Times of excessive margins are history. Every entrepreneur, CEO or CFO knows that by now. Organisations need to operate with lower budgets, costs need to be decreased to acceptable levels for business continuity. Companies have been confronted with this unruly reality for a few years. What is causing that reality? What changes would create a new balance for business continuity? Recognising this profound uncertainty, every organisation should stress the importance of making decisions when the time is right. In this article I hope to give you some insights on how to deal with the current turbulent market circumstances and the constantly changing customer’s demand.
Nowadays information is available for everyone. Hardly any information stays confidential – no trade secret is kept. Ins and outs about producing techniques, inventions, strategies, technologies and so on, are for the taking. Essential parts can be copied as far as a patent allows you to. Or a (legal) work-around is created as a framework for the elaboration of a company’s own bright ideas to match up to the original innovation.
Smart customers require smarter stories
With customers knowing that production is or can be cheaper than they initially thought, a lot of organisations have been disarmed. Competition is on the rise. More and more start-ups compete with the traditional styles of doing business. They can do this by using smarter operational models and connection technology on the one hand, on the other hand by the ability to meet market price demands.
What does this mean? With so much information available most false bottoms have been revealed, end users will not – knowingly and willingly – pay the bizarre margins. Consumers can now distinguish relevance and nonsense perfectly. Therefore companies have to develop that same skill and apply it even better. Ask yourself, what is important for my business? More pivotal is the why-question. “People don’t buy what you do; they buy why you do it.” as Simon Sinek described in his inspirational TED talk about leadership and a golden Circle.
Leaders need to take critical decisions vigorously
There’s always a comparable or cheaper alternative people can change over to. Why should they buy from you? What is your story, what makes you the most authentic choice?
You need to be able to sell the naked product – no mishmash. This requires a different operating model, a different leadership style. Not only minimising costs and mitigating internal risks are the issues here. Agility to react on market demand and the unpredictable environment is crucial. Organisations that can make critical decisions when the timing is right have enormous advantages. They will have the opportunity to capture markets and compete with companies that keep on managing their future business as if their environment is considerably predictable.
Why does this need a different way of operating? What do you need to change in your company to come towards the why-answers? Organisations need to build capabilities that are needed to surface critical issues early. They need to implement processes to determine how issues are raised, what sounding board will deliver feedback and how decisions will be made. A good start for setting up these processes would be to gather knowledge, to conduct the needed research, and analyse the implications. Such approach and change should be encouraged with the right leadership style. Let go of the power play by senior managers. Businesses need to move toward a more dynamic management style.
Change the leadership style
This requires significant shifts in the way companies operate. This style of leadership is about ‘together’ and ‘sharing’, about team spirit. Managers as respected company servants and enablers, not as powerful dictators. Top down style is useless, changing behaviour across the supply chain requires much more. The most effective leader is a listener, a motivator, a giver. He or she knows how to give space in relationship with employees. The collaboration with other managers is just as essential. No deals but partnerships. How effective executives contribute to the success of others influences a company’s organisational, cultural, and political standards and values, and will impact the whole transition. The knowledge and skills that suits this style of leadership makes these leaders better qualified than anyone else to act decisively when circumstances require this.
Continuous performance is not enough anymore. Leaders have to reinvent themselves constantly. That is agility. That is making your company agile thus successful.
Arjen van Berkum
Arjen van Berkum is a columnist, keynote speaker and motivator, with an eye for business ecosystems, innovation and disruption. In addition to his work as technology and contract management evangelist, he is a visiting lecturer at Delft University of Technology (TU Delft).
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