April 12, 2020 | Posted By: EMC

Every Business Needs Turnaround Strategy – Read why?

Once upon a time, Nokia ruled over the mobile handset market. After Nokia, Samsung took its place and then lost it for Xiaomi. It is said that Nokia lost due to a change in technology, lack of vision and management issues; whereas Samsung lost it due to price, aggressive marketing and online sales strategy adopted by Xiaomi. Although these reasons may vary, there is a common thread in both these cases. Both these companies failed to sense the unknown threats and remained incautious. For the emergency situation, they were not equipped with the necessary rescue mechanisms and failed.

Above example is symbolic. Irrespective of industry, the current situation is more or less the same. CEOs are under tremendous pressure to meet the expectations of their stakeholders, customers have got choices and they have become more demanding. The concept of Brand Loyalty has vanished. New entrants and rivals erode away the market share and profitability. The overall business environment has become highly volatile and unpredictable and in this situation, if you do not have any rescue strategy, it is like an attempt for self assassination.

Although the reality is very serious, you can avoid disaster only by understanding its symptoms and plugging up the holes well in time. Speaking in general, following could be the symptoms of the disaster.

1. Decline in order bookings or revenue in case of retail business – Although you have a sufficient number of salespeople, you observe a slow but steady decline in order bookings. At this stage it is important to understand the root causes of this situation. In case, if you brainstorm with your colleagues or appoint an external agency to find out the reasons, be receptive and open to face the criticism or get real reasons, even if it is personally against you. Keep in mind that you too can commit mistakes. Don’t allow your ego to disrupt the flow of the views of your colleagues or consultants.
2. Underutilization of plant capacity or insufficient customer drop-in rate – This can be either due to low order bookings or any other reason too. For order improvement, you can infuse the fresh lease of life into your sales team with various initiatives but if it is something else, you need to understand it and take corrective and preventive actions quickly. At this stage, the factors like your products, technology, market trend, customer expectations, changing habits or fashions, etc will be vital. It is also important to check the human or management aspects like vision, strategy, leadership, motivation of the team, culture of the organization, etc. It is utmost necessary to understand all these points systematically, take immediate professional actions and review the progress continuously till you restore the situation.
3. Dead Inventory – Dead or non-moving inventory is one of the major reasons for the disaster. It’s a dual-edged sword, which cuts your working capital with one edge while the other edge increases the cost of capital. If scrapped out, it results in net loss for the business. You incur some related costs like inventory management costs. These costs include warehouse rent, manpower cost of the warehouse, normal wear and tear of the products etc. In short, you need to take immediate wise and informed decisions while dealing with your inventory issue. Always remember that it has the strengths to punch holes and sink in your boat. So, be really cautious.
4. Fund Flow Management – Funds in the business are like blood in your veins. You are alive till the time there is blood in your veins. Once dried up, the end is for sure and hence is to be treated as if you are in an intensive care unit of the hospital. Get the diagnosis done to ascertain root cause(s) and take corrective and preventive actions immediately. Ensure that the situation will not deteriorate further. If necessary take the help of the experts as it is a specialized function.
5. Other symptoms – Besides above main symptoms, it’s possible that you may experience certain symptoms like disputes or politics within the core team members, job dissatisfaction, high labor or staff attrition rate, labor unrest, productivity loss on various reasons, outdated technology resources, change in government policies, etc. Here, we can name many symptoms but the most important is that you should scan the environment very systematically and find out the exact reasons. Remember that, if you target the wrong reason(s), you may waste your efforts and money by inviting the actual disaster to reach you more faster.

In short, while in business, it is of utmost importance to keep an eye on disaster symptoms and act upon those immediately to ensure smooth sailing. It is easier to plug the holes and cracks before they grow further and cause major damage or total sinking.

The only word of caution is that, one should be experienced enough to find out the exact root cause(s) and treat those very systematically to ensure well being.