No business ever stays exactly the same throughout its lifetime. As market conditions, customer demands and technology change, companies need to adapt to stay relevant and keep growing.
But sometimes, continuing along the same trajectory with a few minor tweaks isn't enough. In certain cases, a company may need to completely switch directions and revamp its business model in order to survive.
Implementing a significant change to your business is a difficult and important decision, so you shouldn't make it lightly. Here are some telltale signs you might need a new direction, and a few key questions to help you determine your next move. [9 Tips to Successfully Shift Your Business Strategy]
Time for a change?
The decision to change course can happen at any time, for any reason — even if it's just a gut feeling that it's best for your company. But if you're on the fence about it, these three red flags could indicate you're better off making the switch.
Growth is slowing significantly. Every business goes through ups and downs in growth and profits. No matter what industry you're in, you're subject to the market cycle, and it's normal to experience slower periods throughout the year. But if your charts are on a continual downward trend — especially compared to others in your industry — it might be time to re-evaluate what you're doing.
"No one wants to admit that their organization can't keep pace with market trends," said Seeta Hariharan, general manager and group head of Tata Consultancy Services' Digital Software & Solutions Group. "However, [there are] early warning signs that serve as harbingers of change, [such as your] business growth lagging more than ... your competitors'."
"If the company has already begun to see the effects of [an industry] change ... in their own financial performance, it is often more challenging for the company to correct course," added Martin Okner, co-founder and managing director of business advisory firm SHM Corporate Navigators and chairman of ACG New York.
The smaller competitors you ignored are starting to surpass you. When your business moves beyond the startup phase, you may start to feel comfortable with your growth trajectory. Other, newer startups don't seem like too much of a threat, as they may be too small to compete with you. But that complacency can hurt you if you don't take those younger companies seriously.
"When you start seeing smaller competitors who are showing signs of disrupting things at the lower end of the market, it's really easy to blow them off," said Don Brown, president and CEO of Interactive Intelligence, a provider of software and cloud services for businesses. "But [especially] in tech, what often happens is ... you turn around, and the competitor you thought was nothing to worry about is in all the deals you're in, and you're at a disadvantage."
Brown said his company experienced a similar situation several years ago, and realized the business needed to move in a new direction with some of its offerings and operations to keep up with the innovative startups entering the market.
"Your company [may] scoff at companies coming in ... with a disruptive approach," he told Business News Daily. "I've learned to really pay attention to them, and take [their presence] as a warning sign as well as an opportunity."
Your customers aren't as happy as they once were. Keeping close tabs on your customers is a good way to gauge the health of your business. Primarily positive social media comments and customer feedback are indicators of happy customers. If these good vibes start to wane, you might need to make a change. Hariharan said to watch for signs that your product or service is becoming increasingly less significant to your customers and their personal journey, or that your customers no longer view your business as providing a high-value experience.
Stephen Sheinbaum, founder of Bizfi alternative financing company, said that internal cues from your staff can tip you off to the need for a change as well.
"Are you having a hard time recruiting for the positions you believe you need to move your company forward?" Sheinbaum said. "Is your sales team telling you that potential customers are no longer excited about what you do or sell? Are they talking about a new product or service that they wished you offered instead?"
Where to go next
Our expert sources said that, once you've decided to change your approach, you should ask yourself the following questions to formulate a solid plan:
- What are the underlying reasons your business is experiencing slow or weak business growth?
- Is your belief in a new direction supported by facts and data?
- Do you have the skills to run your business in this new direction?
- Is the market you want to enter growing, declining or stable?
- Who are your key competitors, and to what extent are they driving the category trends?
- What are the top needs and wants of your new core customers?
- Are you able to listen and react to the market and own your customers' journey? If not, what are the barriers?
- Does your business strategy take into account short- and long-term shifts in the market, including trends, new entries and partnerships that will make the customer experience more satisfying?
- Can you make this change with your current resources?
If you've determined you can indeed make this change, you then need to ask yourself what your "ideal" company, market share, industry reputation and customer base would look like if you were starting over from scratch.
"[This question] is the most confronting and the most important because it identifies the gaps that need to be addressed in order for a management team to achieve their vision," Okner said. "These gaps are also the foundation for the necessary course corrections that need to be made."
Making the change
Big changes take time, and you're not necessarily going to be able to quit your old business model cold turkey. You'll likely have to make a gradual transition and continue doing some of your original work to keep money coming in while you revamp. However, you should make sure the appropriate attention is given to your new projects, ideally through the use of a dedicated group of employees.
"Identify a task-force-like team to assess the business situation," Hariharan said. "This team should be representative of the business at large and include roles from across the organization. [Then], chart a clear road map to help guide the organization through change initiatives. Identify checkpoints to signify whether your business is heading [in the right] direction."
When Brown's company was changing course, the team decided to completely separate its innovative work from the company's regular work. This, he said, helped avoid the temptation to split the team's focus and pull people away from the "change" work to address old business matters.
"The new effort got its own cocoon in which to grow," Brown said. "If you are going to [do] something new within the company, give it some degree of autonomy."
During periods of change and transition, employees will turn to their company's leadership team as an example of how to react to and handle the situation. Now more than ever, you need to motivate your staff and show them that this is the right move for the business. Brown advised consistent, transparent communication about the changes being made, so everyone knows and understands the role they need to play in making it happen.
"There are inevitably going to be bumps along the way — it really takes a united leadership to see [a change] all the way through," Brown said. "It's the difference between having the company succeed, and having it plateau and become irrelevant."