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“We can turn it around — or can we?”
Mistakes companies make when hitting a hurdle
By John R. Graham
It seems as if there are more hurdles than ever in business. A new one appears every day. They impact companies of all sizes, types and in every industry. No business is exempt.

McDonald’s double-digit annual growth was so predictable it came to be expected. But like other fast food companies, the McDonald’s people didn’t seem to recognize that consumers’ tastes were changing, particularly in terms of health consciousness. No amount of tweaking with the menu and adding $1 “value” burgers could turn sales around. Consumers evidently came to see the golden arches dripping with fat. The decline in sales has been unrelenting and painfully precipitous.

Venerable United Airlines presented the government with a business plan to obtain loan guarantees to stave off bankruptcy. The proposal was rejected because of unrealistic revenue projections.

Personal computers, department stores, the travel industry, among other industries, share some of the same problems. And so do countless smaller firms.

There seem to be certain common characteristics of companies that fail to act even when they are headed for the iceberg — as well as those that take the initiative.

Those who appear to avoid facing up to the challenge behave in certain ways. What follows are some often heard excuses and explanations.

“It will get better — it always has”
Perhaps it’s natural to assume that having weathered many a storm, going through the present one is no different.

Businesspeople can be as naïve as anyone else. “We’ve seen bad times before and we’ve always come through.” Unfortunately, demographics, lifestyle, technology and economic changes can have an immediate and troublesome impact.

McDonald’s has been buying up smaller fast food chains that fit specific niches in an effort to strengthen its position, along with closing nearly 200 of its locations. While those may be appropriate moves, it mounted a massive advertising and promotion effort based on price to attempt to stimulate sales.

Rather than face up to the distinct possibility that basic changes are taking place with its customers, the company attempted to grow sales using offers that could never resonate with people who were abandoning the “fat” concept.

“It’s not as bad as it seems”
The entrepreneurial mindset is such that it thinks there is no mountain it cannot climb, no problem it can’t overcome. All it takes is just hard work.
For at least a decade, the clothing care industry has suffered from changes in workplace dress, hoping that the trend would reverse itself and men’s and women’s suits would return. That is happening to a limited extent, as manufacturers try to beef up suit sales.

But just walk through men’s clothing in any department or specialty store and see how little space is devoted to suits. Sak’s Fifth Avenue stores are a good example of what has happened. Ten years ago, the “Men’s Department” was most suits, while today informal clothing dominates.

The direction is clear.

“The situation is temporary”
When companies began downsizing in the late 1980s, just about everyone including the media, business analysts, economists, and even the newly unemployed felt that the situation was only temporary and that shortly everything would return to “normal.”

As we all know, it didn’t. The manufacturing sector continues to decline and even the service sector is under pressure as technology improves productivity. We have discovered that a rising economic tide no longer raises every boat.

There is a permanence to certain economic trends.

“Everybody is in the same boat”
This excuse is perhaps the most seductive of all since it makes us feel that there is nothing that can be done to remedy the situation.

If home sales are off in an area, region or market segment, this doesn’t mean that they need to be off for everyone. There’s a real estate broker in Quincy, MA, who changed his legal name some years ago to Uncle Sam. In his “official” outfit, he appeared at every parade and every event in the region and even beyond. On occasion, he was even turned away. But that didn’t stop him.

Finally, he became a real estate broker and for the past two years has been the top salesperson in the company he works for. He has given himself an identity that separates him from the others in his field.

Whether conditions are good or not, he is positioned for success.

They grab for simple, effortless solutions
A highly regarded East Coast-based asset management firm began to see its customer base erode. Many of the clients had been with the firm since its early years, almost three decades. Over the years, their accounts had grown but now they were beginning to die and the money, which was going to their heirs, was also going to other advisors.

New, smaller, younger investors had not been added to offset the inevitable decline from the deceased clients. Once the problem was faced, the firm opted for the simple solution — it invested in several brochures.

