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Business News/ Opinion / Views/  It’s not the pandemic, it may be you who is killing your business
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It’s not the pandemic, it may be you who is killing your business

It’s easy to blame covid but better to watch out for warning signals of a competitive edge getting lost

Almost 36% of registered companies (about 700,000) in India have gone defunct or closed down, as per the ministry of corporate affairs  ( Photo: Mint)Premium
Almost 36% of registered companies (about 700,000) in India have gone defunct or closed down, as per the ministry of corporate affairs  ( Photo: Mint)

The pandemic has been a perfect storm for many of us to cover up our troubles, but what if our business has always been in trouble and we just don’t realize it? Almost 36% of registered companies (about 700,000) in India have gone defunct or closed down, as per the ministry of corporate affairs. The number is manifold in the unorganized sector.

The retail apocalypse has already shuttered once-beloved brands and ended old traditions. The recent news about Witco, a 60-year old luggage retail chain, is probably just a case that got more publicity than others. Bankruptcies have hit their highest rate since 2015, and this is not just the after-effects of demonetization. Experts have warned that we are far from bottoming out.

Even global iconic retail brands like Ann Taylor, Brooks Brothers, Lord and Taylor, Neiman Marcus and Sur La Table ran out of money in 2020. While it might be convenient to blame the pandemic, these businesses were already struggling, having missed major inflexion points in consumer preference, shopping habits and cost dynamics. The retail sector, though, is just a microcosm of a larger phenomenon, one in which early warning signals of a fading competitive advantage go unheeded.

Many of the difficulties facing these entities could have been anticipated. Here’s a handy checklist for businesses still struggling in the pandemic season.

•Do you buy your own company’s products or services? Ideally, employees should be the most enthusiastic ambassadors for a brand. If they aren’t bought in, that’s a warning that something about the ‘job’ they want to get done isn’t happening at your organization.

•Are you investing at the same levels and not getting margins or growth in return? It’s like escalation of commitment to a failing course of action, and it’s human. Even when the evidence suggests otherwise, executives continue to invest time and resources in a business that has flat growth or is in decline.

•Are your customers finding ‘good enough’ and cheaper or simpler alternatives? It’s common in business to overshoot what customers really need—too much tech, too many features in offerings—and charge them more. At some point, they lost interest. That’s a reason why Dollar Shave Club’s hilarious online ad went viral—“Stop paying for shave tech you don’t need."

•Are you seeing competitors emerge from nowhere? A trap of thinking of your competition in terms of your industry is that it can create blind spots for competition that emerges from places you were not looking. Recall how the smartphone revolution sideswiped makers of digital camera and handy video recorders.

•Does top talent consider your company 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 other places. This is why companies so often fail to attract the talent they would like, and are confused how best to get those people in the door.

•Are you losing your best people? This is a major red flag that things are not progressing in a positive way. It is inevitable that there will be some churn when you go through a major change, but if you’re losing the people you were counting on to get you through it, that’s dangerous.

•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 quarter after quarter, it doesn’t take a genius to recognize that 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, when a business is facing an existential crisis—an inflexion point of sorts—some executives often clearly understand what the challenge actually implies. Unfortunately, they are rarely party to strategic decision-making and their warnings fall on deaf ears.

•Are headhunters targeting your people these days? Ironically, when recruiters are circling your enterprise to poach talent, it’s a good thing. But it’s even better if they aren’t successful.

•Did you have any successful innovation in the last two years? This question is one of the dirty little secrets of big success. With a good performance achieved by your base business, it can be all too easy for new developments to get starved of resources and never see the light of day. Nokia’s prescient invention of a device very much like today’s tablet computers is a cautionary tale—its risk-averse senior management didn’t see the need to commercialize it.

•Are you cutting back on employee benefits or pushing more risk onto employees? This is often a sign that top leaders are starting to worry about cash flow 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 the company management has resorted to focus on matters other than their people—which is often an early warning of problems to come.

What’s next? The more such indicators you see, the more likely it is that your business is either on the cusp of losing its competitive advantage or past that point. 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 trouble is obvious to everyone around, the inflexion point would’ve passed and it will be too late.

Rita McGrath & M. Muneer are, respectively, professor at Columbia Business School and founder of Valize; and co-founder as well as chief evangelist of Medici Institute.

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Updated: 15 Aug 2021, 09:10 PM IST
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