recession

A good crisis can make for great opportunities

Originally published on September 4, 2015 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/a-good-crisis-can-make-for-great-opportunities/article26204036/

A few weeks ago, I went to Brazil to speak to a large group of manufacturers on the perpetually-topical subject of innovation in a time of crisis. The forum, held by FIERGS (Federation of Industries of Rio Grande do Sul), addressed the well-known struggles of the Brazilian economy. Unfortunately, those same issues are now being faced by the Canadian economy.

With the recent announcement that Canada is in a “technical” recession, these two resource-driven economies are slowing to a crawl. The good news? For me, there’s never been a better time for businesses to embrace innovation. And the best way to succeed in this perpetually challenging area is to look at innovation through the lens of crisis – or turnaround – management.

Innovation has always thrived in hard times. Desperation forces people to question the status quo. In good times, people may be less inclined to rock the boat, but when investors and customers are bolting for the doors, you have no choice. That’s probably why some of the world’s great companies were founded during recession – businesses such as General Electric, IBM, Disney, Microsoft and Adobe.

One of the world’s most successful innovators, Apple, wasn’t founded during a recession. But the same principle applies. When Steve Jobs returned to take the reins in 1997, Apple was facing crisis: too many products, too little focus, not enough revenue. What saved the day? Steve Jobs shaved Apple’s product lines by 70 per cent. Even the best companies can become bloated and undisciplined during the good years and forget the core competencies that made them great.

To stay true to your strategic core, you could do worse than look to the process of strategic turnarounds. Once a company has accepted that it has lost its way, a successful turnaround requires an extraordinary commitment to self-analysis, questioning, reflection and day-to-day change. The same turnaround tools can be adapted to meet the enormous market pressures all businesses face today.

The main reason many companies fail is lack of focus. They start off doing one thing well, and then get attracted to – or distracted by – other opportunities. Some may be successful, others not. But all of them distract the business owners and leaders from what they set out to do. And all too often these shiny new opportunities are well removed from the business’s original roots. That means there is little synergy with established operations, and way too much to learn – about new products, suppliers, distribution channels, markets and customers. It’s falling into this pit of guesswork and improvisation that leads most companies to call in the turnaround experts.

It takes courage to admit that your company needs to reverse course. But successful turnarounds require everyone involved to face the brutal truth.

The best turnarounds usually begin with a strategic review that asks: What are our strengths? What do we do best? Where are we losing money? What operations are most profitable? Where can we grow? Successful change also requires that you reconsider some of the specific actions that got you into trouble. Stop doing the same old things; one definition of insanity is doing the same things and expecting different results.

Here are some of the key elements of a successful turnaround:

  • You need the right people on the journey. A winning turnaround starts with shedding employees who aren’t contributing sufficient value, or lack passion for their job. Once you get rid of the complainers and the complacent, your company has a better chance to bounce back.
  • You need a “change champion” to manage the turnaround – someone who owes nothing to the old, failed ways of doing things, and is prepared to listen carefully, consider many new ideas, and take direct action. His or her objective must be to stop the bleeding and get the company moving in the right direction. This is usually a hard job for the original owner/manager to do. Regardless of who takes charge, they require a formal process. As outlined in my book, The 90% Rule, that means knowing where your organization came from, knowing what it’s best at, and finding more ways to create value for more customers.
  • Focus is key. Trimming marginal operations is imperative – as Steve Jobs knew when he cancelled 70 per cent of Apple’s product lines in order to focus on only the best and biggest opportunities. In crisis, protect the core. Pull the plug on non-core activities.
  • Review prices and margins. Many companies are afraid to raise prices or set minimum margins for fear of losing customers, but it’s the best way to figure out who your best customers really are, and to clear out the unprofitable ones. Every penny of these exercises goes directly to the bottom line. No surprise, then, that the companies I have seen do this all wish they had done it sooner.
  • Refocus on the customer: What do your customers want and need? What are their biggest pain points, and how can you relieve them? Get out and talk to the customers. (It’s a shame so many companies wait till they’re in trouble to do this.) Once you have identified new ideas, opportunities and solutions, let the customers know the new directions your company is taking – and how they contributed to its success.
  • Keep employees well informed of the company’s plans and decisions. In the absence of facts, fear breeds confusion and negativity. Keep everyone informed, involved, and marching forward.
  • Paint a clear picture of what you’re trying to do and the process you are following. Share this vision with all your all stakeholders (customers, employees, suppliers, investors, bankers, etc.). You want everyone to know that there is a better future ahead, and that their sacrifice, hard work and faith will not be in vain. Make sure to offer a specific reward at the end, whether it’s increased job security, bonuses, profit-sharing, and/or a blowout party to end all parties.

