Avoiding landing on the Sun – changing strategy at the earliest point
Written by Chris Barling
Friday, 11 November 2011 00:00
Most of us would have no problem ridiculing a government that said they were planning to put a man on the sun.
But the question we need to ask ourselves is whether we continue with equally ridiculous business strategies, and only try to change them after we’ve been frazzled?
The issue is that with hindsight we can see that a strategy was ridiculous, but at the time it seemed fine. It’s amazing to think just how long it took Kodak to realise that film was dead, how long it took Yahoo to know it should have bought Google; and how long before Google knew they should have snapped up Facebook.
These are big companies, but in my experience it’s just as easy to make mistakes when running a smaller outfit. So what is it that prevents people seeing clearly when they need to change strategic direction?
A two-fold dilemma
Firstly, we all know that no business succeeds unless it has sticking power. Sticking power is great, except when you’re sticking to something that’s going to fail.
The second problem is even harder to avoid. Imagine, like Kodak, you have a history of success with a particular strategy. Then things change. You have stuck to your guns many times before and been proved right. So you feel certain that it will be fine this time too, and there is no need to change. Unfortunately this time you are wrong.
This is where the big risks lie, sticking to a strategy that hasn’t yet been proven and won’t be, and sticking to a strategy that has worked in the past but where some change has now made it invalid.
What to do
There is one antidote to both of these problems, and that is to look at the fundamental dashboard readings on your business, and once a bad trend has clearly been established, to respond immediately. The fundamentals of each business will be different, but the sort of things I am talking about are:
- the percentage of leads that convert to sales
- the retention rates for customers
- the average order value
- the cost of acquiring the customer.
These are the drivers of your business, and establish the long term bottom line. Examine the trend in the drivers, not in the sales and profit, to see if the current strategy is working.
My company, Actinic, faced this issue recently. We have a desktop-based ecommerce package, but a lot of the market wanted an online system. We have moved decisively to partner with a company that provides an online system too, so the gap has been closed. We have dedicated a lot of staff and effort to the new venture. It’s been tough, but already we have many customers on the new system.
It sounds simple, but it’s very hard to do. The most successful companies change strategy even when it seems that they are winning. You can only do that if you really keep your eye on the ball. But it’s worth it long-term.
By Chris Barling, is CEO of ecommerce specialist, Actinic. Originally published on BusinessZone.
