“In the confrontation between the stream and the rock, the stream always wins; not through strength, but through persistence.” — Buddha
The leaves are browning, the mercury is dropping and the rains are more frequent. Rather like the changing of the seasons a lot of businesses in traditional industries with traditional ways of working are finding sales, margins and profits are fast browning off like the autumn leaves. Today many businesses caught in a sales, margin or profit eroding death spiral the typical management reaction is “restructuring or rightsizing” or “cost reduction” which inevitably forgets the most important R – “Rethinking” how we can remodel businesses to be more innovative and ultimately more profitable.
Starting Creatovate two years ago I decided to focus our consultancy services and efforts to help client’s growth through what I personally believe is the most sustainable growth pathway – Innovation and International Business expansion. At its most basic definition innovation can be described as “change that creates economic value”. You must be either reshaping value chains to remove cost and / or create value i.e. reduced cost and/or increase prices to customers and consumers. You can also typically expand your business into one of 3 new quadrants using the Ansoff matrix – new products or services development to existing markets (bottom right quadrant), enter new markets with existing products or services (top left quadrant) or take the bravest bet which is new products and/or services to new markets (top right quadrant).
Ansoff Matrix: http://www.quickmba.com/strategy/matrix/ansoff/
Standing still is not an option in business today. You will get run over by new entrants, or incumbents who are running faster than your business or sideswiped by other businesses you did not even see out of your peripheral vision who enter from completely different market spaces with new products and/or services that better meet your customers’ needs (top right quadrant innovators). Starting any new business is not easy and having worked for large multinationals for over 15 years and with well-established clients over the past two years I can honestly say that no one business is safe in the ‘new economy’. Complacency will be the seeds of your business demise. From the Board level to the mail room roles will continue to be constantly restructured and re-scoped and I am afraid to say often without enough upfront ‘Rethinking’.
“Industrial Relations” was a widely used word in the 1990s which later became “Human Relations” and is now more commonly titled “People & Culture” in large progressive modern organisations. During my post-graduate Bachelor of Commerce in Management Honours thesis study I examined Industrial Relations in the Airlines Industry and quickly discovered here was an industry that would always be placing immense pressure on the ‘People’ component in the Value Chain of the Airline industry for the simple reason the typical airline cost structure is divided into 3 almost equal components: 1/3 on planes, 1/3 on petrol and 1/3 on people. As much as an Airline would like to negotiate a good deal on planes that is going to be difficult when your choices are limited to either a Boeing or Airbus Jet plane and as much as Airlines would like a better deal on their fuel bill that negotiation will also be difficult as Shell, Exxon Mobil and BP will have a view on fuel prices and continued upwards direction. So People become front and centre in the ‘cost reduction’ eyes of management and to this day Airlines management are still in a constant struggle with how to get the best out of their people for the least possible pay!
Scattered throughout the many loss making Airlines globally there are a few stars making money and my bet is they will have a better strategy and culture to differentiate themselves and possibly a better business model e.g. Southwest Airlines or Air Asia. Walking into the Ansett NZ head office in 1996 to talk to the Airline Pilots Association union representative I noticed immediately a quote on the wall from Sir Reg Ansett the founder of the Airline that has gone the way of many today post his time in the cockpit “Nothing in this world can take the place of Persistence.” That quote was on a plaque with Sir Reg Ansett name attached to it but its origins came from the late U.S. President Calvin Coolidge and its full quote is “Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful people with talent. Genius will not: unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and will always solve the problems of the human race.”
President Coolidge quote and Buddha’s quote brings me to one more thing I have come to realise over the past 20+ years studying, working and consulting. In the ‘East’ businesses persist and are patient. Suntory management in Japan became famous for its willingness to wait a long time for results. The company took 46 years to make a profit on beer and 14 years for one of its biotechnology units to genetically engineer a blue rose, thought to be a symbol of the impossible (Kachi & Dvorak, 2014). Compare this approach to the one most common in the ‘West’ where the constant demands for 10%++ top line and bottom line growth year on year is simply put “unsustainable”, especially if all we are doing is running on the spot and demanding ‘more for less’ from our ‘People’. Where is the ‘Culture’ that says, ‘persist’, ‘explore’, ‘adapt’, and ‘go again and again and again’ until you turn a dollar, convert a customer, open a new market or create a product or service that solves a new or existing customer’s problem?
Today, with technology front and centre in our lives and as ‘software eats up the world’ around us and computers, apps, robots and systems replace the ‘people’ in many business processes it is doubly and triply important business leaders and their people, Stop! Think! And take a leaf from the wise men and women of the East. Pause, take the time to reflect, think and then Act! Be brave in your restructures, remodel your business models and take controlled bets with new businesses, new products, and new services into new markets and new and existing customers. You can no longer win in the bottom left quadrant of the Ansoff matrix and if you are not already moving to the top left or the adjacent right and planning and implementing a manageable bet into the top right quadrant you risk facing the same fate as the late Ansett Airlines. Every industry is rapidly becoming another Airline industry. Strategic choices rest with everyone in your business from the boardroom to the factory floor and whether you are a winner or loser in the long race to the finish line depends on how you get the most out of your ‘People’ and create a winning ‘Culture’.
Dermott Dowling is founding Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through sustainable innovation processes and spreading their wings outside their home base.
Hiroyuki Kachi & Phred Dvorak (2014) Wall Street Journal, January http://online.wsj.com/news/articles/SB10001424052702303819704579320470878396540, viewed on 8th May 2014