Earlier this fall, I made a presentation at a seminar focused on high growth strategies and I was intrigued by the fact that most questions and interest were directed at the pitfalls encountered, or to be avoided, while implementing high growth strategies. In this context I define high growth strategies as major new product or service introduction or moving into new business sectors or geographies.
Over the next couple of months I will be writing a series of blog articles on the pitfalls starting with what I consider to be the most prevalent– turning your back on your base business.
The “New Business Development” component of an organization’s business strategy is often the most exciting element of the plan but often gets more attention than is desirous.
We were doing an offsite strategy session with the executive team of a manufacturing company and the discussion was around the recent move into the American marketplace. We brought up the danger of neglecting the base business and the CEO turned to the VP of Sales and asked when was the last time he had visited with the top clients in the home region. The extended pause before the answer was the answer.
Proactive communication with employees, clients and other critical stakeholders is a great thing but you must make sure that your messages are comprehensive and inspiring for everyone. Every employee should be able to link their role and activities to the overall strategy and goals of the organization. There is a natural tendency to talk about the exciting new future with a focus on the new initiatives but this can create the “chopped liver syndrome” for the more mature elements of the business! If you are an employee and your job is firmly tied to the base business and all the excitement is elsewhere you can start to feel left behind. This is dangerous territory. A firm must protect and nurture its base business as it is often the cash cow that provides the funds for new business development. Not only can this loss of importance be felt by employees but also by clients and suppliers.
A company brought in a new CEO whose mandate included expanding the service offering away from a paper based solution to a digital one in order to meet marketplace demands. Several new hires were made giving the company the capability to move in the new direction but still the bulk of client work was based on the existing technology. However, many of the existing employees started to feel like second class citizens since they were stuck with the old non-glamorous product while the future was digital. Soon this malaise started to be felt by their clients and key suppliers as confirmed in confidential interviews that I had with these stakeholders. Working closely with the CEO, we identified the communication shortcomings and the appropriate fixes.
The company addressed the morale problem with a well communicated strategy focused on the need for maintaining the paper based-product line as long as possible and that there would still be an enormous reliance on the employees in this base business. In addition, there would be an ability to provide an integrated solution set to their clients which also meant involvement in the digital business for all employees.
All employees stepped up to the challenge and five years later the paper-based product volume has increased and this coupled with new sales in the digital business has resulted in vigorous overall revenue growth and an even more impressive increase in profits.
Unless you are starting a completely new business, it is critical that an organization adopt a plan that provides for a strategy focused on the protection and nurturing of the base business that has gotten the organization to where it is today, while working on the high growth strategy with a distinct set of action items. The new business development focus must not be allowed to become a distraction that prematurely erodes the value of the base business.
In two weeks’ time I will be writing about Pitfall #2 – Expecting growth to fix problems with your foundation!
In the meantime I welcome you to visit our website for additional insights and stories including a previous blog article that I wrote called “The Ten Keys to Customer Satisfaction for Services Businesses”