Stay relevant or get out early.
We all know of a vacant hotel building. On a recent road trip through country NSW and Victoria it was a revelation to see so many vacant hotels. This picture is one example of a fine building that was no doubt once at the heart of the social fabric in Deniliquin, NSW. I was first attracted to its architecture and decided that my wife and I would have lunch there. On closer inspection, I was dismayed to find that it was closed and out of business. This prompted me to consider “What happened to The Pub?” When I say “The Pub”, I am not talking about this particular hotel, but all of the pubs that we had seen on the trip, as well as the ones I know of in the cities, that are closed or about to close because of lack of trade.
What happened to The Pub? – Irrelevance. Despite so many of the hotels being great venues in prime positions, the services that the vacant pubs provided became irrelevant and therefore unviable. This provides a lesson to all of us in our commercial endeavours. Stay relevant or get out early.
This is an age old truism that has been well explored and documented over the years yet there is a never ending cycle of businesses that fail due to irrelevance. I refer you to Theodore Levitt’s seminal article in the Harvard Business Review “Marketing Myopia” (Levitt, 1975).
Irrespective of how good at hospitality as an owner/publican of a hotel you are, there is no point being an expert if the market no longer wants what you are selling or if the market has decreased in volume beyond what will sustain the business. There may be a multitude of reasons why these hotels became irrelevant. Reasons may include the exit of their populations to the big cities, aging of their customers that valued the hotel as part of their lifestyle, drink driving laws that meant it was not possible for patrons to drink at the hotel and get home to their properties, the focus on the health/social problems associated with drinking, non-smoking laws etc. etc. Effectively, the hotels did not do anything wrong in their delivery of their service, the market for the services slowly evaporated. Like the proverbial frog that gets boiled as the water gets hotter, the hotel businesses slowly went broke as the market for their services incrementally declined. On a daily basis, the decline would be barely noticeable yet over an extended period, the loss of trade became irreversibly terminal.
“I am not in hospitality so I am OK” I hear you say? Wrong. Every business is at risk of irrelevance. The high technology sector is a prime example where the rate of irrelevance is measured in ‘dog years’ or faster. (1 year = 7 dog years). Technology companies that were megastars only a decade ago are now worthless or consumed by a new wave company. I have dealt with very large multinational companies that even today are getting this wrong. The motor manufacturing industry in Australia has now diminished to zero. Video rental stores that abounded are virtually extinct. The local ‘Service Station’ and ‘Milk Bar/Dairy’ are quaint memories. The global market for guitars has dropped massively due to the trend to electronic music. Suntan clinics – enough said. Remember when people bought physical music such as vinyl records, cartridges, cassettes and CD’s? What happened to newspapers and free to air TV? The list is almost endless.
How do you address and win in the face of the relentless change in business, no matter what the discipline? There is no silver bullet. Every business person has to realize that there is an aperture for their business to be successful. It is their responsibility to lift their vision above the day to day operation of the business and assess not only the immediate competitive situation that they face but the near, medium and long term prospects for the market and the industry they are in.
Whilst there is nothing that will guarantee that a business will stay relevant, there are steps you can take to increase your competitive position and know well in advance if your industry/market is entering terminal decline. Here are some recommendations.
- Strategic planning. Have a continually refreshed, clearly documented business plan that takes into account a full market analysis including near term, medium term and future threats/risks.
- Future gaze. Seek out expert input on what the future trends are in your industry and market. Apply “What if” to these and update your business plan to take them into account. As an example, if you are relying on repairing petrol/diesel vehicles now, what will you do when they are irrelevant due to the dominance of hydrogen and electric vehicles?
- If your product or service is static, it will become irrelevant. If you are not innovating, others are and you will become irrelevant. As Jack Welch states, “Change before you have to”.
- Core competence. Identify what your core competence is. If you are a hotelier, is your core competence the knowledge of alcohol or are you an expert in customer service? Translate that core competence toward future oriented trends. For example, many country hotels have evolved into niche cafés and restaurants with bed and breakfast facilities serving the trend of relaxed weekends away in a quiet country town.
- Ruthlessly analyse what you are offering and drop the lines of your business that are not performing or that you identify will not perform as the market evolves.
- Study and apply Marketing in its fullest meaning. Get expert assistance if necessary. Remember, marketing consists of the 4 (7) P’s. Product, Price, Place, Promotion (plus People, Process, Physical Evidence). Technology has now enabled so many ways to effectively market your offering that it is difficult to keep up – but keep up you must.
- “No one makes a profit until someone buys something”. Sales is a subset of Promotion. Work out how you will sell your offering and then go about doing so. Again, get assistance if this is not your strong point.
- Exit early. Once you have put considerable effort into your strategic plan, fully exploring the near, medium and long term opportunities for your business, if you reach the conclusion that you are in a declining industry, exit early. There is no glory in ‘going down with the sinking ship’ if that vessel is an industry or market that is clearly no longer viable. Capitalize and move on to a ‘sunrise’ industry/market.
Short term financial outcomes are essential for the health of a business. ‘Cash is King’ and ‘Return for Stakeholders’ are essential business lore. The wise business person also realises that you can’t milk a dead cow and works every day to ensure their business is highly relevant in a growing market.
Philip Belcher, LSE Consulting ©
Please contact LSE Consulting to find out how we can assist you to stay relevant and excel in your market or any other strategic business issues.
