8 Warnings That Your Company is Toast

Last month I reminded you that no big-brand company lasts forever, and few of today’s technology phenoms last long at all. One of my readers emailed to ask if I might dare to note some of the warning signs that suggest company extinction might be zeroing in on your own workplace.

Of course if I knew the full answer to that, I would spend the rest of my career shorting all those imminent losers traded in the public markets. Creative destruction is difficult to see in its earliest phases because it often begins simmering silently in the background when your company is riding a wave of enormous good fortune. Funny how that infecting vulnerability sneaks its nose under the tent precisely when a business seems to be at its healthiest peak.

While the corrosion can be deceptively invisible at first, there are usually festering symptoms we can observe, watching the makings of a crash in slow motion long before opposing forces collide. Here are eight thumbnail questions to help diagnose the severity of your company’s illness and whether it’s likely to be terminal.

What is the company’s R&D budget as a percentage of sales?

If research-and-development spending is declining as your company matures, it’s possible that company is being harvested by its owners as a cash cow. While strong cash flow is an indicator of company health, take notice of how much of your business is being driven by recent successes vs. legacy brands. If new products aren’t breaking, sniff around and see how much of that cash is being invested in next-generation ideas. If increasingly more cash is going to ownership and less to building your company’s future, you may have reason to worry.

Is your CEO surrounded by people who hold the same views of the company’s excellence?

Without gadflies who question everything, you’re likely to keep doing the same things. That could make you a cash cow, a one-hit wonder, or any number of limited-thinking results. Great senior leadership in a company encourages constructive conflict, because no single viewpoint in management can possibly see around every corner or predict a competitive threat. If lots of ideas are flowing, you have a much better chance to reinvent yourselves. Where dialogue is limited and funneling to a singular point of view, trouble is coming.

Does senior management actually use the product or service you produce?

This is the old argument for eating your own dog food. If the people who make and sell something only talk about why it’s great rather than obsess over what will make it even better, it’s likely to stay the same. If there is cynicism around your success and products become passionless widgets, customers will see that soon enough. Your customers can’t reinvent your products, just reject them. If you’re not a fan of what you’re doing, why should they be?

Does senior management regularly sample, investigate, and dissect competitive products?

If you think what you’ve got is the best and don’t even bother to see what could soon be eating your lunch, your lunch will soon be eaten. Be paranoid, be aware of everything competitive, commission and dissect research, never be comfortable that your moat is impenetrable. It’s okay not to use your competitor’s products day-to-day. It’s not okay to ignore them. If you happen to like them better than your own, wake up, the nightmare is about to become real.

In your company’s last earnings crunch, was marketing expense an early and severe casualty?

Marketing is an investment spend. If the money you are spending on marketing doesn’t add value to profitable sales, it should be cut now. If it’s driving profitable sales, it’s downright irresponsible to cut it. Marketing should be seen as a profit center, not a cost center. If there is no measurable return on your marketing spend, you’re already killing the company from within. If the return can be quantified, cutting it in bad times is senseless and irresponsible.

Is great marketing intended to help a mediocre product perform better than it deserves?

Said another way: outstanding marketing helps a bad product fail faster. If the product is garbage, all marketing can do is get it in the hands of early adopters. Once these market influencers trash the product, all is lost. If the product needs refinement before you invest to take it to market, take the extra time to get it right. If the product stinks and can’t be saved, kill it without a dollar of marketing spend.

Does your company culture resist rather than embrace change?

Also earlier this year I suggested that you keep your ears open for the phrase “But we’ve always…” whether it’s uttered in the break room or a key milestone review meeting. If your colleagues have unending excuses as to why you should stick with tried-and-true ways to fail because your company has always utilized a set of urban legends in your planning, you’re going to find it hard to carve a new path into the future. Doing what you’ve always done simply because you’ve always done it that way is a great way to succeed in any business that isn’t dynamic. Go make a list of businesses today that aren’t dynamic and tell me you should remain set in your ways.

Are you patching your platform or re-envisioning a new one?

Never confuse maintenance with progress. Think about just how fast industries are moving. I recently had the pleasure of watching the movie First Man. One of my favorites lines reminded me that it was a mere 66 years from the Wright Brothers first motorized biplane flight at Kitty Hawk (1903) to Neil Armstrong walking on the moon (1969). If you’re anywhere in the vicinity of 60 years old, that doesn’t seem like much time at all. If you’re fixing your biplane while your competitor is building a Saturn V rocket, it doesn’t matter that you’ve happened upon some world-class glue. When the rocket launches, you’re toast.

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Image: Pixabay

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