“It’s important to understand that nearly every company goes through life-threatening moments,” says Ben Horowitz, the legendary entrepreneur and venture capitalist, in his new book The Hard Thing About Hard Things. This is when a chief executive really earns their spurs. Above all, he says, “Don’t punk out and quit.”
He’s right. Most businesses have these moments. And the boss can’t duck out and run away. They need to find solutions to the problem.
BT is doing it right now. The old fixed line revenues won’t last. Not in the age of Skype. So two years ago it launched a television channel, BT Sport. With a £897-million deal for Champions League football, it has kicked off well.
The signs were clear that we had to re-evaluate our strategy and take drastic action to maintain the future of the business
Nokia did it in the 90s. It made tyres and TVs. Not great. Then the boss decided to pivot into mobile phones. By the end of the decade it was Europe’s most valuable company.
So what’s the secret to changing course? Founding an internal startup is a standard tactic. Simon Harbridge, chief executive of Stone Group, was at risk of a threatening moment at his IT company. For two decades Stone Group assembled tech products for the public sector. The market shrank and shrank. “The signs were clear that we had to re-evaluate our strategy and take drastic action to maintain the future of the business,” he recalls.
His solution? “We developed a new business unit, Stone Infrastructure Services, which would focus on selling the services of our people, rather than the products that our people manufacture,” says Mr Harbridge. “Central to the concept was offering our public sector experience, and applying that in a consultative way to the whole technology stack, such as wireless and cloud computing, rather than just supplying computers.”
He re-assigned staff to the new unit and recruited specialists in the field. “Thankfully, it has been a success so far. We posted a 20 per cent increase in profits last year so it’s been worth the blood, sweat and tears of getting to where we wanted to be,” he says.
Finding new markets
His advice to anyone doing the same? “A robust communications plan, a joined-up leadership team and taking your employees on the journey with you, to name but a few, are all important,” says Mr Harbridge.
Controlling emotions helps too. “It has been massively stressful. Sometimes frustrating, but there is no easy way to change the direction of a business, so you must remain calm and find the positives,” he says.
Finding a new export market can work. UK Trade & Investment (UKTI) international trade advisers can help companies of all sizes crack an export market for the first time. Parveen Thornhill, London UKTI regional director, says: “It all starts with speaking to an expert. Whether it’s about marketing, IP [intellectual property] or e-commerce, an international trade adviser can guide interested businesses through the journey. Companies quickly recognise a different way of doing business, which leads to new customers and exciting opportunities.
“My favourite example is Foffa Bikes; they took part in an export communications review with UKTI and with us developed an e-commerce international communications strategy. They have since closed their London showroom and now operate online and through a network of resellers within the EU. It’s made a massive difference to how they do business and importantly their bottom line.”
Adapting once may save your business. To thrive long term, you will need to improve continuously. How is this done?
William Hill online betting
One person who knows is Jamie Hart, group director of innovation at bookmaker William Hill. Seven years ago online betting was booming. William Hill needed to move online to compete. The method? Mr Hart helped form a new unit. A four-man internal division would build William Hill’s online presence. The idea was bold, creating an autonomous entity, rather than add the duties on to existing staff members. But how else do you compete with a swarm of hungry startups?
William Hill needed a startup of its own. The approach worked. William Hill is now an online giant, accounting for 40 per cent of revenue, with a 15 per cent market share in the UK.
Now William Hill wants to retain that revolutionary spirit. Mr Hart says: “We’ve recently created WHLabs, a division that has the licence to experiment and innovate. Here we generate, test and trial fresh concepts focused on delivering compelling user experiences. Some will end up in our core offering, some will stay outside – all will ultimately help us learn faster and differentiate our offering.
“In many ways what we have started is an infinite task. It’s an obsession, a culture rather than a project with an end-date. We set a clear vision of where we want to get to, we update that all the time, we’ve set ourselves up with a permanent, well-resourced development unit that has adopted an agile approach, we’re recruiting top talent and we’re constantly innovating.”
Benchmarking this culture will help. Ian Shott, of the Royal Academy of Engineering Enterprise Hub and serial entrepreneur, built Excelsyn into a $20-million pharma company in six years by acquiring and adapting business units.
“The most important lesson in acquisition is to understand the values and culture of the business you’re buying,” he says. “We track and reinforce the values of my companies through ‘behaviour descriptors’ which check employee performance against our company values. The whole process is transparent and our company values were even written on their business cards. The behaviour system was also integrated into the performance management system, so that every employee can constantly check whether their performance aligns with our values.”
Outside consultants can help. Talking to your bank is essential. Adam Rowse, head of business banking at Barclays, says banks look at companies all the time to track their strategy. But they won’t react negatively to a change of direction if they understand what is at work.
“We try to be supportive,” says Mr Rowse. “We can help you ask the right questions. What is the market opportunity? What research have you done? What competitors are there? What is your USP? How will you get in? M&A? New people? We can advise. We also run business clinics.”
Accountants are surprisingly helpful. For example, Accenture publishes industry reports on disruptive new technologies on the Open Innovation section of its website. It’s a goldmine of free research.
As Mr Horowitz says, most business face life-threatening moments. But with the ability to pivot into new markets and business models, such moments can herald the start of something even bigger.