Turnaround
What does it take to change your business's fortunes?
Last week I had the pleasure of being invited to speak at an event hosted by the lovely people at the Retail Gazette Boardroom Insider community (well worth joining if you are in retail and haven’t already).
The theme of the event was about what it takes to ‘turn a business around’ - in other words, to take a struggling business and put it on the right track. As is often the case at these events, I looked around the table and saw a lot of people with terrific track-records at doing exactly that, so Imposter Syndrome was well set in, but nonetheless I had a crack at offering my contribution to the discussion.
In summary, I offered three ingredients which I think differentiate those businesses who are able to find their way in these challenging times and those who are not.
1) Understanding their purpose
I’ve written here before (and at length in my first book, Reinventing Retail) that the real impact of the internet revolution for retailers is that it has changed what they are for. Once upon a time it was plausible that people would buy from you just because they didn’t have much other choice - you were there on their High Street and had the product they needed. Now, with all the choice in the whole world available to us, that is simply not a good enough “reason for being”. And so retailers have had to rediscover their purpose.
That might be that they have unique or unusual products, or that they have a great ability to discover and curate the best products in their sector, or that they have real expertise in what they are selling and can help you find the best product for you.
Essentially, as established readers of Moving Tribes will remember, they need a good answer to the question “Why should I buy from you”?
Really good retailers not only know the answer to that question, but they invest in making their answer real in practice. If, for example, your answer is “we are experts and know our complex products really well”, that’s fine but how much do you invest in training your store colleagues? If the answer is nothing, you may not be as expert as you think.
A walk down any High Street, though, sadly reveals many brands who just don’t seem to have a particularly good answer to this question of purpose. They stick some product on shelves, and of course do succeed in selling some of it, but their stores and their value propositions are undifferentiated and uninspiring. Those are the ones which won’t make it.
2) Being ready to challenge industry norms
Whether it is new service offerings, faster delivery, new technologies in store or different ways for customers to shop, really successful businesses both innovate and also challenge “how things have always been done”.
In the Cinema sector, for example, it was absolutely unheard of to vary the prices for tickets by the movie being shown - charging more for in-demand seats and discounting those which were slower to sell. But anyone in any other retail sector would regard that as the absolute basics of pricing strategy. When we started to flex prices up and down at Odeon, the rest of the industry lined up to say we were mad - for about 6 months until they all did the same thing because it turned out to be hugely successful.
This need to creatively challenge the norm is why one key ingredient for successful businesses is to have the right mixture in their leadership team of long-standing experts who know suppliers, know customers and have long institutional memories but also people from other sectors, who might ask the “why” question a bit more. Get that mix right, and you can turbo-charge turnaround.
3) Being willing to make difficult decisions
Saving a business often means hard choices. Closing stores that are no longer economic. Shutting down projects which started with high hopes but have not really delivered. Changing out team members who are no longer the right people in the right roles.
All of these are painful. If it doesn’t bother you, for example, letting people go from your business then there is something wrong with you.
They are, however, often essential if you are to unlock the performance change that a turnaround requires. If yours is a business where you can still find regular reporting on a project which started years ago, never really delivered but which everyone is too polite to shut down then you’ll appreciate that more direct and bold decision making might be a better approach.
Best of three
There is, though, a catch in listing these three aspects of turning around a business, which our discussion around the dinner table last week really left me thinking about.
None of these three is enough in isolation from each other. They are all important, but they are important together.
A new leadership team who are all about making difficult decisions, for example, but have no clear view of what the brand means for its customers are going to come unstuck. They’ll end up with a macho culture of hire-and-fire and may make some short term headway on cost reduction, but in the end they will fail the test of whether their customers care if they are there or not.
Equally, though, a ‘fluffier’ approach that is all about the customer value proposition but which fails to have the ‘steel’ to make difficult choices or challenge industry norms may run out of cash before it succeeds in turning anything around.
For a senior team or Board, then, that’s the secret sauce - don’t just answer one of these challenges but all three - find the way to be decisive, focussed and determined in your execution, but do so with a clear eye on your customer and what you want to mean to them. Get that balance right, and the ship will turn.
P.S.
Moving Tribes is kept free for you to read and share thanks to generous support from partners. I’m delighted to be working with the excellent team at Howard Kennedy for this series of posts - they are a full-service legal team with a lot of experience of the kinds of issues consumer businesses often face, so do look them up if you need to.