MISTAKES COMPANIES MAKE WHEN HITTING A HURDLE
It seems as if businesses are facing more hurdles than ever. A new one appears every day, impacting companies of all sizes and types and in every industry. No firm is exempt. For example, McDonald’s double-digit annual growth was so predictable that it came to be expected. But like other fast food companies, the McDonald’s people didn’t seem to recognize that consumers’ tastes were changing, particularly in terms of health consciousness. No amount of tweaking with the menu and adding $1 “value” burgers could turn sales around. Consumers evidently came to see the golden arches dripping with fat. The decline in sales was unrelenting and painfully precipitous. Venerable United Airlines presented the government with a business plan to obtain loan guarantees to stave off bankruptcy. Uncle Sam rejected the proposal because of unrealistic revenue projections. Personal computers, department stores, and the travel industry, among other industries, share some of the same problems. And so do countless smaller firms. There seem to be certain common characteristics of companies that fail to act even when they are headed for the iceberg — as well as those that take the initiative. Those who appear to avoid facing up to the challenge behave in certain ways: “It will get better — it always has.” Perhaps it’s natural to assume that having weathered many a storm, going through the present one is no different. Businesspeople can be as naive as anyone else. “We’ve seen bad times before and we’ve always come through.” Unfortunately, demographics, lifestyle, technology, and economic changes can have an immediate and troublesome impact. McDonald’s has been buying up smaller fast food chains that fit specific niches in an effort to strengthen its position, together with closing nearly 200 of its locations. Although those might be appropriate moves, the company mounted a massive advertising and promotional effort based on price to attempt to stimulate sales. Rather than face up to the distinct possibility that basic changes are taking place with its customers, McDonald’s attempted to grow sales using offers that could never resonate with people who were abandoning the “fat” concept. “It’s not as bad as it seems.” The entrepreneurial mindset thinks there’s no mountain that it can’t climb, no problem that it can’t overcome. All it takes is hard work. For at least a decade, the clothing care industry has been suffering from changes in workplace dress, hoping that the trend would reverse itself and men’s and women’s suits would return. That is happening to a limited extent, as manufacturers try to beef up suit sales. But just walk through the men’s clothing section in any department or specialty store and see how little space is devoted to suits. Sak’s Fifth Avenue stores provide a good example of what has happened. Ten years ago, the “Men’s Department” was mostly suits, while today informal and clothing dominates. The direction is clear. “The situation is temporary.” When companies began downsizing in the late 1980s, just about everyone, including the media, business analysts, economists, and even the newly unemployed felt that the situation was only temporary and that shortly everything would return to “normal.” As we all know, it didn’t. The manufacturing sector continues to decline and even the service sector is under pressure as technology improves productivity. We’ve discovered that a rising economic tide no longer raises every boat. There’s a permanence to certain economic trends. “Everybody’s in the same boat.” This excuse is perhaps the most seductive of all since it makes us feel that there’s nothing we can do to remedy the situation. If sales are off in an area, region, or market segment, this doesn’t mean that they need to be off for everyone. A real estate broker in Quincy, MA changed his legal name some years ago to Uncle Sam. In his “official” outfit, he appeared at every parade and every event in the region and beyond. On occasion, he was even turned away. But that didn’t stop him. Finally, he became a real estate broker — and for the past two years has been his company’s top salesperson. He’s given himself an identity that separates him from the others in his field. He has positioned himself for success whether conditions are good or not. They grab for simple, effortless solutions. A highly-regarded East Coast-based asset management firm began to see its customer base eroding. Many of the clients had been with the firm since its early years, for almost three decades. Over the years, their accounts had grown but now they were beginning to die and the money, which was going to their heirs, was also going to other advisors. The company failed to add new, smaller, younger investors to offset the inevitable decline from the deceased clients. Once the company faced the problem, it opted for the simple solution — investing in several brochures. Unfortunately, this firm isn’t alone. Simple, relatively painless solutions, such as brochures or advertising campaigns, give the impression of action without doing anything substantive. However, this isn’t the only way to overcome hurdles. There’s are far sounder — but also more difficult and time consuming — solutions to dealing with the demanding issues that face businesses today. Insist on the facts. Referring to a particular political party, one observer said after a recent election, “If the … leadership could stop saying what it imagines voters want to hear, maybe more people would vote for them.” As semanticists have long insisted, the road map isn’t the road. In the same way, the picture inside our heads isn’t necessary based on facts. It isn’t what we think customers want that counts. It’s only what customers actually want that leads to sales! And that requires constant research. Move quickly. This doesn’t mean acting precipitously or shooting from the hip — but it does mean taking action with deliberate speed. This is exactly what the airlines failed to do. Gorged on a decade of high-calorie business fares, the airlines failed to change their diet after 9/11 changed companies’ appetite for business travel. “Airlines have steadfastly resisted abandoning their business model, and they’re drowning in a pool of red ink,” stated New York travel consultant Bob Harrell (New York Times, 12/8/02), adding, “They’ve concluded that doing nothing is no longer an option.” In today’s business environment, wait-and-see is costly. Take the longer view. Short-term thinking seems to be falling out of favor with the revelations of its disastrous distortions in decision making. For example, a financial services firm with a long and enviable track record discovered that it was bleeding managed assets. Although their investment model was holding steady, they weren’t doing anything different. The decline in the stock market wasn’t a significant factor; most of their losses came from clients dying. Many had been with the firm since its infancy. The accounts had grown over three decades. Now, the funds were in the hands of the next generation, who had their own financial plans. It’s easy to forget how long it takes to grow an account. Word of mouth brought new business. But as clients aged, there were fewer referrals. At no point had the firm actively marketed its enviable track record, or its expertise in producing significant results for its clients. Taking the longer view means planning ahead, particularly when business is good. Focus on “customer value.” It wasn’t so long ago that the macho CEO types had a repertoire of four or five lines they often strung together. It was their way of sounding like business leaders. Inevitably, they talked about “shareholder value,” “employees are our greatest asset,” and “adding value.” These aren’t current subjects on the CEO list of popular themes. Shareholder value has disappeared, together with about 4.5 million employees, and what seemed so significant when it came to extra value is history. Although “value added” might have made sense at one time, the only value that makes sense today is what the customer values. Companies that take time to discover what the customer needs to survive and prosper get the business. The success of IBM under the leadership of Lou Gerstner is no accident. His clear vision that the customer needed software, consulting, and support to make the black boxes work changed Big Blue into an unparalleled powerhouse. Stay at it. American business seems to have trouble staying on track. Every new executive seems to think that it’s necessary to leave their “stamp” on the company. As a result, programs change in tandem with the names on the office door. Attention spans are short. Follow-through is woefully lacking. What’s new gets the green light. Whenever executives attend a convention or industry seminar, a whole series of new “initiatives” are sure to follow. Whether it’s a product program, a marketing strategy, or a sales initiative, it takes time for results to accrue. Unfortunately, the short-term mentality runs headlong into the reality of long-term results. Those who succeed stay with it. One of the best examples is Chubb Insurance. If there are two words to describe this company, they’d be quality and consistency. More important, they seem to know that you can’t have one without the other. CONCLUSION All this appears to suggest that businesses face a significant danger. They seem particularly susceptible to fantasy thinking that can lead to trouble, and even failure. To avoid this pitfall, sound, informed, and real world thinking provides the key ingredient for keeping businesses on track.
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