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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Established Firms Can Be Easy Targets

Paul Willax The Spokesman-Revi

Most folks blessed with an entrepreneurial spirit tend to concentrate their energies on developing and growing new enterprises. But there’s also a great need for their talents in established companies that are getting a little “long in the tooth.”

Q. I enjoy your observations about the keys to success in starting new businesses, but I work for a firm that’s been around since Hector was a pup. We’re fighting new competitors all the time but we never seem to be able to do anything really new or different. Is it possible for us to get an “entrepreneurial attitude” and turn this company around?

A. Absolutely. But it ain’t easy.

Every company follows a “life cycle” - from birth, to growth, to maturity, to death - just like we do. In some ways it’s better than the human version because the life of an enterprise can be extended considerably with good management and luck. Actuaries say that two-legged critters like us will be fortunate if we see more than 85 years no matter what we do.

Despite this favorable prognosis for businesses, studies have shown that the life of the average Fortune 500 company is only about 40 years. The problem is that too many corporate leaders don’t do the right things at the right time to sustain institutional vitality.

Once a firm’s growth trajectory levels off and a mature, stodgy, steady state pace takes over, it’s often too late to launch an effective revitalization. By then the enterprise has become stale in the eyes of its key constituents.

Its best managers, customers, suppliers and bankers are wary of devoting too much of their precious time and talent to an old dog that doesn’t seem to be willing to learn new tricks. Furthermore, once the culture of a company ossifies, it’s generally not able to withstand the wrenching changes that must come with the kind of rebirth that is essential to a turnaround.

Most importantly, potential competitors begin to take notice of the company’s market lethargy, and position themselves for the kill. Many of these firms are new to the game and, therefore, are more inclined to experiment and take risks.

The established company has been there, done that, knows it all, and doesn’t want to risk losing any of its “accomplishments.” In other words, it’s a perfect target for the new kid on the block.

Despite this positioning, it is possible to effect a turnaround. If management is willing to revert to the entrepreneurial style that gave birth to the firm in the first place, it might be able to undertake product, process, marketing, service and financial initiatives that will restore its competitive vigor.

In essence, the firm has to be reinvented to claim a relevant position in the current market. Only then will it be able to protect and expand its turf. Unfortunately, there are two primary stumbling blocks to this type of renaissance - attitude and capital.

Management really has to want to spark some dramatic - probably uncomfortable - change. Easy to espouse, this type of leadership is extremely difficult to effect.

Even if ambitious middle managers want to take action, they must contend with the fears and hang-ups of those in control. In all cases, the drive for change must start with - or, at least, be sincerely endorsed by - the managers at the top.

There will always be a new competitor willing to pick up the baton when the old champion stumbles. For example, if it weren’t for the aloof, insulation of IBM, Bill Gates never would have been able to invite the world to his father’s garage for the birth of Microsoft.

While it’s difficult to tinker with success during the growth and development cycle of an enterprise, that is precisely when “creative destruction,” as advocated by renowned economist Joseph Schumpeter, must be instigated. Most of us live by the old dictum: “If it ain’t broke, don’t fix it.”

Bad advice. We should all be willing to “break” and “rebuild better” before we lose the edge. It ain’t easy, but it’s the prescription for a long, successful life.

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