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In ancient times mapmakers placed the phrase “here be dragons” at the edges of their known world – beyond those markers were dangerous and unexplored territories.
In the business world those edges of the map represent the “Kodak cliff” (see previous edition of finweek), where companies are afraid to venture into the new world or to explore new territories.
Brian Armstrong, professor of digital business at Wits Business School, says one of the reasons companies end up in distress is that they lose touch with their market.
This often happens because their competitors do things differently, there are new entrants in the market and their customers’ wants and needs have evolved.
Once you realise you are in trouble, you have to almost immediately start running two parallel businesses – the so-called twin engine model – says Bronwyn Williams, trend translator for Flux Trends and keynote speaker with Unique Speakers Bureau.
It won’t be easy.
The current business is paying the bills, there are existing ecosystems, and there are people and players involved.
“You must realise that if you keep the current business, you are going to run it into the ground.
It is going to become a cash cow and eventually the milk runs out and the business is dead in the water – just like your Nokias and your Kodaks,” says Williams.
Kodak’s competitor – Fujifilm – followed the twin engine model to help save the brand by shifting from film to makeup.
Fujifilm discovered that its core strength was its chemistry.
It found that one of the chemicals used in developing film had anti-oxidant properties.
The end result of this realisation was a new high-end beauty range, Astalift, which is currently selling across Asia and in luxury stores across Europe.
Shapeshifting successfully
The biggest challenge to making a successful business shift, as was the case with Fujifilm, is having the courage to take bold action to rescue the situation, explains Armstrong.
Often when a company is in distress and has lost its competitive edge, the availability of funds to invest in the transformational programme is tight.
The temptation then is to gain leverage or extract value from previous investments.
However, it is more important to ask where future profits are going to come from and to focus investments in those areas.
It can be a painstakingly long process.When a company realises it has lost its edge, it is similar to getting lost in the mountains, says Pierre du Plessis, strategist and keynote speaker on innovation and leadership.
“The moment you realise you are lost, the worst thing you can do is to continue moving.
The most valuable thing to learn is to stop and to observe where you are and what is happening around you,” says Du Plessis.
There is a lot of noise in the world today, and very little clear signals, he says.
It therefore takes time and a keen sense of observation to find the signals.
Pivoting a business requires a fundamental structural shift in mindset and a real commitment to allocate resources where it will make a difference, says Flux Trends’ Williams.
“The best way to predict the future – even if it is a cliché – is to create it,” explains Williams.
The challenge, however, is to create a vision that everyone in the company finds worth working towards.
According to Williams, the future is either going to happen to you based on what someone else has planned, or you can be part of planning it.
It is useful to have conversations on this topic with teams in middle management and teams at an operation level.
Lower-level employees are often frightened of change because when they hear words like “change management”, they think of it as code for restructuring (which is code for having to find a new job).
Du Plessis, however, reckons that chaos is a gift – and one that should not be allowed to go to waste.
It offers the opportunity to do things that have previously not been possible.
“It breaks down all the barriers which prohibit us from innovating… It’s like skiing. You have to lean into your discomfort to be able to move forward.”
A successful turnaround strategy requires efficient communication.
It is oxygen to the process.
In order to prevent levels of anxiety among employees, there has to be a constant “vision leak”, says Du Plessis.
Armstrong believes there has to be a tight alignment on all levels of the business when it comes to understanding why the company has to change; how it will change; and how the change will be measured.
Research shows that the current lifespan of a Fortune 500 company is around 10 to 15 years.
If you only focus on today’s business, you are not doing enough to remain relevant and to build a legacy business.
Companies that don’t do enough to embrace change are run by “bean counters who want to extract value from the cash cow rather than lead people on to the next star business”, says Williams.
This article originally appeared in the 18 April edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.
