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Survival sometimes needs fundamental change #012

T
TonyGroom

While continuous business improvement is important, it may not be enough during significant economic challenges when a business's survival is at stake. This may require more radical, fundamental changes to the business model. Seeking advice from a business turnaround adviser can help identify what needs to change, such as overhauling processes that are draining the company. Fundamental solutions like outsourcing production and delivery helped one manufacturing company cut fixed costs and focus on core strengths.

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Survival Sometimes Needs Fundamental Change #012 Any successful business would be expected to be constantly monitoring its activities and modifying them where necessary to improve the efficiency and its various offers. Continuous business improvement does two things: it optimises existing processes and keeps them optimal by continually updating them. But on its own, especially when there are significant challenges in the wider economy, such as the current global economic downturn, continuous improvement may not be enough. Such unexpected challenges can plunge a business into difficulties where its survival may be at stake and this may mean looking at a fundamental change to the way it operates. Too often businesses struggling to survive, are characterised by hard work and trying to improve the existing business model before they fail. Business improvement is all about laying foundations, tweaking the system and improving. Fundamental change is a more radical look at the whole operation but it also needs care to avoid throwing the baby out with the bathwater by looking hard at the business and what needs to be preserved in order to survive and grow in the future. However, if a business tries to grow before bedding in new foundations following fundamental change it will reinforce problems that had not been sorted out. For example in a downturn it is an understandable reaction for a business to trim its costs when it may be better to have an in-depth look at its business model and be open to more radical changes. This can all seem too much when a companys directors are struggling to keep a business afloat at a difficult time. It is possible to be too close to the problem, however, and a combination of worry and a sense of urgency is not ideal for taking an objective look at the whole business model. This is where calling on a business turnaround adviser could make all the difference between success and failure. While the adviser is motivated to help a business succeed and will expect to work with committed managers and staff, they are not so immersed in the day to day minutiae of the operation and can therefore look at all aspects of the business, identify what is viable, what processes are draining the company and what actions can be taken. In a recent case, a business turnaround adviser was brought into a manufacturing company to help it through difficult times when orders had dropped dramatically. The company occupied an expensive factory with consequent high overheads. Having examined the business in depth and established that there was a market for its products given some changes, the adviser proposed two fundamental solutions to cut back on overheads: that the company reinvent itself as an assembly house with outsourcing production of components and that it should also get rid of its fleet of delivery vehicles and outsource that too. Both gave the company much more flexibility by cutting back on its fixed costs in favour of variable costs. It could then focus on what it was good at, which was developing good products.
In a turnaround situation fundamental change may involve such things as radically changing the accounting system from a costly enterprise management system, which depends heavily on everybody knowing and doing their job perfectly, to a more simple order processing and accounting system that takes things back to more manageable basics.

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Survival sometimes needs fundamental change #012

  • 1. Survival Sometimes Needs Fundamental Change #012 Any successful business would be expected to be constantly monitoring its activities and modifying them where necessary to improve the efficiency and its various offers. Continuous business improvement does two things: it optimises existing processes and keeps them optimal by continually updating them. But on its own, especially when there are significant challenges in the wider economy, such as the current global economic downturn, continuous improvement may not be enough. Such unexpected challenges can plunge a business into difficulties where its survival may be at stake and this may mean looking at a fundamental change to the way it operates. Too often businesses struggling to survive, are characterised by hard work and trying to improve the existing business model before they fail. Business improvement is all about laying foundations, tweaking the system and improving. Fundamental change is a more radical look at the whole operation but it also needs care to avoid throwing the baby out with the bathwater by looking hard at the business and what needs to be preserved in order to survive and grow in the future. However, if a business tries to grow before bedding in new foundations following fundamental change it will reinforce problems that had not been sorted out. For example in a downturn it is an understandable reaction for a business to trim its costs when it may be better to have an in-depth look at its business model and be open to more radical changes. This can all seem too much when a companys directors are struggling to keep a business afloat at a difficult time. It is possible to be too close to the problem, however, and a combination of worry and a sense of urgency is not ideal for taking an objective look at the whole business model. This is where calling on a business turnaround adviser could make all the difference between success and failure. While the adviser is motivated to help a business succeed and will expect to work with committed managers and staff, they are not so immersed in the day to day minutiae of the operation and can therefore look at all aspects of the business, identify what is viable, what processes are draining the company and what actions can be taken. In a recent case, a business turnaround adviser was brought into a manufacturing company to help it through difficult times when orders had dropped dramatically. The company occupied an expensive factory with consequent high overheads. Having examined the business in depth and established that there was a market for its products given some changes, the adviser proposed two fundamental solutions to cut back on overheads: that the company reinvent itself as an assembly house with outsourcing production of components and that it should also get rid of its fleet of delivery vehicles and outsource that too. Both gave the company much more flexibility by cutting back on its fixed costs in favour of variable costs. It could then focus on what it was good at, which was developing good products.
  • 2. In a turnaround situation fundamental change may involve such things as radically changing the accounting system from a costly enterprise management system, which depends heavily on everybody knowing and doing their job perfectly, to a more simple order processing and accounting system that takes things back to more manageable basics.