The pandemic has been a perfect storm for us to blame all our troubles on. But business has always been in trouble – it is just that we didn’t realise it.
Almost 70 per cent of small enterprises in the MENA region have been on the brink of closure or working with skeleton staff, according to an OECD survey. It is also the season for the retail apocalypse that shutter once-beloved brands and end old traditions forever. Bankruptcies hit their highest rate since 2015 - and experts are warning that we are far from bottoming out.
Even iconic retail brands Ann Taylor and Brooks Brothers to Neiman Marcus ran out of money in 2020. While it might be convenient to blame the pandemic, these businesses were already struggling, having missed major inflection points in consumer preference, shopping habits and changing cost structures.
Retail, though, is just a microcosm of a larger phenomenon, in which early warnings of a fading competitive advantage are not heeded. Many of the difficulties facing these entities could have been anticipated, given a number of straightforward early warning signs that are clear signals that things are potentially taking a turn for the worse.
Here’s a handy checklist for those businesses still struggling in the pandemic season.
- Do you buy your own company’s offerings? Ideally, employees should be the most enthusiastic ambassadors for a brand. If they aren’t bought in, that’s an early warning that something about the “job” they want to get done isn’t happening. It’s even worse if your people are hiding the fact that competitors are doing a better job than you are, because that can create a real blind spot.
- Are your customers finding “good enough” and cheaper/simpler alternatives? It’s very common in business to overshoot what customers really need – too much tech, too many features, etc. – and charge customers more. At some point, they stop being interested in more of the same. That’s one reason why Dollar Shave Club’s hilarious online ad went viral – ‘Stop paying for shave tech you don’t need’.
- Are competitors emerging from nowhere? A trap of thinking of your competition in terms of industry is that it can create blind spots about competitors who emerge from places you weren’t paying attention to. Recall how the smartphone revolution sideswiped the digital camera and video recorder makers.
- Do people consider your company as a good place to work? The reality is that they are smart enough to go where they feel the best opportunities lie, and will shun places that they feel otherwise. Another related issue is your best people are leaving.
- Is your stock undervalued? Any publicly traded company can go through bad patches, particularly in the midst of a wrenching change. But if this goes on for quarter after quarter, investors will eventually run out of patience.
- Are your R&D folks predicting that a new technology will disrupt your business? In a sad irony, they understand what the challenge will be, but aren’t party to strategic decision-making.
- Did you have any successful innovations recently? This issue is one of the dirty little secrets of being very successful. In light of high performance in the base business, it can be all too easy for new developments to be starved of oxygen and never see the light of day.
- Are you cutting back on benefits or pushing more risk to employees? A sign that the leaders are starting to get concerned about cashflow or long-term expenses. It’s a sure way to get tossed off the various “best/great places to work for” lists, and indicates that focus is on matters other than their people –an early warning of problems to come.
The more of such indicators you see, the more likely it is that your business is on the cusp or well into the erosion phase of a dwindling competitive advantage. This is a signal that you need to stop whatever you are doing and take a hard-nosed look at the health of your business.
By the time the trouble is obvious to everyone, the inflection point would have passed.