Question

Topic: Strategy

I Want To Transform A Loss Makin Company

Posted by Anonymous on 4/13/2008 at 7:52 AM ET 250 Points
am a consultant, i have been offered an opportunity to transform or reengineer an IT firm from loss making to profit and growth company. right now the company are into hardware, software and services, downstream. marketers and sales people sell hardware at low margin, not giving software much credence because hardware to them easier to sell. owners are tired of bringing money to keep company going. the research not coming up with marketable products, sales people are reluctant to refocus they believe the market is too competitive, and margin cant be made since we buy costly from open market. employee insist owner should bring working capital. marketing plan difficult to come up by the head of marketing, employee still purseuing low margin biz, services demanding for more hands to be able to perform, even when it seem they are over staff with nothinh or more to do, manager not ready to sanction erring staff etc. i have started some process but i need help.
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RESPONSES

  • Posted by Lazenby on 4/13/2008 at 8:30 AM Accepted
    This sounds like a lot of fun you are about to have.

    I am not sure what the hardware/software you are selling is so it is tough to give you great advice. Therefore I will go through my process for this type of situation and hopefully this will help you.

    First, what is the vision of what you want the business to look like?

    Second, make a financial plan to drive the transition. This should focus on Revenue, Margin, and Net Profit.

    Third, determine where your current org strengths are and then determine which of those you can build from. This is where it gets tough, you have to determine if there are any strategic reasons to maintain the remainder of the business, then you have to start cutting.

    As a consultant you would reco this company to find some/a core competency which can sustain the business today and tranform it tomorrow, just got to execute that now.

    BTW - it sounds like you are getting in too deep with the employees. Great to hear what they have to say, but you have to set the direction, not them. If you want them to focus on something setup their objectives to ensure this gets done (ie the way they get paid).

    Would love to help you more, but need some more detail to be of help.
  • Posted by CarolBlaha on 4/13/2008 at 9:22 AM Member
    It sounds the culture of this company has been set and the salespeople will be difficult to turn. Good salespeople don't like or need to be managed. A hard hand will have them out the door. They are your partners. But these guys have been taking the easy road-- taking orders vs selling something.

    Its going to have to start from the top, including the new owner. I recently did a white paper, the cost of waiting that should be on my website soon. The wall st journal in a recent article said the cost of a mishire in salespeople is about $250K-- I thought that was high-- till I ran some numbers of missed opportunities for a client. That number is very real. You need to stress the cost of waiting to the owner. Sales will not change unless he and your message are consistant.

    Its my biggest frustration in my biz-- the owner says they need change-- but will continue to accept the same old mediocrity.

    You might want to start with a retreat with the entire staff-- so you get buy in from everyone-- do a strategic planning type session. Remember they only hear "whats in it for me" Follow every week conduct a sales meeting-- not just around sales, but changes in the company. Inspect what you expect-- when I run a meeting, I ask for a SOFT report-- Success, Opportunities, Failures and Threats from each salesperson.
    When everyone realizes there is a "new sheriff in town", they'll either turn or leave. So start developing a plan to get the right people in that job.

    Sell Well and Prosper tm
  • Posted by Jay Hamilton-Roth on 4/13/2008 at 9:33 AM Member
    In a word, "bundle". Whether you bundle the software and hardware, or hardware and customer service, or hardware and active monitoring you need a reason to make your hardware offering unique (I'm assuming that your hardware isn't already something unique).

    Also, "repackage". Is there a way to take the hardware and make a lower end package from it to appeal to a different demographic?
  • Posted by saul.dobney on 4/15/2008 at 4:58 AM Member
    The classic: Where are you? Where do you want to be? How do you get there? (And can you survive the journey)

    It sounds like you are in a political pickle - too many I wants, and not enough I do. So brutal though this may be, at least one person has to be fired quickly, both as a single of change and to establish focus and political clout for the process you are about to undertake. The team aren't delivering, so it shouldn't be too difficult to find the wastrels.

    Secondly, I'd spend a little time talking to customers about why they buy and what the business does well. Everything new will need to be focused on either adding more customers, or getting more value from existing customers - you do need to know what they think. You may also find some quick wins in the process.
  • Posted by Chris Blackman on 4/15/2008 at 9:12 PM Member
    MC

    Sounds to me like there is a high level of toxicity and finger-pointing blame-game going on, and it may even be too late for a transformation.

    You need to get the leadership team together for a session on the organisational strategy and see whether it's the strategy that is wrong, or simply the way it is (or isn't) being implemented.

    Forbes published a big study a while back that said 80% of CEOs fail because they don't actually EXECUTE the strategy they planned. You've got to figure out -FAST- whether the problem is with strategy or execution.

    If execution, what, where, why and WHO are the problems. Act fast to excise toxic people. Better to try to survive without them than to die trying to live with them.

    Tough assignment - good luck.

    ChrisB
  • Posted by matthewmnex on 4/15/2008 at 9:39 PM Accepted
    I agree with Sagehill. I have done quite a bit of this sort of work myself so I can share some insights.

    Firstly, you have to ask yourself " why did they choose me to consult"? and " Are they giving me the full reigns to fix this problem or are they just going to allow me to dabble?"

    The problem that all companies like this face is the owners themselves are often unwilling to change or to take a long hard look at themselves and admit that a). they failed and b). they don't know what the hell they are doing.

    You have to deal directly with the owners and be tough with them. Don't let them tell you, "you can fix this and this but don't touch that and that" Ultimately you will fail and your reputation will suffer.

    Go to them and say, OK, firstly you must acknowledge that you don't know what you are doing (of course you have to find nice ways to say this) :) Then you must lay out for them a solid plan of what needs to be done to make it work.

    Then make sure they give you the full mandate to implement everything that you are planning.

    Make sure that the owners, introduce you to the employees as the top guy who has the full mandate to act and that they must follow what you want. if they are unwilling to do this, you will never be able to manage the employees.

    For the sales team this is easy, you will soon see that there is a ring leader who is unwilling to change and whom the others follow. Take that person aside and make sure they understand that they must go beyond their comfort zone and help to lead the team in the new direction. If he does, great. If he does not, fire him to send a message to all the other sales people. You will see how quickly they fall in line.

    Remember, that in this situation, you are the Doctor. (not a consultant). The patient is dying on the table and so radical surgery is needed as soon as possible.

    When a doctor says you have cancer and only 3 months to live unless I cut it out, then you follow.

    This is the same situation.

    Focus on core competencies, professionalise the working environment, beat the owners over the head until they follow what you want.

    Don't try to be everyone's friend, you are not there to be their friend. Be more lke a football coach or a drill sargeant. They will hate you for 6 months but when things start turning around and money starts coming in the doors - I guarantee they will love you :)

    MAKE SURE YOU GET YOUR FEE IN ADVANCE !!! :)))

    This is the kind of challenge that I love :)) I hope i can find more like this project, they are really fun.
  • Posted by CarolBlaha on 4/16/2008 at 11:30 AM Member
    Its just a classic case of turnaround consultant. Usually when a company brings in a specialist-- the consultant brings in their own top level guys. If they want to turnaround-- its go with it or not. There is even a trade org of turnaround consultants if you need to fill out your team. Its a time to lead vs manage. My ex was a turnaround guy-- made a lot of money with it. The goals would vary. Sometimes it was just to get it looking good enough for takeover. Others to get it back on track. Its a very high stress challenge -- there are usually many stakeholders involved.
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