Reformatting your business: When it is time to embrace change

Many executives and business owners are wary of change – innovation inevitably carries risks and requires additional resources. Also, according to research, two-thirds of innovations in companies fail at the implementation stage. Yet, without upgrade, a business begins to stagnate, losing competitive advantages and failing to address shifts in market needs or changes in customer preferences. So how do you know it’s time to shift gears and do it sustainably?

Assessing the need for change

The past few years have shown that a business must be flexible and promptly adapt to the factors that shape the business climate. Introducing new models and solutions is crucial for staying ahead of the curve. But the need for business change is not always obvious. What signs can indicate that it’s time to take action?

  • Lack of growth or slowdown

Even very slow growth may be something to consider. You need to look at all the indicators such as revenue, profit, market share, and orders. A company, especially a small business, must grow, and there is always room for this. If growth has stopped or your business is slowing down, the time for innovation has come.

  • Your competitors grow faster

This means that your team is either not putting in enough effort or doing something wrong. You need to consider changing your business processes, management or advertising strategies to enhance efficiency.

  • Zero profit or loss

In fact, a situation where a company shows a large turnover with zero or insignificant profit is quite common. If your competitors in the same niche are far more profitable, you need to improve financial management.

  • Becoming outdated

It is important for any business to follow trends. The Kodak case is a good example here: when digital cameras were invented, the company’s management dismissed the technology and failed to grab the niche in time. As a result, the former leader dropped from the competition and lost the market. This clearly shows how important it is to keep abreast of new trends and adapt to them. Changes can be driven by technology advancement as well as fashion trends, especially in markets such as clothing, electronic devices, and beauty products.

Approaching reformatting: Defining goals and priorities

Complete reformatting is a complicated and long process that requires substantial funding. Therefore, it is recommended to identify bottlenecks and start changes with them.

Kurt Lewin’s force field method is a good way to determine effective paths and tools of transformation. Change drivers are placed on one side and stalling factors on the other. They include staff and customers’ attitude to innovation, finances and competition. Each factor is ranked from one to ten. If the sum of negative factors is heavier, a different strategy should be chosen. If the positive factors prevail, the changes will last and benefit the business.  

Assessing risks and resources

Any changes bring risks, primarily due to the human factor as staff may not accept the changes. If it happens, a team will have to be reformatted, which is not easy to do. New people are a risk too.

Assessing risks and resources should happen in stages. For example, a company’s sales department shows poor performance and occasionally lags behind. This means that the sales are a bottleneck. The company should assess the cost and duration of retraining staff, build a training plan, hire experts and implement the strategy.

The same approach works for production. Let’s say that the sales department processes so many orders that the production team can’t keep up and cover the entire demand. The company will assess what needs to be done to expand production capacities. Does it need to buy more space, upgrade equipment or hire more staff? It is once again time to make a plan and implement it.

In other words, any global problem can be broken down into smaller tasks, which makes it easier to assess and carry out them.

Biggest pains of the transition stage: How to be ready and prepare your staff

The biggest pain is when staff sabotage the changes. In 90% of cases, company management believes that it is enough to just announce reformatting to launch the process. But workers are accustomed to a different reality, so they often start to resist or resent the changes, which affects their performance.

This problem may be fixed by using the ADKAR model for sustainable implementation of changes. The model comprises several stages:

  • Awareness: The company explains to staff why reformatting is necessary.
  • Desire: Stimulating thirst for innovation by explaining benefits. For example, sales staff need to understand the benefits of using a new CRM system specifically for their work.
  • Knowledge: The team clearly understands how to work in new conditions.
  • Ability: Staff begin applying their training to work.
  • Reinforcement: The management monitors the effectiveness of changes and helps workers who have not been able to adapt to the transformation, or part ways with them.

Another pain is the difficulty of assessing how effective reformatting is as it happens. To solve this problem, it is necessary to conduct a multi-stage analysis of indicators, on a daily, weekly and monthly basis. It will shortly become clear if the business is moving in the right direction.

If the company fails to correctly assess its finances, it may realize that there is a lack of funding to complete the reformatting. In this case, it is better to take out a loan rather than quit half-way. The loan will be paid off but catching up with competitors and winning back the market share may not be feasible.

By Vladislav Polagushin, fashion industry entrepreneur and marketplace trading expert

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