Interpersonal Business

Vol. LXX

Dear Manager,

I believe we have the tendency to view our competition in very definite terms, predominantly by specific product category. We keep an eye on it; we analyze and try to anticipate it, yet we always come back to the distinct reality that we hold little direct impact over these players’ efforts relating to our success or failure. I would suggest that this type of competitor, while certainly worth our attention, pales in comparison to the balance of the competition we must confront as a manager.

I have seen more companies fail over the past thirty years for lacking the understanding of this single factor than for any other perceptible reason. I would like to review the histories of two companies with whom I enjoyed significant and long-term relationships. Each company was held in very high regard in their industry; each of their annual sales approached thirty to fifty million dollars in their days of glory. For varied reasons, my relationships with these companies were cut short. In hindsight, this may have been good fortune, as each is no longer in business in their original form. Yet, even to this day I feel a sense of disappointment and frustration; a “How could they have messed this up?!” perspective.

Study #1

I began with Company #1 in its infancy. Through innovation, design, and strong sales management, they single handedly drove, expanded, and breathed exciting new life into an established product category. In the early and mid 80’s this company clearly, unequivocally, seemingly insurmountably, owned their strategic product category. This was a company that enjoyed sixty to seventy percent of the market share! Creative business judgments, market timing, and a bit of good fortune, smiled on this company simultaneously. I had never seen anything like it, and I probably never will.

The 90’s brought new and aggressive category competition but, more significantly, it brought a new management team to the company. The historical success of this company was so profound that new management took the potential of risk for granted. As the 90’s passed, the management team continued to rest on the laurels of the glory days of the 80’s. It was honestly heartbreaking to see a company that had formerly been so in tune with their market, show signs of losing its corporate sense of awareness.

When their market share began to slide, initiatives were implemented to revitalize their sagging sales. Unfortunately, these directives compromised the vested relationships with their customers, sales partners, and organizational image: their true “brand” in the marketplace. This company ultimately created an adversarial role with their sales teams that only served to alienate and perpetuate their downward spiral. I can best describe this attitude as one of “cultural arrogance.”

Once reality finally struck, they had lost all position of strength in the marketplace and the support of their valuable sales partnerships. It was simply a matter of time before all of their earlier tangible and intangible assets had been lost. Sadly, this former high flier filed for bankruptcy.

Study # 2

Similar to the first study, Company #2 was enjoying a near thirty-year history of consistent growth. In critical areas, this is a mirror image of our first study. As is most always true, innovation and design also put this company at the forefront of their category. The 90’s rewarded these efforts, establishing this company as one that could clearly execute and sustain a timely theme and trend. It was magic.

A licensing relationship opportunity also began to develop and evolve for this company. Before long, the license drove the category, a classic example of the tail wagging the dog. An explosion of growth followed that I have very rarely seen in this industry. Within two short years, this single theme accounted for over fifty percent of their sales volume. Just as the company saw early indications that the trend was beginning to decline, the company was sold.

New ownership, blinded by the theme’s record-high sales, continued to count on this trend to insure the company’s future value. Their product and marketing departments failed to meet prior standards of marketing genius and, within a year, the trend had passed and sales had fallen significantly.

Management panicked by hiring their own in-house sales force. Certainly greater control over their sales efforts would stem the tide and compensate for poor execution by management. Heavy investment of depleting resources into regional sales management and untested field sales personnel severely escalated training and sales operating costs. Within two years, this company was on the verge of taking its final breath.

What can be learned by the rise and fall of these two companies?

 Never take current levels of success for granted. “One hit wonders” are a dime a dozen in most industries.

 We are only as good as tomorrow’s best selling product and innovation in the marketplace. The only true value in today’s success is in its financial potential to recreate itself, and in the development of its own second generation.

 Establish sustaining and strong levels of communication between your marketing departments, customers, and field sales personnel. While their participation may have been limited at the front end, their guidance will be invaluable at the back end.

 Maintain a balance of control and resources to insure that if the market shifts, your risk is both defined and survivable.

 Accept full accountability that only sustainable product innovation holds the lifeline to future success. Professional sales partners can only enhance the sale of a strong product presentation. They cannot compensate for poor execution.

 In time of crisis, create an agenda that takes full advantage of your current wholesale and retail partnerships. Their clear interests are vested on your behalf, now is the time to call in the IOUs.

 Difficult times are the true test of management. Insure that you have your best “management foot” forward when it’s all on the line. As these studies suggest, ownership’s life and death is truly in their hands.

 If you are confident enough to risk your future on a single trend, then you had better be equally confident in your ability to identify and grab that next tiger by the tail.

We began with the topic of competition. While market conditions and management decisions played a significant role in the outcome of these two companies, neither of them was clearly taken out by significant category competition. They had but one competitor: themselves. Are we as managers so preoccupied with the evil outside competitor that we are ignoring the priorities within our control? In many cases, outside competition is a distraction acting as a placebo. The true poison pill is more often than not sitting right on our desk.

Personal Regards,

Keenan

INTERPERSONAL© is published by INTERPERSONALBIZ.COM, Keenan Longcor, Editor, ©2010. Duplication of this publication is permitted for both personal and business use. Excerpts may only be quoted with acknowledgment of INTERPERSONAL/INTERPERSONALBIZ.ORG as the source. For re-publication rights, please contact the editor at KEENAN@INTERPERSONALBIZ.COM