Improving Your Business in 2018
Middle-market companies tread a treacherous path. Improvement is imperative to growth and success, but how do you improve? A Newport Board Group partner recently quipped:
The beginning of 2018 is a great time to consider restructuring your business for success in a proactive way. With the right attitude and the right tools, it is possible to build and grow a successful and resilient business. In fact, the business environment today requires all business leaders to be Open, Flexible, and Focused in order to build and grow a successful business. This is the “New Normal”.
Let’s go back to that quote for a minute. Perhaps the term “restructuring” has a negative connotation, but if we use the literal meaning rather than the meaning from business jargon, that quip is actually quite insightful.
Restructure: to change the makeup, organization, or pattern.
This definition is a good guide for middle-market companies in 2018. By helping our clients be Open, Flexible, and Focused while using the simple, but powerful, Four M’s (see below) approach to analyze your business, Newport Board Group partners help middle-market business owners and leaders adopt this New Normal mindset and practice to lead their businesses to growth and resilience.
A Tool and Approach for Today’s World
Consider the major news stories of the last year: tax reform, trade, immigration, #MeToo, natural disasters, healthcare, cyber-security and cyber-attacks, income inequality, artificial intelligence/machine learning and the resultant impacts of automation, the Trump effect – both pro and con, the power of social media, terrorism abroad and gun violence at home, populism and disruption of the international post-World War II order and institutions, and then there are the Russians, China, and North Korea.
Almost every business in America is affected by at least one of these headline stories and most are affected by more than one. In many cases the impacts are existential. Today you can quickly pick out the trends that you expect to impact your business, but by the end of the year it is highly likely that you will realize you were affected by other issues on the list even though today you think you are immune.
An interconnected world, with global supply chains, finely-tuned strategies to manage regulatory and policy constraints, rapid technological change, and changing social norms and expectations can be a daunting place. In addition, many middle-market businesses lack the resources to track, much less prepare for, all the possible impacts to their business, thus becoming even more susceptible to disruption from a rapidly changing world and business environment.
Yet, the New Normal requires that businesses constantly evaluate their environment and adjust. We all live and work in a world that is changing rapidly and our success, whether personal or professional, depends on our ability to change with the times.
Despite all the challenges faced by middle-market businesses today, there is a way forward. In the next few paragraphs let’s take a look at a tool and an approach for leading your middle-market company to success in today’s world.
The Four M’s – a Hard Look at Your Business
Newport Board Group is dedicated to helping business owners and leaders evaluate and grow their business. One of the tools we use is the “Four M’s Model”. The four M’s are Market, Model, Management, and Money.
Let’s start with Market. To be successful, your business must be in a viable market. In the 21st century, buggy whips and PacMan make for better nostalgia than a business market. That’s a laughable example, but the questions of what is your market and what market forces are in play are key to preparing your business for the future. Do you have a clear view of your market, how it is evolving, and your competition?
Once you have sized up your market, next consider whether you have the right model for that market? Selling bespoke paper clips is a niche business at best. Is your purpose and brand promise aligned with your market? Do you have the capabilities to succeed in your market? How do you know? A clear-headed review and a bit of analytics could reveal areas of opportunity or reasons to change. Would a bit of proactive restructuring make sense?
Next there is Management. Do you have the right people in the right spots; people with the competencies and skills necessary to perform their job to produce results for your business needs? Or, maybe the business is growing and you simply don’t have enough people on the team to continue to grow or overcome your challenges. Chances are, you likely have gaps on your team that should be addressed.
And then, money. Do you have access to the capital resources you need to run and grow your business? Where is the money coming from and where is it going? Many middle market businesses don’t have a full understanding of their cash situation or the levers they can use to affect that position – for better or worse. In the context of cash, the term “restructure” rightfully has both good and bad connotations. It is best to carefully analyze and understand your cash position and potential and then restructure proactively. The alternative may be to restructure in a forced and defensive manner.
The Four M’s approach is a powerful tool that can be used to help assess and improve the condition of any business. Also, it doesn’t really make any difference which M you start with. They are all related. Pick the one that seems most obvious for your situation and start. You will soon find that you visit the other three.
Open, Flexible, and Focused – The Right Attitude is Key
The Four M’s approach is just like any other tool. It’s only as good as the craftsman that uses it. Trusted advisors (more on that below) can help you learn and use tools, but as with any business tool, your approach and attitude is enormously important to the end product. As you take your business through the Four M’s process, your attitude should be Open Flexible, and Focused.
Have an open, flexible, and focused conversation with your team, investors, and key stakeholders about your market, model, management, and money. Open, flexible, and focused. That’s a tall order, but it is necessary to successfully lead a business today.
As you go through your business review process (whether Four M’s or another process), do be open and inclusive, not only with the topics to be reviewed (be expansive) but with the places you seek perspective. Look both inside and outside of your organization, and your peer group, and your social group, and your customer base, and your competitors.
Be flexible as you consider the feedback you get. It is likely that you will get conflicting perspectives. Maybe what appears conflicting can be reconciled, or maybe you simply have to make difficult trade-offs between competing legitimate ideas.
Be prepared to challenge conventional thinking – not to throw it out, just because, but to critically review whether what made sense in yesterday’s world is likely to still make sense it today’s world. The more you are open, the more you will need to be flexible.
Finally, be focused in your review. Why does your company exist? What is your brand promise and what value do you bring to the market? How do your actions affirm your values? The whole point of the review is to find the best ways to achieve your vision. Always keep that in mind. Don’t get distracted on things that may be interesting, or popular, or controversial. Do stay focused on the critical issues that will drive the strategies and tactics required to achieve your business vision – the key determinants and drivers of your business results. Be Open, Flexible, and Focused; willing to try new things, and prepared to draw the line or recognize failure and move on.
As you can probably already tell, these three things go together. Being open means being flexible, and that requires focus (on the key elements) to get a useful and actionable result.
The Trusted Advisor and Execution Plan
Going through a thorough Four M’s review and being Open, Flexible, and Focused is not easy, and sometimes not much fun, but these things are necessary.
Often a trusted advisor can help you stay on track and do the hard work of making sure you understand your challenges and recognize your opportunities. Whether as an extra, independent, and experienced perspective, or as a constant reminder to stay on track and do what needs to be done, that trusted advisor can play a critical role.
There is no reason for you to do this alone. Help is available and the right support resources will make the process easier, faster, and more successful. Here again, be open (to getting help), flexible (in considering the form of that help), and focused (on being efficient as you go through the process; this process is not your business, it is a tool to improve your business).
Of course, once you have completed your review of the Four M’s for your business, and been Open, Flexible, and Focused in mapping out a plan, you still have to execute. Find the team that is up to the challenge. That may mean adjusting your current team or supplementing with new resources or perspectives, but in the New Normal of 2018 you need to be prepared to constantly restructure (i.e., change the makeup, organization, or pattern of) your business. Otherwise, you will find someone else restructures it for you – possibly in a very unfortunate and unpleasant way.