The “7th sin of innovation” is complacency – thinking your enterprise is ‘good enough as is’ (see The Seven Sins of Innovation: a Strategic Model for Entrepreneurship). Some arrogantly think they’re at the top of their game, so why change anything? Others are coasting toward their end-game, tolerating mediocrity, and not wanting to rock the boat. But hopefully you are an entrepreneurial leader, dissatisfied with business as usual, and driven to constantly look for new ways to drive improvement! If you are presently engaged in an enterprise that you are dissatisfied with, you have three main options:
Revitalise. Innovate. Exit
In fact, the right strategy is almost certainly a mix. Maximizing performance and profits by revitalizing existing lines of business, whilst also exploiting new opportunities for profitable growth and competitive advantage both make good sense. And everyone should be planning for an eventual exit. Your business will be worth more if you’ve invested in developing viable successors and a strong leadership team and culture.
Case 1: Growth in a flat market
Based on 6 months of engagement, a UK sales subsidiary of a German multinational manufacturer achieved 21% turnover growth in a flat market. Looking into the results more deeply revealed that the improvement in competitive share was based on increased customer confidence, directly resulting from improved internal and external communication.
Monthly sessions with the leadership team, along with one-to-one mentoring, resulted in greatly improved cohesion among the board. There were now more regular, focused and engaging meetings, along with fewer process or procedural ‘review’ meetings. There was a much greater tendency to constructively challenge, question and problem-solve across what had previously been silos within the organization. These changes at the top had also had a pronounced ‘trickle down’ effect, resulting in improved communication throughout the organization. In turn, this meant that customers, who typically talked to the commercial, technology, finance and operations teams during the purchase decision process, were getting much more consistent messages regarding what could be delivered, and when. Greater communication consistency translated into greater customer confidence, and therefore more business.
This is a perfect example of revitalization leading to growth and strengthening competitive leadership. Along with improved cohesion and communication, there were measurable improvements in engagement, morale, motivation and performance throughout the enterprise. Not everyone came along for the journey, and in fact early engagement revealed that one director and a number of other people in the business needed to exit, and did. But these transitions happened in a win-win manner, as a natural consequence of the engagement, discovery and learning process. In any change journey, there are champions, enthusiasts, and sometimes a few ‘victims’ with little or no appetite for the journey.
All of this happened because the MD was dissatisfied with business as usual, even though the organization was hitting all its key objectives, and strongly leading within their industry. He felt even more could be achieved if the leaders within the business worked more cohesively, rather than just being excellent in their respective roles – and he was right! Following the initial 6 months, and the resulting highly profitable business growth, the engagement has gone on to identify and implement some business model innovations that are continuing to drive even greater growth and industry leadership. But that’s another story!
Case 2: Innovative new brand & Business model
A North American human capital management group launched a new brand and operational business model, achieving profitability as a direct result of a 3 month engagement driving value creation – a.k.a., innovation.
I was hired to identify a ‘unifying brand’, and perhaps more importantly, a coherent way to integrate a group of 14 companies that had been acquired in the preceding year. The companies included an online recruitment portal, online resume building, career coaching, executive headhunting, and various other HR service providers including outplacement services, specialist legal advice, and consulting. In management and operational terms, it was a big mess. And it was haemorrhaging cash at a worrying pace.
Several associates and I conducted strategy sessions, customer focus groups and survey research, and in the process developed a powerful branding concept that evoked the concept of the human capital life cycle, as well as an innovative new business model that effectively integrated the various service offerings in a value-adding and cost-effective organizational structure and operating process, and also identified and monetized several innovative new service products.
Six months after the engagement ended, the client confirmed the intended results – profitability and positive cash flow had been achieved. But there was also an unexpected consequence – a trade sale of the company to a global player wanting to adopt the new brand! But that too is another story!
Case 3: Selling for substantially more
I was engaged to breath new life into a mature, declining business that had failed to innovate within a fast moving industry – mobile card payments. The owner had been mostly absent from the business for several years, focused on other interests, leaving the day-to-day management in the hands of a friend and business partner employed as the MD.
Within the first month, engagement revealed various issues within the business. The MD agreed to step down into a business development role, a sales manager was promoted to sales director, a couple of non-performers were moved out, several parts of the business were restructured, and I served as interim CEO. Everyone was ‘on their toes’, and the entire ‘vibe’ in the business changed.
Then, the client called to say she had received an ‘eight figure’ offer to buy the business. The question was whether to accept. My advice was say thanks, but not commit until checking options and properly assessing the value of the business. Within hours, a London-based finance guru was engaged to work with me, advising the client.
To make a long story short, the process of driving various business improvements continued, including identifying long overdue innovations, eliminating unnecessary complexities, costs and inventory, and tightening up human resources management and employee engagement, resulting in measurable gains in productivity and establishing a much stronger, more incentivized and committed leadership team, along with effective succession plans for all key roles in the business. This was now a much more valuable package!
And six months later, the business was sold for about 50% more than the original offer – largely driven by the fact that the right buyer was found, who appreciated the true value of the much more highly functioning business. This was a classic example of a business owner whose exit was long overdue, and ultimately far more successful based on identifying and implementing a powerful strategy, effective engagement of key people within the business (culture, behavior, attitudes, etc.), and powerful business model innovation.
If you are dissatisfied with an enterprise you’re involved with, it may be time to revitalize your enthusiasm and the enterprise itself. Or it may be time to drive greater innovation within the enterprise, or get out of it – exit, based on the highest possible valuation. Of course, achieving maximum value, and enjoying success to the fullest possible extent, even if you’re not exiting, require drive and innovative leadership!
Three options and three case studies…