There have been many articles written about why startup companies fail. What is less studied is why mature companies fail. Fail to maintain profitability. Fail to grow. Fail to remain competitive.
Companies face many inflection points in their history, starting with investing in the initial idea, defining operations, and working through growing pains. The key to transitioning through them successfully is recognizing them early enough to take action. Henry Ford is credited with saying, “If you always do what you always did, you’ll always get what you always got.” The point is, in the face of ongoing poor performance, you need to make changes. Systemic issues don’t fix themselves.
Looking back at my career, I can’t help but think about an overlooked inflection point. In the ’90s, I joined a small private-label food manufacturing company. One of their primary product lines was roasted coffee, which we packaged into 1-pound, 2-pound, and 3-pound tin-coated steel cans. This was a very low-margin commodity business. We competed strictly on price. During this time Starbucks was just starting to spread across the country (they had maybe 500 stores; today they have over 40,000). The prevailing thought within my company was that they were a fad, that people wouldn’t pay $3 for a cup of coffee they could make at home for 25 cents. Less than three years later, that company was sold, and the plant was closed. We ignored the signals.
How to Recognize it’s Time to Change the Status Quo
Inflection points can be triggered by a variety of events—significant downturn in customer demand, entry of a competitor, a change in a regulation, etc. However, recognizing an inflection point is not a straightforward task. It is very difficult in the early days to differentiate between a short-lived fad vs. a long-term trend. For example, in the case of a new product/service, is it a fad fueled by media hype (high-protein snacks) or a major shift driven by real customer need (better-for-you food)? You only really know in hindsight.
So, what can you do to see the signals in your market? Start by looking at your own data. Trends show up as long-term shifts rather than normal market or seasonal fluctuations. Dig deep to determine the underlying cause. Did your company take a specific action? Raise prices? Make changes to a product/service or change suppliers? Has a new disruptive product or service recently hit the market? And does this new product/service fulfill a customer’s need and/or provide additional value? Did you lose a major customer or multiple customers for the same reason? Look for patterns.
In contrast, fads often fall into the “too good to be true” category: products or services priced well below the going rate or that make unbelievable claims. Fads are often style choices. Fads spike quickly, quicker than seemingly makes sense, often driven by a “coolness factor” or a “fear of missing out.”
If you think you’re experiencing an inflection point, check the trade journals and major business publications for articles on emerging trends and talk with your current customers about where you’ve noticed changes in their buying patterns. Find out if something has changed in their demand or if they’ve switched to a different supplier or a different product/service. One of the biggest reasons a mature company fails is that they have lost touch with their customers.
How to Manage a Big Transformation
Once you’ve determined that your company is at an inflection point, the next step is getting others to agree that something needs to be done. True inflection points require organizational transformation and stakeholder alignment. They typically involve difficult decisions—exiting a line of business, organization changes, etc. And they can be very disruptive if they are not managed well. Neither employees nor customers like uncertainty.
Transformations require structure, governance, prioritization, coordinated communication, detailed planning, and change management. This is best organized via a Transformation Management Office (TMO), which is essentially a special-purpose Project Management Office.
Here are the steps to IPM’s approach:
- Start by setting the strategic direction.
- Identify and communicate the strategic imperatives and goals that will be used to measure success.
- Break those imperatives down into individual projects or programs with defined outcomes that must be achieved.
- Establish the TMO’s project portfolio so there is full visibility into the work that must be done.
- Utilize a well-defined, but simple, prioritization methodology to determine how best to sequence the project execution given the project dependencies and resource requirements.
- Last, but not least, actively manage the TMO work.
Companies face numerous inflection points throughout their lifecycle, from the initial decision to start a business to later stages of growth and potential failure. Recognizing that you’re experiencing an inflection point is the biggest challenge. Don’t ignore the signals.
January 6, 2025
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