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Thursday, June 20, 2013

Manage Change to Grow Your Business

Manage Change to Grow Your Business 
By Dean Pax Lapid 

The October month was quite hectic. There was the Cebu Youth Summit, Dos Palmas Wealth Circle, AFFI convention, AIM Alumni Board meeting, Shell Club 15 Retirees event, and, of course, my 55th birthday celebration. 

Adding to my activity was my youngest son creating a Facebook account that I now regularly visit to check, add friends, post pictures, reply with quick messages and upload nuggets of business wisdom for long-time and new friends. 

During the Dos Palmas event of the Wealth Circle, Bro. Bo invited me to specially write a newsletter for existing entrepreneurs who would either like to grow or harvest their business or would want to extend their business legacy to the next generation. 

After my plenary talk during the 11th AFFI Convention (Galing ng Pinoy) held at World Trade Center, a couple took the opportunity to consult with me regarding their business. 

“Dean Pax, we are in the garments/sports apparel business and we would like you to help us in our problem. We would like to find out if we could franchise this business to eventually grow what we started,” they said. 

I was excited because I could see the passion in the eyes of the business couple. I was also excited that early in their business life, they want to strategize for growth. Innocently I asked a simple question, “How long have you had the apparel business?” 

To my surprise, they have been running it for the past 10 years! Wow, I now understand their PROBLEM. They have not grown beyond infancy and the business was coming into infant mortality because of Chinese apparel competition. 

In my entrep lectures, I tell the audience that business has five rings: 

1.Courting the idea= engagement ring 
2.Initiating the idea into business = wedding ring 
3.Into the early stages of the business = suffering 
4.Coping with the struggles = enduring 
5.Coming into prime of the business = God’s offering  

Why Some Businesses Do Not Grow Despite Their Operational Age 

The coming into prime of any business is not a function of the number of years of business existence. I have seen many businesses that are 10-15 years old but have not gone beyond the activities at start-up. This is especially true for family ventures where the founder-entrepreneur has not given up control of his ‘baby’. Or the founder has stopped being entrepreneurial for fear of failure or added responsibility.  

Let me tell you first a story: 
Once upon a time, there were two hunters who went for a safari in South Africa. As they were resting under a banyan tree after a long hunting day, they saw a lion approaching them with its wild roar. One of the hunters started putting on his running shoes. “Hey, you cannot outrun the lion, said the other hunter. 

I’m nottrying to outrun the lion,” the first hunter replied. “All I need to do is outrun you!” Let me quote from Charles Darwin: “It is not the strongest of the species that survive, or the most intelligent, but the one most responsive to change.”

(Forgive me, I’m now in the Dean Mode as I share with you a short portion from my PhD core paper about change.) 

Internal and External Pressures That Change a Business 

Businesses become altered or different in one way or another due to forces from the environment or forces from within the organization. Some external pressures can be: 1) technology and the Internet, 2) global economy and diminishing boundaries to trade, 3) demanding consumers, 4) climate change, 5) knowledge economy, and 6) increasing emphasis on employee diversity, mobility, and work-life balance. 

Internally, organizations face pressures from: 1) increased costs of production and marketing, 2) diminishing profitability/shareholder return, 3) competition for the right resources (human resources and operational), 4) new and radical competition, 5) government and regulations, and 6) new technologies. 

The challenge for any business is to be able to balance and address these internal and external forces in a manner that allows the organization to survive and grow. Some ventures are just in the survival mode, hence still in start-up mode despite more than 10 years in operation (just like the apparel couple). 

As entrepreneurs, we need to manage change within our respective organizations and the market that we choose to compete in. Change can be seen as either problems or opportunities. This is similar to the Chinese character of CRISIS = wei-chi/ wei-ji ( wei= danger/fear, jihui= opportunity.) Changes within your macro (country, region) and micro environment (industry) plus within your business organization give rise to problems and/or opportunities. 

As long as you are living, there is change; as long as there is change, there will be problems and opportunities!  

When Does Change Happen? 

Change occurs when this balance is disrupted. There are two ways that the status quo can be disrupted — through positive change or negative change: 

When entrepreneurs (intrapreneurs is my term for company executives) believe their capabilities exceed a challenge, they generally feel positive because the outcome is not only desirable but expected (just like in a wife’s pregnancy.) We are attracted to situations that are familiar to us because they allow us the feeling of being in control. 

When the opposite is true, people feel negative not only because the outcome is undesirable, but also because it lacks predictability. We feel uncomfortable when facing situations filled with the unknown because of the loss of predictability.  

Time to Work on Your Business 

Scan the CHANGE QUESTIONS to determine the CURRENT STATE of your business (Full excerpts from ‘New Venture Creation’ 4th Ed J.A.Timmons, Irwin Publisher p.577-78)  

Start-up and Survival (typical 0-3 yrs.) 

- Are the founders vying for the decision role (lead) or insist on equality in all decisions among partners? 
- Is the company a one-product company with no encore in sight? 

*(OD stands for Organizational Development, Environ=Environment)

- Is the company facing a ‘cash crunch’ early as a result of not having a business plan/financial plan?- Are the economic benefits and payback being achieved on time? (Two critical questions) 
- Are founders preparing for managing rather than doing?  

Early Growth (typical 4-10 yrs.) 

- Have the owners begun to delegate and let go of critical decisions or do they still maintain veto power? 
- Is the mindset still operational (managing same product with same customers) or has It shifted to being strategic (new products into new territories, new platforms or alliances)? 
- Are gross margins beginning to erode? 
- Are the accounting systems and information systems keeping pace with growth or being there when they need it for strategic decisions?  

Harvest/Stability (typical 15 plus yrs.) 

- Are mechanisms in place to provide for management succession (especially for family business)? 
- Have the partners’ personal and financial goals and priorities begun to conflict and diverge? 
- Has there been an erosion of the passion for creating value through recognition and pursuit of opportunity? 
- Is there a spirit of innovation and renewal in the firm? 
- Has the core economics and durability of the opportunity eroded?  

Final Word 

YES, business has its seasons, like our lives. You need to treat your business as a living organism and manage the change in order to grow. 

Business has its springtime, when we begin new ideas and look excitedly toward the venture’s future. Summer comes and we work diligently in the heat of business that we have established. 

With autumn comes the result of hard work begun at an earlier time in our business life. Winter brings an end in the form of harvest or closure. If we remain faithful to our calling as entrepreneurs then even after harvest or closure, another spring is around the corner. 

“To everything there is a season, a time for every purpose under heaven” (Ecclesiastes 3:1). May God always prosper you, your families and especially your business! 

Source: Wrote by Dean Pax Lapid, EntrepCircle TrulyRichClub

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