Diamonds can only be created under great pressure. Whether your company needs a major rethink or you are simply looking for new opportunities for growth, crisis thinking can create the new opportunities you and your team are looking for.

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Experts suggest using innovation in times of crisis

Photo credit: Dudu Leal

This post was translated from Portuguese.  It was originally posted by FIERGS in Brazil following a keynote presented by Ken Tencer at their Innovation Forum, “Innovation in Times of Crisis”.  The original post can be read at: http://www.ielrs.org.br/pt-br/noticia/especialistas-sugerem-usar-inovacao-em-tempos-de-crise

“Nothing like a good crisis to generate great opportunities”. This was one of the takeaways shared by Ken Tencer, entrepreneur and Spyder Works CEO, during the 3rd Forum on Innovation and sponsored by the FIERGS System, through Sesi, Senai and IEL. “Many great businesses have started during recessions,” he told more than 700 people who came to FIERGS Events Center this Wednesday. “It’s important to focus on key clients and invest in innovation in a few areas,” said Tencer, a leader in management and innovation, and co-author of The 90% Rule®, which empowers companies of all sizes to identify, prioritize and implement growth opportunities. “Every day I challenge myself and my team to search for the next 10% of growth. We have to think about innovation every single day”, he commented. During the talk “Cause a Disturbance – a Simple Way to Innovate Continuously”. Tencer, who also co-authored bestseller Cause a Disturbance (2014), recommended delighting customers, “because they will delight your bottom-line”. To do this, the Canadian speaker suggests always listening to your customers, “because that’s where your ideas will often come from”. He said there are six steps to ensure that innovation is lasting and targeted (1) Engage emotions, not numbers, (2) Change the lives of your customers, (3) Connect the dots – between your business and its customers, (4) Identify and rank the opportunities, (5) Develop a plan, and (6) Communicate the plan.

In addition to Tencer, Gijs van Wulfen, an expert on innovation and design thinking, from the Netherlands, also spoke at the event. Van Wulfen is founder of the Forth Method which has been implemented by 35 European companies and is a LinkedIn Influencer, with more than 260,000 followers throughout the world. Van Wulfen shared 10 insights to innovate in times of crisis (1) Teamwork -You can invent alone, but you cannot innovate alone. Innovation must be bought in by all, (2) Choose the right moment, (3) The pace of the process has to be slow, (4) A great idea is a simple solution for a problem or a dream the customer has, (5) If you don’t have new insights, you will not have new ideas (which is essential for the sound operation of a business), (6) Think outside the box, but present it in a box, (7) Have a business plan, (8) Connect with the client from the start of the innovation, because “he is your support”, (9) “Innovation doesn’t stop at the first No, that’s where it starts”; 10) Lead your people, show them the way.

Gijs van Wulfen also presented the Forth Method, with its five islands of thought. According to van Wulfen, first we have to know where we want to get to, and then, look for the knowledge to get us there. “Ideas will come after a while and, with knowledge, we can choose the best ideas, try them, get the feedback, and then outline our business plan”.

Also presenting at the Forum was the company Imobras, which was featured in the Best Practices Toolbox, an initiative by the RS Innovation Center in the State of Rio Grande do Sul. The Center was created to support businesses in generating innovative solutions to their own challenges.

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Why entrepreneurship by necessity scares the hell out of me

Originally published on December 4, 2014 as a Guest Column in The Globe and Mail: http://www.theglobeandmail.com/report-on-business/small-business/starting-out/entrepreneurship-by-necessity-scares-the-hell-out-of-me/article21876071/

You won’t often see me get upset over the rise of entrepreneurship in Canada. But this is one time, in my 25 years as an entrepreneur, I feel I have to voice my opinion.

