5 Reasons Your Business Is Doomed
No executive team is flawless, but avoiding these business mistakes could help your track record.
By Kristine Blenkhorn Rodriguez |
The road not taken is a tough concept for most business leaders. Not the ones who make successful choice after successful choice. They manage successive hurdles, seemingly bathed in a golden light that is all knowing.
But when the road you take your company down is less than desirable in its outcome, the road not taken can haunt.
Just ask Jim Wong, founder and CEO of BrilliantTM, recently named the fastest growing company on Crain’s 2015 “Chicago Business Fast 50”
“This is my third company. Each time you succeed and are recognized for it, people want to call it an overnight success. But it never is,” says Wong. “My current company’s success has been the result of five years of hard work and then some.”
Wong admits to decisions he wishes he had not made, successes not quite as sweet as he had hoped for, and unanticipated outcomes. But without those less-than-stellar moments, the homeruns might never come. So when we somewhat glibly tell you about the five things dooming your company, take us with a modicum of discretion. The seasoned experts we’ve interviewed here have seen companies just like yours fail or falter. But each is quick to point out that one company’s mistake may be another’s saving grace.
In that spirit, we have limited ourselves to some of the most egregious offenders. See if you recognize your organization in any of these common errors.
1. You forgot core is king
This error is the fatal flaw of many entrepreneurs, says Wong. “You start a business and you know what your core business is. But if you are managing it right and encouraging your people, you get a lot of opportunities thrown your way.” It’s not wrong to explore some of these, he says, but you need all hands on deck to keep the focus on your core growing business in the early years.
“Too many times, we don’t plan for the unexpected,” Wong explains. “If you don’t have a plan for how to handle new opportunities, your team can end up getting distracted and chasing multiple paths that conflict.” When that happens, your people won’t know where the business is headed and where their focus should be, cautions the CEO. Resources won’t be allocated properly and strategy will become muddied.
“Put a process in place,” he advises. “Things are moving so much faster than they were 10 or 15 years ago. To evaluate and make decisions as quickly and precisely as you need to, there needs to be some rigor to the process. Without that, you can fly in too many unproductive and unprofitable directions.”
Drs. Amy Lui Abel and Rebecca L. Ray of the Conference Board call this using “a cold set of eyes.” “If you’re not making data-driven decisions based on what drives your business, you’re in trouble,” says Ray. “Continuing to fund something because it’s the CEO’s pet project when it should have had a breakthrough or shown a profit a year ago, is not wise.”
2. You forgot customers also reign
“Customer is king as a marketing catchphrase instead of an action item spells trouble,” says Abel. A good example of this is when internal technical systems are disconnected or misaligned with customer-based systems.
“A good retail system has eliminated any extra clicks or steps. Most companies instead expect the customer to adapt versus aligning to customer needs,” she says. “There’s talk of, ‘Which organizational chart do we have to rejigger to support this process change and is that too much work?’ versus ‘This is what the customer demands or needs so we’ll make it happen.’”
3. You went all cheap & cheerful
“Better before cheaper” is just one of three guiding business principles that Deloitte’s Michael Raynor says has led many companies to success. The research director details these principles in his recent work, The Three Rules: How Exceptional Companies Think
, co-authored with Mumtaz Ahmed.
“Look at Maytag. Going on 20 years, they had exceptional financial performance because they were highly differentiated. They could demand a price premium because their products were perceived as high quality and a cut above. When the competitive environment around them changed in the 1980s, they had some strategic and tactical reactions. Some were perfectly rational but they turned out to be the wrong ones because they weren’t aligned with ‘better before cheaper,’” says Raynor. He adds that, “Maytag's run of superior performance lasted from the mid-60s to the early 90s. Since being acquired by Whirlpool, there’s been a sustained effort to return the brand to its roots in innovation and quality.”
He points out that it’s certainly possible to build a large and relatively long-lived company with the cheaper mentality, but most of those companies find it hard to sustain profitability over time. When their competitors go to bat using innovation and true differentiation, price wars cease to be as effective.
