bizdom

How to reverse the fortunes of a declining business

According to Adizes, to get back to their Prime, aging companies basically need to go on a diet and get more flexible. To get their companies back in shape, owners and directors need to cut management layers, decentralize, hire talented people with fresh ideas, make risk-taking a cultural tenet, banish as many control systems as possible, sell off secondary businesses, and most importantly, refocus every person, process and ounce of organisational energy on the company’s products and customers.

The first step, of course, is to stop the denial that the company has lost its once golden position in Prime. Key decision makers identify and analyse only those problems that they believe they are able to manage and control. Owners and directors need to remove denial and get the group to accept responsibility squarely. A specific plan of action must be detailed with clarity on what, by whom, by when.

Secondly, the management team must be taught how to manage meetings and deal constructively with conflict.

The team’s attention is then drawn to learning how to empower the rest of the organisation to solve problems and deal with change. Without an organisational power change, there can be no behavioural change.

Units must then be established where units for change operate independently to units needed to produce results, eg. marketing and sales are separated.

Rarely does the rejuvenation process require a change of leadership. As the system changes, so does everyone’s behaviour. Read more of this post

This is what business success looks like

Companies in their ‘prime’ are recognizable: all aspects work well together, all operations thrive, and all members of the organisation know where it is going and how to stay on track. However, this state of ‘prime’ is an ever-changing condition, a segment of a journey, not a haven at the end of the road. Due to Prime being a state of equilibrium between flexibility and control, function and form, imagining and producing, innovation and administration, it is a state requiring constant balance. So hard to achieve, so easy to lose, the state of Prime continually risks sliding back to childish habits or stumbling into the rigidity of old age, warns Adizes.

A good way to judge an adult company is if it fails to produce significant new products or spin off promising start-ups within any three-year period.  Then it is either decaying, or on the brink of decline.

Of course, this rule of thumb varies by industry. In aerospace the cycle is much longer, whereas in the fashion industry it is much shorter. In the restaurant business, you must offer a new special every day, and change the restaurant’s concept every five years or so. In certain industries that are evolving at a breathtaking pace – electronics, biomedical research or telecommunications – product lifecycles last only six months to one year.

A company in Prime predicts trends correctly and is not attached to a single product line or market to the exclusion of any other. It develops and changes. For example, if Domino’s saw themselves as a company that delivers quality snacks quickly instead of a pizza company, they could have opened a new chain for bagels as pizzas were declining, and so transferred energy to the new endeavour.

“You always pass failure on the way to success.” Mickey Rooney

A company in Prime focuses on results with a ferocity that ensures that they will meet and exceed customer needs. The entire organisation shares a vision, encourages creativity, and performs with excellence.

But success hides danger. The Prime organisation suffers from a dearth of managerial depth and talent to match its opportunities for growth, and rather than confront the instability and challenge of Prime, too many companies ignore the signs of their degeneration and the process of management that produces those results. Like athletes at the top of their sporting events, companies in Prime face a questionable future: continued triumph or decline.

Of the two directions, decline is the more likely. Managers’ delusions about their company’s dominant position in its markets can bring about aging. What Prime companies need to do is to open their eyes to other possibilities while remaining within the range of businesses they know and understand.

Note, these diagnostic assessments of a company’s lifecycle don’t mention financial components. That’s because the financial picture may appear rosy – deceptively. To explain, a company’s financial statements capture individual moments in its history and are in no way indicative of the future.

So what does management look like at the Prime stage of business development? Read more of this post

Is your business struggling with its adolescence?

Much like an adolescent teenager, the adolescent company struggles for emancipation from its parent-founder, according to Ichak Adizes in his book ‘The Pursuit of Prime’. The stakes are high during this wrenching rite of passage: nothing less than rebirth as an adult. Brave, teary-eyed, scornful, scared, the teenager zigzags into a new sense of self. Although we can accept the teenage years as a normal transition from dependence to self-reliance, we need to remember nothing grows without a struggle.

As long as the company does well, expanding revenues and market share, the board regards the founder or COO as a genius with a golden touch. When, however, profits decline and uncontrolled activity brings about a succession of managerial disasters, the board starts to view the same leader as an unguided missile.

What is going on? How did the company survive the stages of Infancy and Go-Go only to arrive at Adolescence once again to do battle?

The answer lies in understanding the dynamics of systems development. Leaders of adolescent organisations want law and order, predictability, acceptance and ‘ownership’ of decisions. They want a constitution, but one they can stand above – free to break the rules by which others must abide – and this won’t continue to work.

So how to address this in terms of the 6 aspects of management? Read more of this post