The Bermuda triangle is an ever present threat to growth
Friday, August 3, 2007/
Upon suffering a hiccup, if the response is ‘we need to improve our marketing’, it may be better to have a serious look at the effectiveness of the resource of leadership
There is a risk that repetition can debase the currency. As against that there is the argument that if you say something often enough, people will ultimately listen to you and even understand what you are saying.
I have said it before and propose in different situations to say it again in the future that the greatest obstacle to growth is a short fall in resources.
A business starts off with a set of resources that are used to generate a work or customer base. This base grows, but so frequently the resource base does not grow at the same speed, with the result that the resources become inadequate for the work base and customer discontent develops into a downturn in customers at the same time as the business increases its resources.
However, the increase in resources comes too late because a lot of damage has been done. It is much harder to win back disaffected customers than it was to gain them in the first place.
This nasty little area in which the demands of the customer outpace the resources of the organisation is called the “Bermuda triangle”. The frequency with which I still see this phenomenon occurring suggests that there are a lot of people in business today who do not understand this serious problem.
There is a tendency to attribute the lack of resources to the inability to recruit people. Often, this is not the real problem and the resource that is mainly lacking is at the top, in that the leadership has got out of step with the reality of the business, the industry and the market place.
It is one thing to have the entrepreneurial skills to bring a product to market and grow the business around that product and another to have the leadership and managerial skills to maintain the entrepreneurial momentum. Not infrequently the entrepreneur who has established the business and grown it to success has overlooked the necessity to grow the managerial skills necessary to manage the grown entity with the result that the leadership, infrastructure and imaginative energy necessary to take the business to the next level are missing.
In the meantime, customers are becoming less enthusiastic about the performance of the business and this creates an opportunity for a new player to enter the market or for an existing player to identify the weakness in its opposition and take advantage of that weakness.
If growth has slowed, stalled or even worse, gone into decline there is a tendency to resort to the belief that the company has to improve its marketing. That may be so but the better question is “why is this necessary?”
There is a short check list that senior management can use to get some idea of why the situation has occurred. For instance, when in the last three years has senior management sort, received from, and acted upon, recommendations of people lower down in the organisation in relation to growth? If the answer is “never, that is my responsibility” there is a real risk that you have overlooked a precious resource.
Another question is “do I know why growth has stalled?” and if the answer is “I think so, but I don’t have any empirical data that provides a serious indication to the problem”, then in all likelihood you don’t know what the problem is and you need to do some serious research and be open to the findings of that research.
A further question is “do I see growing the business as my exclusive responsibility”. If the answer is “yes” there is a real problem. If the answer is “no” then you move on to see what structure is in place for others to assume and discharge this responsibility. Some open and frank discussion might reveal some obstacles to growth that for whatever reason, middle management feels unable to address.
So, if businesses find themselves in this difficult trap of the Bermuda triangle, before the response is “I know what we need to do, we need to improve our marketing” it is better to have a serious look at the effectiveness of the resource of leadership.
Lou Coutts left law and became a successful entrepreneur. He has qualifications in Advanced Management from Stanford; turnarounds and strategic alliances from Colombia; International Marketing from the University of California and Changing Strategic Direction from the Kellogg Graduate School of Management in Chicago. For some years he was a visiting lecturer to the International Extension program at the University of California at Riverside.
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Grant Cameron writes: Lou, what a great blog. You could be peering into my business. I know I should be spending more on resources but I am in that classic position of not having the money. Do I go into debt to fund the expansion? Isn’t that how start-ups go broke?
Louis replies: Grant, thanks for the feedback. Borrowing money is risky but so is running a business. If you can build a business case that indicates the effectiveness of borrowing money, then it becomes a matter of risk assessment to measure the risk as against the advantage. It also involves looking at what the outcome is if you don’t take a risk.
Borrowing money to fund growth is a traditional approach. However, if the revenue is not already in place to give some comfort about the ability to repay the money, then the risk increases.
Furthermore, you have to have a clear idea of the application of the funds to be borrowed and the outcomes expected. Without a clear business plan as to the reason for borrowing and the outcomes to be achieved, it is probably wiser to avoid borrowing.
Money is not the only resources available to businesses. There are the resources of technology, money, and time. Sometimes, the last resource is under utilised.