Unfortunately, this firm is not alone. Simple, relatively painless solutions, such as brochures or advertising campaigns, give the impression of action.
This is not the only way to approach hurdles. There is a much sounder — but also more difficult and time consuming — solution to dealing with the demanding issues facing businesses today.

Insist on the facts
Referring to a particular political party, one observer said after a recent election, “If the…leadership could stop saying what it imagines voters want to hear, maybe more people would vote for them.” As the general semanticists have long insisted, the road map isn’t the road. In the same way, the picture inside our heads isn’t necessarily based on facts.

It isn’t what we think customers want that counts. It’s only what customers actually want that leads to sales. And that requires constant research.

Move quickly
This doesn’t mean acting precipitously or shooting from the hip. But it does mean taking action with deliberate speed. This is exactly what the airlines failed to do. Gorged on a decade of high calorie business fares, the airlines failed to change their diet once 9/11 changed companies’ appetite for business travel.

“Airlines have steadfastly resisted abandoning their business model, and they’re drowning in a pool of red ink,” stated New York travel consultant Bob Harrell in a December article published in the New York Times. “They have concluded that doing nothing is no longer an option,” Harrell said.
In today’s business environment, wait-and-see is costly.

Take the longer view
Short-term thinking seems to be falling out of favor with the revelations of its disastrous distortions in decision-making.

A financial services firm with a long and enviable track record discovered that it was bleeding managed assets. Their investment model was holding steady; they weren’t doing anything different. The decline in the stock market was not a significant factor. Most of the loss was due to clients dying. Many had been with the firm since its infancy. The accounts had grown over three decades. Now, the funds were in the hands of the next generation who had their own financial plans. It’s easy to forget how long it takes to grow an account. Word of mouth brought new business. But as clients aged, there were fewer referrals.

At no point had the firm actively marketed its enviable track record, its expertise in producing significant results for its clients.
Taking the longer view means planning ahead, particularly when business is good.

Focus on “customer value”
It wasn’t so long ago that CEO types had a repertoire of four or five lines they often strung together. It was their way of sounding like business leaders. Inevitably, they talked about “shareholder value,” “employees are our greatest asset,” and “adding value.”

These are not current subjects on the CEO list of popular themes. Shareholder value has disappeared, along with about 4.5 million employees, and what seemed so significant when it came to extra value is history.
While “value added” may have made sense at one time, the only value that makes sense today is what the customer values. Companies that take time to discover what the customer needs to survive and prosper get the business.

The success of IBM under the leadership of Lou Gerstner is no accident. His clear vision that the customer needed software, consulting and support to make the black boxes work changed Big Blue into an unparalleled powerhouse.

Stay at it
American business seems to have trouble staying on track. Every new executive seems to think that it’s necessary to leave his or her “stamp” on the company. As a result, programs change in tandem with the names on the office door.

Attention spans are short. Follow-through is woefully lacking. What’s new gets the green light. Whenever executives attend a convention or industry seminar, a whole series of new “initiatives” are sure to follow.

Whether it’s a product program, a marketing strategy or a sales initiative, it takes time for results to accrue. Unfortunately, the short-term mentality runs headlong into the reality of long-term results.

Those who succeed, stay with it. One of the best examples is Chubb Insurance. If there are two words to describe this company, they would be quality and consistency. More importantly, they seem to know that you cannot have one without the other.

All this seems to suggest that businesses face a significant danger. They seem particularly susceptible to fantasy thinking that can lead to trouble and even failure. To avoid the pitfall, sound, informed, and real world thinking is the key ingredient for keeping businesses on track.

About the author: John R. Graham is president of Graham Communications, a marketing services and sales consulting firm. He is the author of The New Magnet Marketing and Break the Rules Selling, writes for a variety of publications, and speaks on business, marketing and sales topics for company and association meetings. He can be contacted at 617-328-0069 or . The company’s web site is www.grahamcomm.com.

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