You shouldn’t have to become an entrepreneur because you’ve been downsized. You should want to become an entrepreneur because starting your own business is the one thing that you want or need to do more than anything else in the world. Entrepreneurs should start businesses because they see opportunities to do something different, something better than the competition. They’re in business to leverage new ideas to shake up sleepy markets. The function of an entrepreneur is to disturb the status quo, to blaze a new trail and to make a difference.

Unfortunately, that urge to build a business isn’t what’s driving the many people who have been forced to seek self-employment in the wake of the 2008 recession.

Over the past five years, much has been written on the resurgence of entrepreneurship. I was particularly struck by a recent article published on CNBC.com entitled, “After recession, wave of ‘accidental’ entrepreneurs.” “Last year, almost 13 per cent of the U.S. working-age population was in the process of starting or running a new business, according to the most recent Global Entrepreneurship Monitor study by Babson College – a slight decrease from 2012 but a jump of 67 per cent from 2010,” writes Nancy Mann Jackson. “And more than one in five of those starting a new business in 2013 said they did so out of necessity rather than opportunity.”

I know the old saying, “necessity is the mother of invention,” but necessity in the form of entrepreneurship – starting your own business, finding clients, meeting payroll, and working ridiculously long hours in the process – just shouldn’t be.

Why? Entrepreneurship is not for the faint-hearted, because all too often it leads to stories like the one Ms. Jackson shares in her article. She tells the story of Angela Daidone “who became a freelance writer and marketer after being downsized three times from public relations and marketing jobs.” For Ms. Daidone, self-employment has been an emotional roller coaster. “You go through bouts of depression because you’re always worried about paying the bills,” she said. “When jobs don’t come through, you see it as a failure.””

Ms. Daidone’s concerns should be taken to heart by anyone considering the path of self-employment, and maybe – more importantly – by our political leaders. I’m not a political animal, but I believe we as a society need to step up and provide greater opportunity for retraining, co-op, apprenticeship and related programs to help to reconfigure people’s skill-sets and open up their frame of opportunity – not force them onto a path of ‘necessity’.

We’re not all cut out to be entrepreneurs. I remember one meeting with a very bright, articulate client. She had created a good product that was just beginning to build traction in the marketplace. She was talking to a number of people to find the “easiest” way to take her business to the next level. One option was to raise capital and open her own plant, but she didn’t want the financial risk. The second option was to contract an overseas plant to manufacture the product for her, but she knew this would entail a lot of due diligence, travel and personal time spent overseeing quality control in another country. She did not want to spend that much time abroad. So she asked me, “what do you think I should do?”

I thought about it for a nanosecond. As hard as I searched my instincts and experience, I could only come up with one answer: “Go to bed and get a good night’s sleep. When you wake up, go find a job.”

This may seem glib, even rude. But it isn’t. Business, especially entrepreneurship, is all about attitude and will, the things that drive us to make a difference in the businesses that we build. The truth is – as any entrepreneur knows – that building a business means sacrifice, risk and tremendous uncertainty. This life isn’t for everyone.

Early in my career as an entrepreneur I had the good fortune to sit down to dinner with a gentleman who was nearing retirement from his own 40-year entrepreneurial journey. I asked him one simple question, “when does this get easier?” His reply spoke volumes: “Sorry Ken. I don’t know yet”.

I wish that I had the perfect solution for those that have found themselves necessarily self-employed. I don’t. I do know, however, that we can’t get dazzled by fantastical statistics that promote the near-term rise in entrepreneurship as a completely positive trend. For some people it’s a trap.

How can accidental entrepreneurs escape their circumstances? Stay in touch with friends and colleagues. Tell them the truth about your business. There’s no shame in struggle. Let them know you’re open to all offers. If you’re lucky enough to be offered another job, stress how much you’ve learned and stretched as an entrepreneur. And remember: Your next boss will be lucky to have you.

 

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