Advisory Board Forum: Survival of the Fittest
Change is the only constant. The difference between the men and the boys, between those who survive and those who disappear, becomes most evident when change occurs quickly.
From a personal perspective I don’t subscribe to the theories of evolution as they apply to animals or the human species. I do, however, believe that the concept of “survival of the fittest” has merit in the business world.
If you think about it, species that disappeared (without the intervention of man) didn’t do so because they were not suited to their environment but rather because the environment around them changed quickly and they were unable to adapt. I submit that the key to survival has less to do with where you came from and more with your ability to adapt to your current surroundings (your reality).
It would be irresponsible to go any further without admitting that some people and businesses are better suited than others to adapt to a changing environment. But it boils down to a simple mindset: the willingness to embrace and benefit from change.
Change is the only constant. It’s always been with us and will always proceed us. Most of us have at least some capacity to change. Let’s take a closer look by examining three different business types.
Business Type #1 (Can we survive?) — Many companies, maybe even yours, will be fortunate if they even survive the next two years. Many have already closed their doors, simply because they didn’t build their businesses during the past few years around a culture that embraced and adapted to change. They had no protection against uncertain times, sharp downturns in the economy and unexpected regulation. They just assumed the good times would last forever and they bought in to the illusion that our economy was bulletproof. Lack of cash flow will be the single most common cause of business failure during the current recession. Failure to make quick and sometimes deep cuts in overhead, while assuming things will get better soon, will be the second most common cause of failure. Can we even survive? This is the question being asked by companies that were ill prepared for the current recession.
Business Type #2 (Can we sustain?) — This is the question healthy businesses, properly situated to handle a recession, are allowed to consider. Can we maintain profitability? Can we maintain revenues? Even, can we maintain growth? Companies looking to sustain current revenues, market share and profits have healthy backlogs. They know how to accurately forecast revenues and profits. They know how to manage the overhead of the business to meet current conditions. They will do whatever it takes to be profitable every quarter. They will pay close attention to receivables and do an excellent job collecting what is owed.
Business Type #3 (Can we prosper?) — There will be companies that prosper during the recession and will be poised to dominate when it’s over. If you’re a Type 2 business, you have the option to become a Type 3 business if you have the vision and courage. Type 3 businesses will position themselves to take market share from competitors, ramp up marketing and sales efforts when everyone else is cutting back, and they will seriously dominate their market when things improve. In other words, healthy companies have options. They can choose to hunker down, becoming very protective of what they have and simply survive or sustain during the next couple years. Or they can go on the offensive by using this opportunity to trim the fat and ramp up marketing and sales efforts. They can even consider strategic mergers or acquisitions designed to capture meaningful market share and build momentum. The lessons of past recessions and even the “great depression” tell us when handled wisely great opportunities can be identified and exploited.
John Jennings is CEO of Scottsdale, Ariz.-based Safeguard.
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