Retail therapy and management

Window shopping for business strategies

The business landscape is littered with disasters based on “expansion by acquisition”. What seemed like a great idea to combine two small firms to make a much bigger one often leads to a smaller one, or to none at all.

Sometimes it’s spectacular. America Online and Time Warner merged at the turn of the millennium. In 2003, they wrote down the value of their combined entity by US$99 billion. Small businesses don’t get it right either. When the “dot.com” boom ended, literally thousands of small firms went bust after basing their strategy on rolling up small enterprises with rough synergies.

Yet you only have to look around to notice that many survivors are combined entities. Virtually every major bank has grown through acquisition. Most law firms or accounting practices I knew in my youth now go under the name of some merged entity. What are the drivers behind this growth model? There are three:

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Getting traction on change

Sometimes it’s better to lower the bar

Parents walk a tightrope between encouraging their children on one hand, and turning them off on the other. Some obsess about getting their kids to “reach their potential”. Others are so protective their children never get to “stretch” a little and discover new ground.

Where to set the bar is problematic. No one knows where it should be. In business, managers and entrepreneurs regularly set it too high. It’s all lofty talk about “raising the bar”, or clichés about getting going when the going gets tough.

I do not mean the actual goals are too ambitious. It’s more to do with the ladder they put in place to reach them. Either they set the rungs too far apart, or they expect the ladder to be ascended at an unrealistic speed.

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Recycle the cycle

More work for your think tank 

The Great Recession was a great reminder on one great fact: the business cycle is not dead. There have been about ten recessions in my lifetime – one about every five to six years. Get used to them. If you are 35 now, expect another half a dozen before you retire.

There are a few other cycles we should also be aware of. There’s the life cycle of your products. They don’t remain fashionable forever. There’s also the life cycle of your business. It might begin as an exciting start-up. If it doesn’t crash and burn, there is a good chance it will evolve into a mature entity. But if it is like most companies, eventually it will go into decline.

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To overtake competitors, overtake yourself

Why your personal best is better

Competitor analysis is a great way to assess where you stand in the marketplace. If you methodically work through the key strengths of your competitors, it will soon become apparent where you do well and where you could do better. It’s a useful process; one that should be ongoing, not just a one-off project.

But there’s a danger here. If you focus only what the others are doing better than you, it is easy to lose sight of what you do well. It is an axiom in life that some people do some things better than you. Conversely, you do some things better than others.

In business it is no different. Competitive advantage comes from all sorts of sources. It might be location, time in the market, technology, training, key personalities or something special to them, or you.

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To innovate, collaborate.

Using the CASA Principle 

In 2010, Linus Benedict Torvalds was listed as one of the 100 most influential inventors of all time. What did Linus Torvalds do? He posted a message on an online noticeboard in 1991. He said he was building a free operating system and wanted some help.

The result was Linux. It revolutionized the open source software movement. Today it is everywhere. Torvalds was 22 years old at the time.

Linux didn’t grow in a straight line. It grew in fits and starts; in bits and pieces; with thousands of collaborators. The core driver was this: they shared a common interest and a common goal. If you want change, that’s what you need.

Why would you want change?

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