Tips to Solving the Business Mid-Life Crisis

Classic Bob Dylan, “He not busy being born is busy dying.”  Companies are challenged every day to grow or die. The odds are against us from the start. Most businesses fail within before Year 3. If you make it, you will find that the average life span of businesses from start up to maturity when they start the downward slide into pressured margins, commoditization and aggressive competitive threats has shortened A LOT.

In 1958 businesses averaged 61 years on the Dow Stock Exchange; the average is now 18 years. That puts the midpoint right at about 9 years–and 60% of businesses are 10+ years or older. What does that mean? Most businesses are in their Middle Age and may be facing the Business Mid Life Crisis.

A business mid-life crisis is most easily diagnosed by evaluating effort versus reward. If the same smart people are working twice as hard and generating half as much gain, chances are the organization has slipped into that challenging time. How can they come successfully out the other side? Just as overcoming our own personal Mid-Life Crisis requires a change in attitude and maybe some new healthy behavior as well; the business challenge also mandates some fresh thinking and new habits.

The most common reason for being in a mid-life crisis is that the world around us has changed but our business has not kept up. A decade doesn’t seem like that long of a time, but most of our businesses have been around that long or longer. Yet in that time frame, the world has changed a lot!

Texting has become a new language, the human genome has been mapped, and Apple has taken over the world, well, at least changed how we communicate, learn, entertain ourselves and work. Chances are our businesses haven’t kept up. There are 3 key steps to solving the business mid-life crisis.

Step 1: Determine where to play.

Re-evaluate the customer base and decide which group to align with. Not all customers are created equally. Your company’s products and service mentality are a better fit with some customers than others.

Many businesses add expense without generating value by trying to be a chameleon and change color for every customer. They end up being average and serving a lot of clients in an adequate way but if they were gone tomorrow, would any of those customers truly miss them? Doing a few things really well, that a customer group with an adequate profit pool really values, is the key to success in today’s highly segmented market space.

You have to deliver real value to win. You can’t afford to do everything, so you must determine where to play.

Step 2: Decide how to win.

What are those things that you must excel at to woo your chosen customer group? Target and Walmart are in the same business but they take very different approaches. I can buy the same jeans or bleach at either place–so how do I choose where to go? The one that appeals to my needs better.

They position themselves differently which dictates different business models. Walmart excels at supply chain management which takes cost out of their system allowing them to be a low-cost provider and make money doing it. They appeal to people who want the best deal. Target promotes brands and fashion and carries exclusive merchandise with better presentations, charging (according to Target’s CEO) 1 penny more per staple item ( What Can a Penny Buy?). They appeal to people who want the latest fashion.

No matter what business you are in, it can be differentiated from others in your industry allowing your company to be a better choice for your selected segment of target customers. It is quite possible that what your customers used to value is different than what they value today.

Just a few short years ago the entire value equation was different. Today, post-recession and with new technology, second hand clothing shops are “in”, as is mobile marketing and online shopping. Has your business model changed to keep up?

Step 3: Implementation.

Now this is something you know how to do. The challenge comes in doing it. It requires the organization to embrace changes, re-allocate the budget to be consistent with the strategic decisions, and provide the necessary leadership to motivate the workforce behind the change. If executives don’t lead, no one will follow.

If you are not sure if your business is in a Mid-Life Crisis, you can take this simple test to find out.

2586 views