As a turnaround authority, I’ve dealt with tens of dozens of businesses that are floundering. Many of them I can save from financial ruin. A few I can’t. They called me too late and while I can salvage parts of them, it’s not possible to bring them back to financial health.
In my several decades of the turnaround business, I’ve come to recognize eight words as very dangerous to the future of a company. “But that’s the way we’ve always done it.”
The ironic thing is I generally hear these words when it is abundantly clear that the way they’ve always done it is clearly not working. But what I learn immediately from these words is that these folks are resistant to change. And every company has to change to survive.
Part of that process of change is reviewing your business model on an annual basis. Examine what is working and what is not, what areas are making money, which ones are not profitable. Look at what competition has done to you the prior year and what effects it may have in the future. And make changes as necessary to that model, no matter how you’ve always done it.
It can be a painful and difficult process sometimes. Just look at Scoutmob, an Atlanta-based company that was founded in 2010 and is now nationwide.
It began with a similar business model to Groupon of offering discounts for local businesses to consumers primarily through an app on their smartphones. They differed in that consumers did not pay in advance, but only paid once they arrived at their location.
In 2012, Scoutmob launched Shoppe, an ecommerce site for small quantities of items from mom and pop shops offered at a discount. They soon found out that this division was much more profitable. While they were not making money from their primary business, Shoppe is reported to have brought in $5 million in revenue last year.
So the company made the tough decision to focus on this division, changing its homepage to reflect that Shoppe is now its focus, as reported in the Atlanta Business Chronicle. Unfortunately, that move meant laying off about half of its staff of 40. One of the founders, Michael Tavani, also exited last week.
Every business must review its business model annually. Yes, it can lead to some tough decisions and you never like to see talented, loyal people lose their jobs. But as Jack Welch said, “Change before you have to.” He also said, “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”
Continuing along the same path without examining your direction and heeding to the phrase, “But we’ve always done it this way,” do not lead businesses to grow.
But they do lead businesses to call me and help them turnaround the mistakes they have made. Which would you rather do?