commercial opportunities from adoption of a digital strategy in your business, and specific advice on systems, processes and technology to provide the maximum commercial benefit for your business.
The following are 4 key benefits from digital transformation. They will help you to survive in a rapidly changing commercial environment, and to drive innovation and growth in your business.
- Customer analysis
- Digital process automation
- Product innovation
- Transformation management
Performance Improvement
I understand the important role a trusted adviser plays in the client/adviser relationship. Don’t underestimate the value an independent set of eyes and different perspective on your affairs.
Like most of us, you get so involved and immersed in your affairs on a day to day basis that it is too hard to step back and take an objective view. An independent perspective can take on many different forms, from a detailed review of your business, to drilling down on your numbers or simply a discussion about your business
Testing your business, its assumptions and you, is what I do best.
Here are the top four reasons business owners say they failed at their business:
- Poor strategic management of the business
- Inadequate cash flow or high cash use
- Trading losses
- Poor financial control, including lack of financial and other records
If we step back in time, let’s say 3 decades, the reasons cited by business owners as to the reason they failed would include the following four:
- Poor strategic management of the business
- Inadequate cash flow or high cash use
- Trading losses
- Poor financial control, including lack of financial and other records
My point is this, these reasons are always offered by business owners. We can help you work through your plans, strategy, operations, financial controls, record keeping and administration.
For example, have you considered the impact of price? Do you price according to your costs rather than value, have you considered changes in the market place or different market segments.
Have you considered how digital may impact on your business – both positive or negative?
There are so many options. You must understand where you are today and where you want to get to. It’s only when we know these two reference points can we start the performance improvement path.
Turnaround
Workouts
Workouts occur where business owners recognise issues with its business and take early action to prevent the situation from getting worse. The key is to get in early, engage with key stakeholders and come to an agreement on how to manage the business. An independent perspective is critical in this circumstance.
Recovery needs time, the earlier you start the better your chances.
Change Management is challenging but rewarding The success of any change management program hinges on a plan and more importantly buy in from key players.
Have a read of the following comments to get an understanding about the stages of failure and why it is so important to get in early.
Despite changes in governance and regulation, insolvency continues to grow. It is not surprising the business of going broke has been one of the most researched topics in business over the last seven decades (Balcaen & Ooghe, 2006a).
Every year, on average businesses operating in the construction industry will make up approximately 22% of corporate failures, business and personal services making up 23% with retail approximately 10%. The industry sector league table consistently looks like this:
- Construction
- Business and Personal Services
- Retail
- Property and Business Services
- Manufacturing
Clients operating in these and allied industries need extra attention.
Generally, an organisation is made up of a matrix of resources, both tangible, such as cash and intangible such as social capital and policies, including strategic and operational plans and other policies such as financial management. These resources interact in a market place and success or failure will be determined on how well these resources and policies are applied in this competitive setting (Crutzen & Van Caillie 2008).
This is clearly demonstrated by the causes of failure. The table here looks like this:
- Poor strategic management of the business
- Inadequate cash flow or high cash use
- Trading losses
- Poor financial control, including lack of records
A recent trend has been the increase in poor economic conditions as a reason for corporate failure, sneaking into the top 5 in the last three years to 2012.
In their work, Crutzen, N and Van Caille D, identified four key phases of business failure. These phases are simply identified as:
- Phase 1 – a deficiency in the resource base – no cash, no capital either financial or social and core competencies reliant on the individuals involved in the business.
- Phase 2 – appearance of failure such as no hold in the market place, low or no profitability.
- Phase 3 – critical warning signs.
- Phase 4 – insolvency.
Real focus has centred around the warning signs for insolvency and for good reason, given the risk taken by directors if they trade whilst insolvent. These signs include difficultly in realising stock or collecting debtors or cash flow difficulties. Other warning signs include not paying taxes on time, fully drawn funding facilities or defaulting on loans or dishonoured cheques and trading losses. These warning signs usually occur during late phase 3 and 4 of the Crutzen and Van Caillie model.
Waiting around and ticking off how many warning signs you demonstrate is not a great idea. Some of the warning signs, if you can get to early enough, such as arresting trading loses or collecting debtors, could leave you with some remedies to avoid collapse but some of the warning signs leave you with no option but to cease operating, not being able to pay next week’s wage bill for example.
A better idea would be to start earlier.
Picking up on warning signs sitting in and around phases 1 and 2 is difficult. These are not as well pronounced as those signs in phases 3 and 4. Some of the consequences of implementing a poor strategy for example do not become apparent until late phase 2 or 3. You could imagine the response from senior management after implementing something new on a prediction of insolvency when seemingly the business is performing or appearing to perform well.
A great example of this is the work of Kamel Mellahi, a senior lecturer in International Business at The University of Nottingham Business School on the demise of HIH. Mellahi concludes HIH started to collapse when it established its UK operations in 1993, some 7 years before the appointment of a provisional liquidator. Critically, the UK branch had started to operate in areas which HIH had little knowledge.
Both qualitative and quantitative aspects come into consideration when analysing failure at this level. Mellahi for example sensibly suggests directors must have a clear understanding of an organisation’s strategic direction, whilst at the same time being vigilant for signs that matters are not tracking as they should, especially in the case were the organisation is doing well.
