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“We can turn it around––or can we?”
Mistakes companies make when hitting a hurdle
by John Graham
It seems as if there are more hurdles than ever in business. A new one every
day appears. They impact companies of all sizes, types and in every industry.
No business is exempt.
McDonald’s double-digit annual growth was so predictable 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 has been unrelenting and painfully precipitous.
Venerable United Airlines presented the government with a business plan
to obtain loan guarantees to stave off bankruptcy. The proposal was rejected
because of unrealistic revenue projections.
Personal computers, department stores, 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 its natural to assume that having weathered many a storm, going
through the present one is no different.
Businesspeople can be as naïve 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, along with closing nearly
200 of its locations. While those may be appropriate moves, it mounted a
massive advertising and promotion 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, the company 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 is such that it thinks there is no mountain
it cannot climb, no problem it can’t overcome. All it takes is just
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 men’s clothing in any department or specialty
store and see how little space is devoted to suits. Sak’s Fifth Avenue
stores are a good example of what has happened. Ten years ago, the “Men’s
Department” was most 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 have discovered that a rising economic tide no longer raises every boat.
There is a permanence to certain economic trends.
•
“Everybody is in the same boat.” This excuse is perhaps
the most seductive of all since it makes us feel that there is nothing that
can be done to remedy the situation.
If home sales are off in an area, region or market segment, this doesn’t
mean that they need to be off for everyone. There’s a real
estate broker in Quincy, Massachusetts who 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 even 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
the top salesperson in the company he works for. He has given himself an
identity that separates him from the others in his field. Whether conditions
are good or not, he is positioned for success.
•
They grab for simple, effortless solutions. A highly-regarded East
C oast-based asset management firm began to see its customer base erode.
Many of the clients had been with the firm since its early years, 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.
New, smaller, younger investors had not been added to offset the inevitable
decline from the deceased clients. Once the problem was faced, the firm
opted for the simple solution––it invested in several brochures.
Unfortunately, this firm is not alone. Simple, relatively painless solutions,
such as brochures or advertising campaigns, give the impression of action.
This is not the only way to approach hurdles. There is a much sounder––but
also more difficult and time consuming––solution to dealing
with the demanding issues facing 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 the general 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 once 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,”
states New York travel consultant Bob Harrell (NYT, 12/8/02), who adds,
“they have 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.
A financial services firm with a long and enviable track record discovered
that it was bleeding managed assets. Their investment model was holding
steady; they weren’t doing anything different. The decline in the
stock market was not a significant factor. Most of the loss was due to 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, 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 are not current subjects on the CEO list of popular themes. Shareholder
value has disappeared, along with about 4.5 million employees, and what
seemed so significant when it came to extra value is history.
While “value added” may 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 his or her “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 would be quality and
consistency. More importantly, they seem to know that you cannot have one
without the other.
All this seems 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 the pitfall, sound, informed, and real world
thinking is the key ingredient for keeping businesses on track.
© 2004 Graham Communications
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John R. Graham is president of Graham Communications,
a marketing services and sales consulting firm. Mr. Graham is the
author of four books on marketing and sales, including Break the Rules
Selling: Success Strategies that Beat the Competition (Superior Books).
Mr. Graham writes for a variety of marketing and sales columns for
business and trade publications and he presents his Magnet Power presentations
at company and association meetings. He can be contacted at 40 Oval
Rd., Quincy, MA 02170; by telephone at 617-328-0069; by fax at 617-471-1504;
or by email at j_graham@grahamcomm.com. The web site is grahamcomm.com. |
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