Are you Swimming Naked??

“You never know who’s swimming naked until the tide goes out.” … Warren Buffett

Warren Buffet’s quote is a good reminder to get your back-yard in order when times are good, to ensure you survive, and indeed thrive, in tough times.

In a booming economy you can perform well without having all your ducks in a row. Tough economic times however, sort the “wheat from the chaff”. It very quickly becomes clear which businesses are well-managed and those that are just surviving with a combination of poor processes, toxic culture, lack of strategy and planning.

Lessons from Africa

In nature, “survival of the fittest” is a common and well-understood phrase.

As an example, look at the annual migration across Kenya’s Masai Mara and Tanzania’s Serengeti National Park, with a super-herd of over 2 million wildebeest, zebra and antelope. For all predators, food is plentiful (sadly for the migrating herds). All species such as lions, cheetah, leopard, hyenas can happily eat well, thrive and co-exist with limited competition in a plentiful environment.

During less plentiful times, only the fittest animals can survive, those that are fit, healthy and strong, good hunters.

Survival of the Fittest Businesses

Same in business. If the business is not fit, strong and healthy, it can survive and even grow to a degree in booming times, but will probably not survive when times are tough.

One perfect example is Amazon … Retail companies were hit hard by the recession, but Amazon stood strong, seeing its sales actually rise by nearly 25 percent. Why? Amazon unveiled many new product offerings, including the Kindle 2, which helped boost sales during the holiday shopping season.

On top of that, Amazon has always made profitability a secondary priority to customer service and competitive dominance; it was able to offer more products for lower prices, which made it a top choice for consumers trying to save some money.

Similarly with Lego … When you think about families cutting costs to save money during times of economic struggle, you’d imagine plastic building toys to be at the top of the list of expendable luxuries.

While most companies were scrambling to survive, Lego saw profit growth of more than 63 percent, reaching an all-time high of profitability. Why? There are a few reasons, but the most important was expansion into the global market. While Americans were facing the worst of the recession, Lego expanded into Asia and made concentrated efforts to build sales in Europe.

Yet GM was caught “swimming naked” … After being one of the biggest car manufacturers for more than 100 years, and one of the largest companies in the world, GM also resulted in one of history’s largest bankruptcies. Focused predominantly on profiting from finance, the business neglected to improve the quality of its product, failed to adapt to changes in customer needs and did not invest in new technologies.

Are you swimming naked??

Most businesses don’t have in place the 4 key success factors for continuing growth. These have to be built, measured and maintained. It’s a big task and many organisations simply don’t have the capacity to do this on their own.

1. Vision and Strategic Plan

Many businesses don’t have a well-articulated vision or strategic plan, with clear goals and milestones. This results in a lack of direction in decision making and a failure to effectively drive and manage performance.

2. People and Culture

Recessions or tough economies make it even more important to attract and retain the best people in your business to perform consistently well. The people and skills to lead the second growth phase are very different than those required in a start-up. Many CEOs struggle with the transition of bringing in fresh talent whilst also honouring (and retaining) loyal employees.

3. Governance and Leadership

The optimum level of governance and right style of leadership must be in place to survive tough times, lead growth and manage risks. Things that need to be in place may include

• • A Board or Advisory Board to help develop strategy, identify & manage risk
  • HR policies, processes, skills and resources
  • Analytical and reporting skills and systems

4. Systems and Processes

The systems, tools and processes in some organisations are quite rightly basic, often in the founder’s head or written on the back of an envelope. This makes for nimble and cost-effective growth when starting out. Challenging business times demand a different level of rigour and sophistication as systems and software across the business become increasingly vital to compete profitably and avoid costly errors.

Contact Jayne today for help in building the 4 key success factors, so you’re not caught swimming naked!