In Depth: The Direct Selling Channel Part Three
Last week I had a conversation with a highly respected colleague about a business that was taking on water. Swamped in a gale would probably be a better metaphor. It’s always easier to think clearly when you’re not the one in the storm trying desperately to save an unresponsive vessel. The CEO had done many things right—lowering the sails by cutting costs and jettisoning the drag of underperforming cargo. But with each successive quarter the vessel rode deeper and deeper in the water.
We imagined ourselves at the helm and the decisions we would make from the pilothouse. We recalled the words of one of America’s most respected strategists, Warren Buffet. He said, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.” Buffett’s clear, no nonsense advice is exactly what so many CEOs understand intellectually but find so difficult to execute.
If you find yourself in a leaking business it is essential to determine if you can repair it—what’s broken and why? This needs to be done calmly, but with a sense of urgency. If your team believes they’ve identified the actions required to return the business to sustainable growth, then implement the actions and measure the progress against a near-term deadline. If the actions fail to produce the desired results you need to make the hard call to change vessels as soon as possible. Forget all the emotional baggage that goes along with brand and history. Remember, you’re in the business of making money and building equity for your investors and that’s it, period. Products come and go and channels are constantly in need of rethinking. The one constant in the equation is management’s responsibility to make money for the shareholders.
Think of yourself sailing through a shallow water passage in a deep draft ship. You need to reach the open water on the other side but you know your ship will certainly run aground before you find safe harbor. The old boat that has served you well for so many years just isn’t capable of making the journey. Once you’ve decided to find another boat, release that decision to a very small circle on a need to know basis to avoid panic. Don’t abandon ship; view the current business as a collection of valuable resources to be harvested allowing you to construct or acquire a new business structure. You drop anchor and begin stripping the vessel of its parts—building a new catamaran capable of navigating shallow water. Of course all of this depends on your ability to find an architect to build you an appropriate boat and a plan for transformation. For more thoughts on navigation visit my website at shawstrategy.com. There’s no reason to go down with the ship.