Recently my wife was diagnosed with cancer. We are stunned. She has had the best medical attention and followed all recommended health care protocols by multiple physicians. Yet, we did not catch the disease until it had metastasized.
So what does this have to do with business? The situation is a metaphor for how businesses die from within because management is relying on trusted but unchallenged measures of business health. Whether it is weakening cash flow due to declining profitability on existing businesses, new product or service launches that fail to meet their goals, or delays in business building activities that lower peak revenue realization, these events are rarely seen together by management as symptoms of failing corporate health.
Dun & Bradstreet studies show only 36% of businesses live longer than five years, and other studies suggest that 77 – 85% of middle market businesses fail to survive beyond twenty five years. The numbers are difficult to interpret, but evidence is clear that the vast majority of businesses fail, contrary to the myth in business school that corporations last forever.
To me these findings indicate that Management needs to consider using objective and seasoned outside advisors to a greater extent. The purpose is to gain independent and unconventional assessment of operations and business practices. Managers often argue that independent consultants without same-industry experience cannot offer meaningful insights and are too expensive. To the contrary, my belief is that by combining insights learned from many industries with deep scrutiny of any specific company is a formula for innovation.
Intense promotion wins quarters for the C-Suite, but innovation wins decades for shareholders. My colleague, Bill Donnelly, in the prior Oak & Apple Partners blog post speaks to “Why Good Companies Go Bad”. He identifies a loss of mission and leadership failure as key components for silent corporate disease.
Our other colleague, Ken Drossman, distinguishes in an interview between key performance indicators (KPI’s) and typical financial metrics used by companies. Ken argues compellingly for scrutiny of business DNA for unconventional leading data that predict strengthening or weakening performance and provide a call to action.
Collectively, Oak and Apple Partners believes businesses can live and even thrive through the natural life cycle of success and failure. One prescription calls for involving outside advisors to take on the role of a forensic performance team not only in times of decline but also at times when business is robust. Curing a company’s ills when it is strong is far easier than curing a weakened company.
For businesses as well as people, looking for unconventional insights to health is necessary in our complex and fast changing life.