Business Transformations: Biggest Challenges and Critical Questions
AlignTro Group helps our clients by providing answers to the critical questions which usually center around the biggest challenges which are typical to any given type of business transformations.
The highly dynamic and hypercompetitive nature of technology markets forces high-tech companies to constantly re-align, re-position, re-focus and re-organize themselves. Therefore, frequent business transformations of different types in technology companies are the norm rather than the exception.
Business transformations usually occur when a company has experienced or anticipated considerable changes in its competitive market position: a lack of growth, declining revenue, profit and/or market share, price erosion, outdated business model, technology deterioration, increased competition, ineffective sales channels or inability to scale up operations.
Accelerating Organic Growth: The biggest challenge in accelerating organic growth is to select the right strategic initiative and execute it without impacting current business negatively. Those initiatives could include adding new product line, entering adjacent markets with a modified product, signing up strategic partners or entering new geographies. Sometimes new strategic initiatives defocus senior management, marketing and development teams plus drain other resources. The current business suffers, while new strategic initiative has not yet gained market traction, resulting in actual decline in revenue and profits. The business result could be a totally opposite to the original strategic intent.
Redefining and Streamlining Business Processes: The biggest challenge in redefining and streamlining business processes is to ensure that new processes are scalable, well understood by employees, well documented / implemented and add value to the company (in terms of speed, cost, quality, customer experience, repeatability, scalability, standardization, etc.). The need to frequently redefine and improve business processes is very typical for fast growing technology companies. Their rapid growth results in "outgrowing" current business processes.
Transforming a Business Model: The biggest challenge with a business model transformation is to prove viability of a new business model and to avoid liquidity problems during the transition period i.e. before the new business model gains significant traction. Some companies decide to transform their business models to grow or improve their business results, but make overly optimistic financial assumptions about the transition period. During the transition period, a company will most likely experience lower revenue, extra costs and significant time and efforts required to develop new core competencies.
Company Repositioning and/or Rebranding: The biggest challenges in market re-positioning are: (a) remaining credible with customers, analysts, partners, and employees after the repositioning, and (b) delivering on a new brand promise, if applicable. A company has to quickly learn how to walk the talk consistently, otherwise market re-positioning will be perceived as purely "cosmetic." When market re-positioning is combined with a total rebranding of the comapny, the chances of failure increase dramatically due to inherent complexity of changes.
Investigating and Executing Mergers and Acquisitions (M&A): The biggest challenge in any M&A situation is to uncover, explore and fully leverage business and technology synergies existing between two companies. In other words, to create a "1 + 1 = 3" formula. Another challenge is to clearly define what a buyer is buying (acquiring): revenue and/or profit stream, economy of scale, superior and strategic technology, key personnel's expertise, OEM relationships, sales channels, customer base, intellectual property or a combination of the above. In many M&A situations such perceived synergies are superficial resulting in transactions that fail to deliver the expected results.
Planning Pro-active Exits: The biggest challenge in pro-actively selling a company, company's division, business unit, or product line is to determine who are the prospective buyers and what they want to buy, not what you want to sell. It is absolutely critical to clearly articulate to any potential buyers a compelling value proposition and post-acquisition scenarios in both business and technology terms. They need to clearly see a strategic fit and improvement to their competitive position after the acquisition. The post-acquisition scenarios should also convince potential buyers that they are getting good value for the money (i.e. your valuation is reasonable from their point of view).
Engineering Corporate Turnarounds: The biggest challenge in corporate turnarounds is to eliminate impediments which caused the problems in the first place, but doing so without impacting the ability to execute. The key question in the first stage of any turnaround is how to significantly cut costs and improve the balance sheet. In the later stages of corporate turnarounds critical questions could be focused on core technology and business competencies, go-to-market strategies, market re-positioning, business model transformations and/or future growth strategy.
Raising Initial Capital: The biggest challenge in raising initial capital for technology start-ups is to articulate a clear and compelling intrinsic value of a company. VCs, angels or investment banks will always look for a unique intrinsic value first, even before they start to look at management, markets, product concepts, revenue / earning projections and valuations. The intrinsic value in high-tech companies could be a patentable design, unique architecture or algorithms, innovative business model or a combination of the above. But, the key to getting funded is to determine how to develop technology and business core competencies based on this intrinsic value, so they are scalable, competitive and relevant to a sizable market segment in the long run.