"Things will work out in the end." "It’s always darkest just before the dawn." These were a couple of phrases my mother used to say. To her, just have faith and everything would work out. Raised in Oklahoma during the Great Depression, and never having the opportunity to go to school beyond about the 6th grade (and a sparse 6 grades at that), she simply had to trust in faith most of the time. But for us in business, we should be quite a bit smarter than that. It’s not faith that drives our success – but the ability to know when to make changes reacting to shifting markets. Because too often, things don’t work out in the end – and the darkness never goes away.
Just today it was reported (read article here) that Whitehall Jewelers will be liquidating its inventory and shutting its 370 stores. For the company’s employees, investors, suppliers and customers very soon there will be no tomorrow. Things didn’t work out. But you can bet management was not admitting this. Management kept expecting things to work out. Why just in April Whitehall paid over $14million to buy the assets and take over 78 stores from another failed jeweler – Friedman’s. Surely they did not expect to be throwing that money down the drain. Yet, by June Whitehall itself filed for Chapter 11 bankruptcy. And now the company is liquidating. The final end.
All Businesses go through a lifecycle. From the Wellspring of ideas it eventually finds a market allowing it to enter the Rapids of high growth. But then growth hits a bump – usually because the market shifts and the old Success Formula no longer produces above-average performance. Growth hits the Flats. It’s here that management needs to reassess it’s Success Formula – Disrupt and use White Space projects to create a new Success Formula, throwing itself back into the Rapids and keep growing. But most don’t.
Instead leaders will decide to protect the old Success Formula by Defending & Extending it – hoping the market will return to its previous state. But markets don’t go backward. Only forward. Thus the business and the market keep getting farther and farther apart – developing a re-invention gap – that the business doesn’t close. The business moves into the Swamp, where it’s so busy fighting the alligators and mosquitos – the competitors that are pushing the market forward and it’s business nowhere – it forgot the original mission was to make money, rather than defend its old products and practices. Growth is spotty to nonexistent.
In the Swamp management constantly asks its stakeholders to have faith. To believe things will get better. To trust that given just a little more time, a little more money, a break in one form or another and the business will suddenly return to producing returns like it did before. They keep promising things will work out in the end, and the darkest days are behind it. But, inevitably, things just keep getting worse. Until one day, as a surprise to most stakeholders who have been optimistically hoping for the best, the business ends. Possibly in an acquisition or merger (like the Bear Stearns takeover by JPMorgan Chase) or liquidation (like Bennigan’s a bit over one week ago – and now Whitehall). By trying to do more, better, faster and cheaper management lets the business slip into the Whirlpool of no return.
When you enter your church, synagogue, temple or mosque have faith. But when you work, invest, sell or buy you need to be sure the organization clearly recognizes market shifts. Management needs to be aware of the hard reality that market shifts can be deadly – totally deadly. Deadly to the point of failure. Unless management reacts to these shifts using The Phoenix Principle, with clear determination to Disrupt and use White Space to regain growth – building a new Success Formula rather than trying to Defend & Extend the old, tired one – the end is assured, it’s only a matter of time.