4. You lost respect for debt & liquidity
John Dischner, a turnaround specialist and managing director for AlixPartners, has seen too many companies play fast and loose with financials. “It’s not necessarily that they don’t have their eyes on the big picture—they know how much money is in the bank—but they lose their focus on short- and long-term liquidity. If you asked the financial team how its cash-flow picture looks over the next several quarters, taking into account any seasonality in the business and large project completion dates, they can’t necessarily tell you.”
Some companies are so healthy that it doesn’t really matter, says Dischner, but in others, it’s a sure sign of insolvency risk or failure. “The CFO is so focused on closing the books that he misses the month-to-month movement of cash. I see it a lot in middle-market companies.”
Combine the lack of a financial snapshot with a disconnect between the company’s strategic implementation and its debt level, and you have a recipe for disaster. “Things change quite quickly. Look at the mining industry—fracking in oil and gas. Over the past five to 10 years, prices as well as supply and demand have changed. Many of the industry’s players haven’t removed costs quickly enough, but the external environment requires it.”
Dischner has seen companies from every sector with too much debt fail to react quickly enough to changes in the competitive market. “And that’s when they bring firms like mine into the picture,” he says. “Many of them scratch their heads because technology has caused changes to happen at a rapid pace. Their decisions and reaction times have to match that pace in order to stay solvent.”
5. You don’t know your next leaders
“It’s a potential fatal flaw when companies fail to make a strategic bet on what the world will look like in the not-too-distant future,” says Ray. The fatal aspect comes into play because, in the event of a labor market shortage where companies compete not just for top-notch workers but simply for warm bodies, workers need to be prepared now for jobs that don’t even exist yet. And leaders need to be prepared to blaze a trail in that environment.
The Conference Board’s DNA of High Performing Organizations
explains that, “As your organization looks to develop a global mindset among leaders, consider aligning leadership development programs with the business strategy so leaders understand the ‘on the ground’ challenges associated with product development, operations, customer service and other functions. This must be done in a systematic way, beginning with young leaders and in lock-step not only with succession management conversations, but also in strategy development sessions, as the bench strength (or lack thereof) will have implications for the ability to execute the strategy.”
While it’s not always possible to predict which technical or non-technical skills might be necessary in a world that hasn’t yet come into being, training employees in areas that will help them regardless of specific job function is sure to enhance productivity overall. Critical thinking, creativity, problem-solving and collaboration are becoming basic necessities in our increasingly networked, matrixed world of work.
Making Chicago’s Fast 50
Ask Jim Wong about Brilliant’s number-one slot on Crain’s
2015 Fast 50, and the first words you hear are, “Honestly, I wasn’t even sure we’d make the list.” His modesty is epic.
“We surprised ourselves,” he quickly adds.
But ask him what he did to get his company there, and he’ll speak volumes. “The first thing we did was have the right plan. I had to have the right vision of where we wanted the company to go.” And when he says vision, he means things visualized, planned and plotted, with contingency plans for the unexpected.
“I knew what I wanted the company to look like in five years. I knew the size and the profitability. I knew what markets we would be in, the type of organization we would become in five years. And I knew the niches of the marketplace.”
Brilliant specializes in staffing accounting, finance and IT positions, and as such, Wong finds himself competing against some behemoths. For growth at the rate he has achieved, is vision really all it takes?
Of course not, says Wong. And then quickly hits you with what may sound like another management consulting paradigm: “The right people are also required.”
Seriously, Jim? Oh yes.
“It’s easy in our business for people to become jaded and view the people we serve on both ends of the hiring equation as a transaction. That’s not what we’re about. It’s about making people’s lives better, both the hiring manager and the candidates. You have to buy into this basic premise to share our values and fit into our culture.”
Third key to success? Wong will tell you it’s the right process, systems and culture.
Part of his secret sauce may be the advisory board he uses, filled with former clients and candidates. “They’re my sounding board. You know that saying in golf about not being able to see your own backswing? Well, I use my board to show me what I’m not seeing. They ask me tough questions and push back on my answers.”
A founder and chief executive who asks to be challenged to avoid blind spots? Well, that may be part of the secret sauce as well.