During the transformation of a business or industry, it’s important to understand both the cost of inaction and the cost to respond. Many organizations plan their path forward; they determine a budget, put together a proforma, assign the team and move forward enthusiastically.
Going from where you are to where you need to be is not a journey for the indecisive. Today the greatest test of any leader is how they respond to innovation’s threat. Disruptive innovators using the marvels of technology are and continue to change the things we thought to be unchangeable…or at least we hoped the current circumstances of our comfort would last forever.
As leaders plan the construction of what will be, they must also plan the destruction of what was. During this process, not only do you need a complete understanding of the cost associated with the progress towards what will be new, you must also comprehend the cost associated with any temporary stalling in the “what is” along the way. In this transition process, leaders will have many opportunities to prove their determination to create and deliver a new order of things. As leaders recognize opportunities for improvement, they must remember that their greatest responsibility is to the business.
As most will attest, a business is a living, breathing entity which provides nourishment and security to those it employs. When the business comes second to a human, it threatens the remaining humans who rely on its stability and wherewithal to provide. There is no greater threat to businesses than indecisive or insecure leadership. You can recognize them when their comfort of complacency supersedes their comfort in leading a new way forward when a new way forward is demanded by either innovation or market conditions.
So, as the organization is moving along the road to a reinvention, restructure or simply the continuous modification required of all businesses, it must have not only the proforma outlining rewards of what’s to come. The organization must also analyze and understand the cost and burden of any temporary stubbornness that stalls them along the way.
Think about a service industry or business where there is a serviceability transition, a transition were service needs are diminishing through increases in the product’s reliability, thereby disrupting the legacy service model. The disruption is that the new product only requires one service interaction to the old products’ four or five service interactions.
This type of disruption is not uncommon. Think about the television, think about the everyday appliances used in homes, think about the automobile industry. Now think about your industry. I assure you I am thinking about mine.
The facts are that all products which require a service deliverable will consistently improve to reduce service interaction, and today that improvement is moving faster than ever. The demands of end users who desire service-free experiences are growing at record speeds. In the past, products were made to break and be fixed. The aftermarket revenue from replacing parts and servicing the product was equal to the revenue from selling the product. However, in most cases, the profit was always greater on the service deliverable.
Parts and People
As service models modify, the two key components needing the proverbial under-the-microscope management are Parts and People, or Labor. Parts are easy, just realign your inventories. If ever a reason to ensure that there is never more than six to eight weeks of parts usage in a service provider’s inventory, it’s during a declining market when equipment is rapidly improving. Have a strategy to eliminate back stock which matches the strategy to move from the legacy service intensive equipment to the new, innovative equipment. Don’t be the last TV repairman who had thousands of dollars and a five-year supply of tubes in stock the day televisions stopped using tubes.
Now comes the hard part, the people. The hardest job of any leader is the responsibility of the people. When workforce corrections are needed and not responded to, the consequences can be devastating—it jeopardizes the life of the organization. Even with the knowledge and understanding that personnel corrections are needed, the pain associated with implementation is troubling. After all, humans are supposed to have compassion (thankfully, most do). However, I must repeat my earlier thought: “The health of the company is every leader’s greatest responsibility.” Leaders who prepare for transitions must include the human capital implications in their roadmap. In other words, don’t hire more sailors when you know you are replacing your boat with a train. Planning a different future must include a plan for the people as much as the plan for the product. During transitions, the unprepared will try fitting people into positions, and those prepared will have people in positions they fit.
During good times and bad, how one prepares for the constant modifications needed in today’s business world will define them. Many organizations will face opportunities which will challenge everything they thought was sacred. When leaders understand the cost impact of indecisiveness, they will respond appropriately—that’s what leaders do. In this innovative world, as we elect or are forced to transition along with our proforma describing what we strive for, we must also put together a detailed description of what the cost will be if we stall progress with inaction. Inaction is an unnecessary cost and will overwhelm the good intentions of what we know must be done.