Is your business obsolete?

Conventional wisdom may be used to carry out activities that revitalise under-performing organisations that are in deep financial difficulties. Yet I believe it is possible to consider the deeper problems that are causing this situation and prevent the downturn and its potential repetition.

What follows is my understanding of the circumstances and how I believe a relatively straightforward solution may be introduced to organisations. The activity will identify the problem(s) that caused the under-performance and direct the organisation towards the goal of its shareholders.

The underlying problem of so many successful organisations that are under-performing and in financial difficulties today, is that their ‘business structure’ is no longer relevant.

Today there are many excellent management techniques available for companies to use, for example: downsizing, out-sourcing, benchmarking and reengineering. Each is a useful and indeed powerful ‘what to do’ tool.

However, the challenge facing management around the world today, has been more a question of how to implement the ‘what to do’ solutions, especially for the companies that previously enjoyed long-term success. Many companies that were stars only yesterday are floundering and frustrated today.

In nearly every case, the root cause was not that the wrong things were being done, or even that they were being done badly. The reason has been the outmoded assumptions on which the organisation was built and is still being run. For example this may be where there have been fundamental changes in the marketplace, or in the product / service of the organisation. Therefore, the original assumptions of the organisation are no longer relevant or valid.

It is these assumptions that shape the organisation’s modus operandi, its organisational behaviour, the culture that influences its decisions about what to do and what not to do, and the mission that exemplifies the organisations concept of itself and how it defines success.

These assumptions are about the way that the organisation views the market, identifies its customers and sees their behaviour and values. They are the assumption that the company uses to value its strengths and weaknesses and its ability to evaluate its strategic vision. These are the assumptions that make, drive and work the organisation. It is these very assumptions, which are the organisation’s ‘business structure’, that no longer work.

The reason that previously successful organisations become distressed – especially ones that have been successful for many years – is not through complacency or arrogance, but because the realities that the company faced on conception and then for many years have changed, but the organisation’s ‘business structure’ has not.

A ‘business structure’ comprises three sections. The first is, looking at the environment that the organisation is in, i.e. the market, the customer and current technology. This defines what the organisation is paid for.

Second, the organisations specific mission must be defined or redefined in the current environment. This identifies how the organisation sees itself making a difference to society.

Third, the core competencies required to accomplish the above mission must be identified. These assumptions define where the organisation must excel to achieve and/or maintain its market position.

For the ‘business structure’ to be valid, those three parts must conform to the following four specifications. First, assumptions about environment, mission and core competencies must fit the reality of today and be workable.

Second, all three assumptions have to fit each other in order for the mission to relate to the market and the core competencies able to achieve the mission.

Third, the ‘business structure’ once defined must be accepted as a discipline by the entire organisation and the culture required to achieve this must be understood and accepted throughout the organisation.

Finally, it must be understood that the new ‘business structure’ is not written in stone and is to be reviewed in a structured manner. This is easier than it sounds, when it becomes part of the culture and this may be seen within most of today’s successful organisations.

Whilst for some, their ‘business structure’ may be very powerful and last a long time, eventually all theories become obsolete. There are however two preventative measures that are currently available and if used consistently should keep an organisation alert and able to adjust to a constantly changing market environment.

The first is internal and I call ‘systems management’. That is the management system of the organisation shall be documented in a proscribed format and each element of the system is then reviewed at least annually with scheduled audits. Additionally, the whole of the system is totally reassessed every three years with every aspect challenged.

The second preventive measure is external. It does not relate to the requirements of the organisation’s customers but to the needs and requirements of people that do not buy the goods or services from the organisation. The question must always be; ‘Why don’t they use the product/service?’ and ‘What do they buy or use?’ This is very important, as the organisation must be market driven.

It is clear that by using an evolving documented systems management procedure, an organisation of any size will perform consistently and adjust to the market and social conditions. It is only by this planned, consistent, vigilance and change, that the organisation’s ‘business structure’ can be relevant in a constantly changing environment.

Managers need to be aware of the early warning signs for problems. Once an organisation achieves its original objective, the current ‘business structure’ becomes obsolete.

A second warning sign of the ‘business structure’ is rapid growth. For this is a sure sign that the organisation has outgrown its ‘business structure’.

Two other warning signs are: unexpected success and unexpected failure, either of the organisation or its competitors. These must be assessed to understand why they happened for if they were unexpected then the reason must be found in order to be able to exploit or limit the damage of the unexpected result.

To establish, implement and maintain a successful ‘business structure’ is not achieved by luck, it is not achieved by chance or the throw of the dice. Success is achieved by design. It is achieved by having a set of well-conceived procedures that are regularly audited for their relevance and a commitment to be consistently searching to improve and move forward.

To accept that your organisation’s ‘business structure’ is obsolete and therefore life threatening is an acceptance of the oldest principle of effective decision-making. That is, problems in an organisation will not be cured by procrastination. The resolution of degenerating problems in an organisation requires decisive action.

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The status quo of the 21st Century is – Continuous Improvement.