Art of Managing Business Decline– Coping with the Silent Creep of Doom: Grasping for Silver Bullet…

Managing decline is when a business, organization… has gone irreparably wrong and disintegrating into irrelevance… but being managed, in an organized way, to salvage resources and minimize all possible negative consequences… According to Wikipedia; managed decline refers to the management of decline (or ‘sunset’) of an entity, at the end of its life-cycle, with the goal of minimizing costs or other forms of loss or harm.

According to Maurilio Amorim; right now somewhere in the world there are people managing the inevitable death of a business, organization, product line, entire industry… While some are smart enough to know that the end is inevitable; they are either powerless to change it, or don’t have the will-power it takes to make the shift to something new– knowing the end is near but holding-on because it’s their job…

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According to Bob Angart; the nature of decline and the strategic alternatives for coping with changing conditions are complex; some businesses age gracefully and maintain extremely high profitability, while others decline steadily experiencing rapid market deterioration… Once a business has entered the stages of decline, it’s very hard to change and reverse the process… it takes leadership with vision and motivation to put a business on a new life-cycle and return it to the early days of ‘start up’, when risks are ‘risky’ and unknowns are ‘truly dangerous’ to the business– and it’s at this point that the business begins to ‘evolve’ again, re-imagine itself, and finds new life and new meaning…

In the article Stages of Decline in Business by admin writes: Most business don’t know they have The Decline Disease until it’s too late and when remedies are too painful! According to Jim Collins; some of the best companies that crash and burn go through ‘stages of decline’ with early warning signs, such as:

  • HUBRIS BORN OF SUCCESS: We’re so great, we can do anything! Great enterprises can become insulated by success; accumulated momentum can carry an enterprise forward for a while, even if its leaders make poor decisions or lose discipline… But it’s when the rhetoric of success succumbs to hubris and attribute success to your own superior qualities (e.g.; We deserve success because we’re so good/so smart/ so innovative/so amazing)… Then, you might find yourself surprised, unprepared when you discover your vulnerabilities too late, then decline surely follows…
  • UNDISCIPLINED PURSUIT OF MORE: More scale, more growth, more acclaim, more of whatever… that those in power see as ‘success’… when companies stray from the disciplined creativity that led to greatness in first place, and making undisciplined leaps into areas where they are not great ,or growing faster than they can achieve with excellence– or both… When an organization grows beyond its ability to fill its key seats with the right people, it has set itself up for a fall. Although complacency and resistance to change remain dangers to any successful enterprise, overreaching better captures how the mighty fall…
  • DENIAL OF RISK AND PERIL: When internal warning signs begin to mount, and yet external results remain strong enough to ‘explain away’ disturbing data, or suggest that difficulties are ‘temporary’ or ‘cyclic’ or ‘not bad’, and ‘nothing is fundamentally wrong’… It’s when leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether. When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for decline…
  • GRASPING FOR SALVATION: When the cumulative peril and/or risks gone bad assert themselves, throwing the enterprise into a sharp decline… The critical question is: How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place? When you find yourself in trouble, when you find yourself on the cusp of falling, your survival instinct and your fear can prompt lurching– reactive behavior absolutely contrary to survival. The very moment when you need to take calm, deliberate action, you run the risk of doing the exact opposite and bringing about the very outcomes you most fear. By grasping about in fearful, frantic reaction… companies accelerate their own demise…
  • CAPITULATION TO IRRELEVANCE OR DEATH: The point of the struggle is not just to survive, but to build an enterprise that makes such a distinctive impact on the world it touches (and does so with such superior performance) that it would leave a gaping hole– a hole that could not be easily filled by any other institution– if it ceased to exist. To accomplish this requires leaders who retain faith that they can find a way to prevail in pursuit of a cause larger than mere survival (larger than themselves) while also maintaining the stoic-will needed to take whatever actions must be taken, however excruciating, for the sake of that cause…

In the article End-Game Strategies for Declining Industries Kathryn Rudie Harrigan Michael E. Porter write: In choosing a strategy when in decline, managers need to match the remaining opportunities in the industry with their companies’ positions. The strengths and weaknesses that helped and hindered a company during the industry’s development are not necessarily those that will count during the end-game, where success will depend on the requirements to serve the pockets of demand that persist, and the competition for this demand…

To determine the correct strategy a company should assess its strategic needs vis-à-vis the business and modify its end-game strategy accordingly– companies must choose an end-game strategy for themselves, rather than let one be chosen for them… Clearly the best course is to manage the decline so that the business can improve its end-game position…

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In the article Business Turnaround Strategy by Gary Rushin writes: In a situation where the business is in crisis and you are trying to identify and manage the decline– the nagging questions are: Is the business really faltering out of control, heading towards doom? What strategy do I employ to turnaround the business? How do I identify the real problems the business is facing? What actual resources do I have to employ to reverse the decline? Determining what constitutes a managed turnaround and restructuring in a declining business is not easy.

Too often business management is focused on symptoms of the business decline rather than determining the causes of the business decline… Some of the common symptoms of business decline can be noticed by– rapid turnover of senior management and employees, factoring customer invoices, declining customer services, increased disputes with leading suppliers, stretching of supplier payables, build-up of inventory, low employee morale pervasive through the company… Both internal and external issues can cause serious business deterioration, for example:

Internal causes; high costs, lack of an effective marketing, lack of innovation, weak financial policies, organizational confusion… External causes; changes in market demand, competition, disruptive technology… Widely known and most often the causes of business decline can be attributed to: (a) flawed or outdated strategy, (b) good strategy, but poorly implemented, (c) poor strategy, and poorly implemented… Not all distressed businesses can be rescued… whereas for others, remedies may involve just applying basic  traditional management techniques mainly by following best practices…

Understanding the signs of crisis and decline in organizations can help management understand the environmental context of a situation, in the critical early stages of setting expectations and roles… before it’s ‘too late’. According to Joe Lamantia; business crisis can present great opportunities with significant benefits, as well as, mitigating many dire consequences, when well-managed… however, in other situations business decline is better managed for quick closure rather than delay of the inevitable– wasting much time and resources– there are too may holes to patch.

To avoid difficult crisis business must engage in regular health checks– examining, re-examining all the critical elements that can impact health and well-being of the business, both internal and external…

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Business that regularly check and assess their business process,  competitive intelligence, market innovations…  are in a position to spot potential problems early on and take steps to avoid crisis…

Several common issues that cause business decline are:

Entanglement; companies that tackle basically different business activities with the same strategy…

Out-of-focus;  companies that fails to focus on value creation…

Un-adapted; companies that do not adapt to changing market conditions…

Over-stretched; companies that grow faster than its structurally capable of handling… Those in charge of a business must take a good hard look at themselves to determine how their decisions and attitudes contributed to the decline…

They must ask: Why are we in business? What do we hope to achieve with the business? Once the answers are known; the business must take appropriate action to re-imagine itself, quickly, and move forward…