Troubled company? A good chance the cause is ‘strategic drift’
So, the company underperforms? Margins are squeezed, with revenue flat, profits down, debt suffocating the business and an ongoing cash squeeze – with creditors and banks applying pressure, leaving little room to manoeuvre. Moreover, the share price is down, and employees are under pressure to the point of breakdown and leaving?
Recognise this situation? Boards often don’t recognise fundamental business problems, nor act upon until it is too late – until a belated focus to improve operational performance, reduce costs, and restructure the business and its balance sheet. Instinctive reactions follow with themes such as let’s get ‘back to basics’ and ‘sweat the assets’.
Nothing is wrong with this approach to solve the problem. However, ‘inside – out’ responses often ignore the fundamentals of the business and may not address the causes. Changes in market dynamics, customer needs and wants, diminished value propositions, business definitions and mandates, and a lack of competitiveness and innovation lead to outdated business models over time – in a gradual process of ‘strategic drift’.
Strategic drift is latent in all organisations – furthered by human resistance to change and general organisational inertia. A fertile ground for strategic drift to surface is the diminishing understanding and interrogation of the fundamentals of the business – particularly when the business is increasingly subjugated by management processes, growing blind spots and the assumption that today’s success formula will last into the future. This also leads to a key question: are the leadership that got us here the right people to get us out of here?
The harsh reality is that often when fundamental changes are required, the lack of strategic insight – combined with forces against change – lead to the downfall of companies. In many instances company troubles can be avoided had Boards recognised the slide towards strategic drift.
My advice: Being constantly alert and prepared to take considered, decisive and bold action is critical to ongoing success. And act before it is too late!
To engage with the Author, Paul Aucamp (Managing Partner: Maxit Advisory), contact:
Mobile number = +27 (0)82 570 4678
Email address = paul@maxit.co.za
Website = www.maxit.co.za