Continuous Improvement or Survival: The Clock is Ticking

Ticking Clock

Over the last few weeks we’ve been discussing the Stages of Industry Growth, outlining the three potential final stages, and explaining that every company – yes every company – will eventually pass through one of these three:

  1. Transformative: Fueled by Innovation
  2. Continuous Improvement: Fueled by Desire for Profits and Growth
  3. Survival: Fueled by Need to Stay Afloat

How do you know which stage, either A, B, or C, is your company’s destiny? Well, that depends upon company leadership decision making, and even more often, when the leadership makes that decision.  If you are like 99% of the companies operating in mature markets, for you, the clock is ticking.

Most company’s leadership will profess the desire (and the budgetary support) for option A: Transformation. Every year billions upon billions of dollars are poured into R&D, new product launches, new business models/“pivots,” all in the search for that “Transformative path,” and for some those investment yields spectacular results. As we noted in a past post, it is the rare company that successfully pulls off the Transformative path.  We can all “hope” for brilliance, yet hope is not a strategy.  Instead we must plan for the much more likely alternative paths of Continuous Improvement or Survival.

Making a decision too late, or even worse, not making a decision at all, inevitably puts a company on a path to Survival, a path accompanied by radical, and often debilitating, Cost-Cutting Measures.

As a result, most companies are best served by anticipating and proactively planning for  Continuous Improvement.  In order to effectively pursue Continuous Improvement, company leadership needs to recognize the need to improve processes and products in order to regain, maintain or widen their lead over competitors. This path, while requiring a concerted effort over an extended period of time, is less stressful on company culture and employees than attempting to transform the company or radically re-engineer the company.  Even so, creating a culture of Continuous Improvement and ultimately seeing substantial change will be the work of months if not years. This is because the process is evolutionary, as opposed to revolutionary (although occasionally well-conceived evolutions result in dynamic revolutions).

Abandon the Notion of Reactive “Cost-Cutting” and Proactively Embrace “Continuous Improvement” 

In order for it to be successful, Continuous Improvement requires a willingness to critically examine nearly everything that a company does, looking for opportunities for incremental improvement.  This can be difficult as it is hard for us to look in the mirror and critically evaluate current processes, some of which are the result of decades of experience. Critically addressing those long term ways of doing things is hard, because some practices become so ingrained that companies cannot imagine parting with them. Yet, becoming aware of these “Sacred Cows,” and determining how to let them go in favor of something better, is key to the success of the endeavor.

In our next blog we will explore how companies can begin addressing the challenges associated with beginning the process of Continuous Improvement. and help you to avoid outdated and unnecessary Cost-Cutting measures in the meantime.

 

 

 

 

 

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Do You Have a Culture of Continuous Improvement?

Coffee Splash

In our previous discussion of the Stages of Industry Growth, we outlined that companies pass through predictable stages in their development: Early / Rapid Growth, Competition, and eventually reaching a point of “maturity”. This leaves them at a leadership crossroads, and the decisions made here forecast one of three future stages:

  1. Transformative: Maintain high growth even at the expense of existing products/services
  2. Continuous Improvement: Protect our current business and widen the gap
  3. Survival: Competition has passed us by and now it’s about survival

Achieving each of these stages, as you can see, requires very different approaches and decisions by company leadership (often ranging from “Bold and Proactive” to “Reluctant and Reactive”).

In our experience, it is the rare company that can consciously adopt the “Bold and ProactiveTransformative approach.  Apple, for example, has made that conscious decision to repeatedly transform their business, even at the expense of current successful products.  Successful transformation requires companies to establish a strong foundation for dynamic innovation, built into their company culture, married with effective leadership to nurture and keep them going in the right direction – even in the face of conflicting information and slower than hoped for market results.  This high risk, high reward approach has sometimes led to great success, but other times to untimely failure if the company wasn’t ready to adopt and support transformative change. For transformation to work, a leader must be confident that the company has the cultural strength and resiliency to survive the process and emerge stronger and better, just like a metal refiner knows the precious metals he exposes to the fire will be able to withstand the heat, and come out more valuable than before.

Of course at the other end of the spectrum is the “Reluctant and Reactive” approach where companies slowly relinquish their market position as a result of either failing to keep pace with increasingly capable competitors or failing to react to changing market conditions.  In many cases their devolving position happens so gradually that company leadership fails to recognize what is happening – much like the proverbial frog put in a pot of water that is slowly heating to a boil.  As the story goes, by the time the frog has realized what has happened it is too late to “jump” and they find themselves in Survival mode. Being in survival mode doesn’t result from a single mistake, a single disappointing product, or one bad decision.  It happens because a company’s leadership missed the inflection point and failed to see the signs of decline coming on the horizon and, as a result, didn’t react until it was too late.

