Yesterday we chatted about traditional planning and it’s limiting impact on our businesses in today’s uncertain and dynamic world. That’s not just because of the planning – it’s mostly because of the way human instinct forces us to stick to the plan when things get tough or change rears it’s scary head. Today – let’s look at a case in point.
I worked with a turnaround client not so long ago that had been a huge multi-billion dollar force in it’s heyday. This former shining star was a bit rusty around the edges – but when I met them they had one last chance to rise from a serious downturn.
You see, they’d gone away from their traditional focus area – where they owned the market. Why? Because new leadership came on board that didn’t understand the value of that traditional business. So in all their “wisdom” they shifted the company toward more mainstream markets will all of the accompanying commoditization and competition. Still, the company had so much going for it.
- An unbelievably loyal customer and market following,
- A game changing innovation,
- A significant and growing market demand for exactly that innovation,
- A bit of money to back it.
I watched customer after customer ‘light up’ as we told our story. We relaunched the company around that game changing solution to widely acclaimed success. In all my years I’ve never seen customers react so passionately. We had the proverbial Slam Dunk.
We knocked it outta the park! Within a month of the relaunch, there was $90+M of qualified potential revenue in the pipeline. Sounds great, right?
Wrong. Six months later the company was facing tougher times than ever. Even with that amazing uptake on this innovative solution in a fast growing market, the investors sold out. This former giant was acquired for pennies on the dollar by another company with much less vision and an even more backward facing plan.
The new innovation? It died even as customers were begging for more. So what the heck happened?
The Plan Must Be a Success!
The plan is what happened. The hedge fund investors couldn’t get beyond the plan and the executives had to follow that plan – even when their opportunity to rise and shine was sitting right in front of them.
The Plan of Record called for the development/enhancement, selling and support of a broad range of products, the majority of which were on the decline side of their market maturity curve. The Plan WAS a success… Revenues were still growing, but margins were next to nothing and dropping fast. And the company was spread too thin across legacy (and commodity) products.
- The former best selling product was losing margin on almost every deal. The revenues in no way covered the cost of the product. Yet it was the “flagship” product in the eyes of the executives and their “best” customers. It was their baby and they fought for it – hard.
- That same product that the company was convinved its new customers wanted. was costing the company money on every deal they took. The “hope springs eternal” philosophy was in play. If we just do this one deal at a loss we’ll make money on the next one with this new client. Uh huh.
- Another new offering with minimal distinction. This Me-too solution had been demanded by the sales force so they could match the competition. They couldn’t make a profit on the older solutions – so they went with what they saw in the market – and copied it. Here’s a clue. You can’t follow your competition and be a market leader. It’s impossible. The game changing product we were launching that offered:
- The game changing product we were launching that offered:
- Strong differentiation – as in ‘only one of its kind’. No other vendor could come close. In fact, they still can’t – some five years later,
- 4-5x the product margins – probably double that once the solution established its market position,
- A residual leasing revenue model – predictable, high margin revenue,
- Immediate customer demand – everyone wanted to buy it,
- The chance to step into some serious partnerships that would have made this offering the defacto standard in one of the biggest new markets around – internet gaming.
But, since the game-changing innovation didn’t have revenues (yet) it was allocated a paltry share of the plan. Company revenues were increasing according to the plan, but the company was losing more money than ever and draining cash along the way. That didn’t seem to matter. The executives were so busy fighting for their share of the plan they couldn’t see reality. Welcome to our unconscious survival brain in action! No one wanted to support this upstart of a solution because it was different, it required a change in thinking and the status quo was oh-so-strong in this culture.
Even after the huge launch success, the amazing customer meetings where every single customer wanted the solution, the pipeline that grew exponentially – the plan was still The Plan.
This company was positioned to soar in the face of an uncertain past. But thanks to The Power of the Plan – this perfectly set up business crashed and burned before it ever had the chance to fly again. The hedge fund managers sold it before that new killer solution saw the light of the market.
The Plan is Yesterday’s News
The idea that we have to stick to the plan, hang onto yesterday’s approaches and force our way forward is prevalent in today’s uncertain markets. It’s how we humans hang on to our sanity and safety. It’s also how we hang onto turf, which is just plain silly cause you can’t pay the bills with turf, now can you?
Yesterday’s approach to planning is a big problem in today’s dynamic world where markets, customers, markets and competition change and change again.
In our new world of uncertainty and change, our plans have to be dynamic and changeable too.
Tomorrow we’ll chat about how to create dynamic, forward looking plans.
If you think this company is unusual and not representative of a great business – think again. This is the story of pretty much every turnaround I’ve worked with – all 50+ of them. The human need/program to stick to the plan got in the way of their business reality – and their opportunity for success.