Room To Grow
Even Successful Businesses Need Change
The need to innovate within the auto recycling industry has never been higher. Unfortunately, there are many reasons to resist change; especially if you have been successful. It is too easy to look at your business and fall into the comfort of “if it ain’t broke, don’t fix it.” At that point, inertia becomes a powerful force. If you do not actively seek to grow and improve, you run the very real risk of letting your competitors get ahead of us.
Have you changed the way you run your business in the past few years? Or, are you using the same ideas that have been in place forever? It’s important to realize that if you do not try to grow your business; you are at risk of losing your business.
It’s necessary to understand that in some cases, what has brought success up until now, may not be the answer in the future. For example, years ago you were taking a step in a bold new direction when you adopted a yard management system and started posting parts for sale on eBay. Now, that is simply the way many businesses operate. The question needs to be asked, “What’s next?”
Think about how the industry has changed. Years ago, parts were found through phone calls and walking around yards. Today, a quick Internet search provides all the information needed regarding the location, price and condition of parts. This is true for commercial customers as well as individual retail customers.
Let’s consider a few basic questions:
- Has the level of competition increased or decreased?
- Have the expectations of customers increased or decreased?
- Are market pressures pushing price increases or price decreases?
Here are my answers to those questions:
Clearly, the level of competition has increased. The ability to locate and transport parts has turned local businesses into regional businesses and regional businesses into national businesses.
Speed and quality really do matter. Customers’ expectations have greatly increased. Regardless of the product or where we shop; we expect to have our needs satisfied today, not tomorrow.
The market continues to put downward pressure on prices, and always will. Customers want to believe anything can be delivered the same or next day. They won’t wait for three to five day shipping / delivery times.
It is important to realize that when strategy is based on pricing competition can respond very easily. How many businesses do you know with a “price match guarantee”? Price is the easiest and most over-used tactic to win business. Think about the businesses that are able to succeed without focusing on price? What do they do? The answer is not as elusive as you might think. These businesses have found a way to change their policies in a way their competition would never consider.
For example, it was not that long ago that a leading luggage company found a way to increase its sales in small boutiques. Its sales policies caused the small boutiques to order in quantities larger than they could sell before the styles changed and new inventory was offered. Consequently, the boutiques would have to try to sell the old inventory for large discounts. This resulted in hurting the shops’ cash flow and it also caused that particular brand of luggage to be seen as second-rate merchandise. Instead of offering discounts and waving shipping fees for larger orders, the luggage company moved to selling on a consignment basis while it still offered free or discounted delivery of merchandise. This change in tactic pushed it far ahead of its competitors in sales. The competitors could not find a way to alter their strategy to reclaim their market share for several years.
Another key in running a business is to learn to see the business “holistically.” Too many business owners see their operation as a series of departments, each with its own responsibilities. Unfortunately, this is one of the easiest ways to fool ourselves into thinking we are making progress while we are actually losing ground. Let me give you a simple example.
Several years ago I met someone from a business working in the electronics industry. The business designed and manufactured sophisticated devices that were custom-built for various clients. The business was having a difficult time and actually was losing money. However, at the exact same time, its marketing department staff was getting bonuses because they had met certain goals that had been set a year earlier. Ironically, their goals were not connected to overall sales or profitability of the company - rather, they were set only to the sale of a few individual services. So, while the company as a whole was struggling for profitability and individual department was seen as very successful. The fact that it was the marketing department simply adds to the irony of the situation.
Sadly, this situation is not unique. How often do we provide incentives to an individual or a department? Are their goals linked to their success or the success of the entire business? If we do not keep the goals of individuals or teams aligned with the success of the business as whole, we run the risk of what is “local optimization.” Local optimization is what happens when one or two parts of business succeed but the company as a whole fails. We all know the importance of setting goals and encouraging people and departments to be successful. However, goals need to stay aligned with the success of the whole business.
Let’s remember, the goal of a business is to make money now and in the future. How does your view of your business need to change?
Jim Hayward has is an accomplished professional in process improvement and talent development. For over 15 years Jim led the process improvement initiative for a leading magazine and product fulfillment company based in Des Moines, Iowa. He has also worked as a consultant for many organizations in and around the central Iowa. He has taught and studied various process improvement methodologies including the Theory of Constraints (TOC), Six Sigma and Lean. Jim also has extensive experience with the development and evaluation of adult education.