These are the companies that we often see in the headlines, talking about selling subsidiaries, closing stores, and/or reducing headcount.  Think Starbucks in 2008 – once synonymous with market dominance, in 2008 Starbucks announced that it planned to close 600 stores and lay off 12,000 employees. As one journalist noted “My disillusionment set in about three years ago, but the company’s ballyhooed ‘Starbucks experience’ died even earlier, killed by a growing bureaucratic culture” (see “Drip by drip, Starbucks lost what made it shine”). The water temperature in the pot had been rising for years and management either didn’t, couldn’t, or wouldn’t feel it. By 2008 the pot was boiling and Starbucks was in Survival mode. Since then, Starbucks has managed to turn things around, which is an incredible achievement. Sadly, the story doesn’t always end this way.

Knowing this, if it is rare for a company to embrace the risk of Transformational decision making, and nobody wants to wait for the boiling water of survival we believe most companies are best served by anticipating, planning for, and proactively adopting an approach of Continuous Improvement.  In continuous improvement, the leadership proactively recognizes the need to improve processes and products in order to regain, maintain or widen their lead over competitors – and do so “above and beyond” the normal course of business evolution. This last point is key!

Yes, every company, every department, and every employee is (or should) always be focused on continuous improvement. That’s not the point. We cannot tell you how many times we have heard “We already do that here, we are constantly innovating,” and they are right. But step back and think a moment. If every company improves and innovates, then every company remains at the same relative state of performance. If everybody is “great”, then by definition they are all average, they are all mature, and they are all facing the exact same three future paths. So the question becomes: What are you going to do above and beyond to break out of the pack?

At Brookeside, we believe there is a better way, and we will begin to address that in our next blog where we will discuss our approach to continuous improvement, what we call Efficiency Evolved, in more detail, and provide more insight as to why the middle path could be the best option for your company.

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Is Your Company Destined for Decline?

 

Stages of Industry Growth

Last week we asked a question, why do so many re-engineering efforts fail? The beginning of the answer to that question lies with a company’s leadership, and their ability to make the right decisions at the right time.

The Stages of Industry Growth 

Most companies progress through a natural life cycle. Successful companies often begin with a great idea.  If they are talented at marketing their idea, they will experience early rapid growth and a subsequent land (or market share) grab. Their success will naturally spawn competitors, in the form of copycats or existing companies with similar ideas. So that early period of unrestrained growth migrates into a period of intensifying competition, a struggle for market share and profitability.   As the market matures, they will either continue to succeed, albeit with reduced growth and profitability, or they will be overtaken by the competition, ultimately falling into decline.

At this point (market maturity) there is an inflection point that these companies face, where competition is beginning to intensify.  Leaders who have helped their companies navigate the stages of growth recognize that the inflection point requires forward looking decisions.  And those decisions will set your business on a path that will largely drive the future success of your company.

Option 1: Do we take the risk of cannibalizing our own products in order to recapture the benefits of rapid growth.  Apple is the most talked about success story of a company willing to transform their business, even at the expense of current successful products.  The iPhone is a huge success, at the expense of the iPod.  The iPad is a huge success, at the expense of the Mac.  It is a high risk, high return approach, but it has worked so far for Apple.  

Option 2: Other companies may not have that next innovative idea, and instead choose to focus on improving their current approach.  These companies are choosing a path of incremental improvement, hoping to reinforce their competitive position by enhancing  current products and services at a faster rate than their competitors.

Option Three: Unfortunately, in our experience, many companies choose to ignore this inflection point, and largely rest on their laurels, looking back and talking fondly of those days of high growth, while more aggressive and farsighted competitors pass them by.  These companies quickly find themselves in a state of decline and ultimately end up in survival mode.

So, back to our original question, why do so many re-engineering efforts fail?  In our experience the answer to that question lies with corporate leadership.  Are they willing to begin thinking about the future of their company early enough in the life cycle to make a difference?  Do they begin planning for the next transformative product or service while they are in the early stages of growth?  Do they begin proactively planning for increased efficiency, or do they wait until forced to react by increased competition?

A companies options are dependent on the point in the company life cycle where leadership begins addressing these key questions.  Next week we will talk about those options, and the likelihood of success.

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Why Some Efficiency Projects Succeed While Others Fail

Companies Cut Costs

You can pick up any copy of the Wall Street Journal from the last 40 years and see headlines like these. The history of such projects includes some stories of successful business transformation, but more commonly, stories of cost cutting failures.

Here at Brookeside we’ve been helping companies become more efficient for over 20 years, and while many of our clients have seen tremendous success, we likewise have been part of some frankly mediocre business results. That led us to ask ourselves:

  • Why did some of our clients achieve those tremendous successes?
  • Why were other engagements less successful?
  • What were the key factors that led to each outcome?

In exploring these issues we have identified several patterns that help us determine in advance whether a company is likely to be successful in their efficiency, cost-cutting, and/or re-engineering efforts.  We’ve looked at the role of leadership, their definition of success, the people and approaches involved, the impact of organizational culture, and many other factors. Over the next few weeks we’re going to share some of our experience, and explore the reasons why certain companies are successful in implementing their projects.  Conversely we will also talk about why others fail to achieve their goals, and what they could have done to produce a much more positive result.

We look forward to your thoughts, comments and ideas!

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