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Is Your Company Destined for Decline?

Last week we asked a question, why do so many re-engineering efforts fail? The beginning of the answer to that question lies with a company’s leadership, and their ability to make the right decisions at the right time.

The Stages of Industry Growth 

Most companies progress through a natural life cycle. Successful companies often begin with a great idea.  If they are talented at marketing their idea, they will experience early rapid growth and a subsequent land (or market share) grab. Their success will naturally spawn competitors, in the form of copycats or existing companies with similar ideas. So that early period of unrestrained growth migrates into a period of intensifying competition, a struggle for market share and profitability.   As the market matures, they will either continue to succeed, albeit with reduced growth and profitability, or they will be overtaken by the competition, ultimately falling into decline.

At this point (market maturity) there is an inflection point that these companies face, where competition is beginning to intensify.  Leaders who have helped their companies navigate the stages of growth recognize that the inflection point requires forward-looking decisions.  And those decisions will set your business on a path that will largely drive the future success of your company.

Option 1: Do we take the risk of cannibalizing our own products in order to recapture the benefits of rapid growth.  Apple is the most talked-about success story of a company willing to transform their business, even at the expense of current successful products.  The iPhone is a huge success, at the expense of the iPod.  The iPad is a huge success, at the expense of the Mac.  It is a high risk, high return approach, but it has worked so far for Apple.  

Option 2: Other companies may not have that next innovative idea, and instead choose to focus on improving their current approach.  These companies are choosing a path of incremental improvement, hoping to reinforce their competitive position by enhancing  current products and services at a faster rate than their competitors.

Option 3: Unfortunately, in our experience, many companies choose to ignore this inflection point, and largely rest on their laurels, looking back and talking fondly of those days of high growth, while more aggressive and farsighted competitors pass them by.  These companies quickly find themselves in a state of decline and ultimately end up in survival mode.

So, back to our original question, why do so many re-engineering efforts fail?  In our experience, the answer to that question lies with corporate leadership.  Are they willing to begin thinking about the future of their company early enough in the life cycle to make a difference?  Do they begin planning for the next transformative product or service while they are in the early stages of growth?  Do they begin proactively planning for increased efficiency, or do they wait until forced to react by increased competition?

A company's options are dependent on the point in the company life cycle where leadership begins addressing these key questions.  Next week we will talk about those options - and the likelihood of success.

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