Survival Sometimes Needs Fundamental Change #012

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Published on 9 November 2010 by Tony Groom

Survival Sometimes Means Making Fundamental Change

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.

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This can all seem too much when a company’s 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.

We are not Insolvency Practitioners. We operate within the law to protect our clients and their wealth. Our team has worked for over 20 years to help stabilise and return hundreds of businesses to profitable growth. Once appointed, Insolvency Practitioners do not work for you, they work for creditors and use your company’s assets to pay themselves. We work for you, not creditors.

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