Author: Don Turner

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COMPANY RESTORATION IN THE NEW NORMAL – PART 4 – 5 C’S RESTORATION STRATEGY – THE FINAL 2 “C’S”

From the mind of Don Turner – “Creating Clarity in a World of Complexity’

 

We are in our last installment of “Company Restoration in the New Normal.” I hope you are finding it informative and it is prompting some of your own thoughts about what to expect as we conduct business in this new world, we have found ourselves. Again, I invite you to leave comments on your thoughts so we can all learn together.

“The capacity to learn is a gift; the ability to learn is a skill; the willingness to learn is a choice.”

~ Brian Herbert

In Part 3 we introduced this mind map of the “5 C’s Restoration Strategy” and discussed the first three. In this final Part 4, we finish introducing the last 2 “C’s” and talk about the future.

5 C Restoration Strategy

COMMUNITY

“Alone, we can do so little; together, we can do so much”

~ Helen Keller

Your business operates within a community of Suppliers, Customers, Lenders, Local Government, and more. In “normal” times there is always a level of dependency with each member of this community. I know many companies like to talk about “partnerships” over “vendorships”, but the reality is that there is always a recognition that if needed there are options to replace one member of your community with another – i.e., the “law of supply and demand.”

Given the increased requirements of conducting business in the New Normal, you will be forced to have more detailed, more transparent, and more involved “heart-to-heart” discussions with everyone in your Value Chain. You will certainly need them to be accommodating to your liquidity pressure as they will require the same of you.

If there ever was a need for commitment over-involvement, the New Normal is the time.

With all due respect – and somewhat “tongue in cheek” – you and your business community need to embrace the “swine mentality.”

What does this mean?

For Suppliers associated with some form of fabrication, you may have to jointly work out the flow of raw materials with the flow of cash. As mentioned in the last installment, this will likely have several characteristics to it:

  • You may have to interactively negotiate cash flow terms between your Supplier and yourself and with     your

Customer and yourself.  This will require a level of trust

AND transparency that all parties are most likely not accustomed to. Expect to have honest discussions around “normal” margins and temporary New Normal margins – i.e., “I’m working at 20% less margin, can you sell to me for 20% less?” Who knows? In the short-term, you may have to “open the books” to negotiate with your Suppliers and Customers.

  • If – and that is a big IF – this is done successfully, would fully expect these relationships to evolve into strong “shared goal” partnerships as we evolve into later stages of the New Normal.

For service Suppliers, the challenges maybe even more difficult given that in tough times cutting back on outside services is typically one of the first burn rate reduction initiatives. With this in mind, there will be a renewed focus on monetarily quantifying your value-add to your Customer. This will be a rude “wake up call” for many Service Providers who have ignored this service-providing fundamental for way too long – i.e., paying “lip service” to it in promotional literature without routinely reviewing, refining, and enhancing their value to the marketplace.

You may have to provide a partial service to your Customers for a heavily reduced amount just to keep the business. In this case, you may have to significantly broaden your Customer base providing a narrower focus of services for heavily reduced prices.

All this said, with either fabrication or service Suppliers, I would expect that those business communities that survive and evolve into the New Normal to represent phenomenally stronger entities. This should serve them well in the future.

We addressed “Customers” as a stand-alone item in the 5C Restoration Strategy but it deserves some additional discussion in the context of your business community.

Customers should be open to discussing mutually beneficial arrangements where you can offer a temporarily reduced price and in turn, they will give you a long-term commitment to continue purchasing as the market becomes healthier. As with your Suppliers, you will likely have discussions that involve an entirely new level of transparency.

Again, everyone is simply trying to engage in commerce again. Communication, creativity, transparency, and commitment are the ground rules for the New Normal.

Lenders have always been willing to talk about helping in a distressed situation. Trust me, they don’t want to see you fail – costs them money, time, and a whole lot of paperwork. In the New Normal, there may not be much new capital available through traditional lending institutions (ED: we will briefly address the role of Private Equity at the end) but that is likely not your issue. Early in the New Normal, businesses will most likely be looking to “buy time” in dealing with existing institutional debt.

Relative to new lines of credit, I don’t see this as an impossibility if the Lender is brought into the interactive and integrated discussions that you are having with your Suppliers and Customers. At the risk of repeating myself ad nauseam, this will require complete transparency and a commitment by all members of your business community to work together. “Good and Services” move on the current of “Cash Flow.”

COMMERCE

“When only one party makes a profit that’s robbery; when all parties make a profit that’s business.”

~ Amit Kalantri, Wealth of Words

Last but not least is the business itself. An involved topic but the key points are:

New Normal Marketplace Ground Rules – you must take an honest, fresh look at your value proposition into the marketplace. Think through the real value your offering has to your Customers. If you can’t answer the following four questions succinctly then you have a true “value proposition problem” with your business:

  1. “Why should the Customer listen to you?” 2. “Why should the Customer listen to you now?
  2. “Why should the Customer buy from you?”
  3. Why should the Customer buy from you now?”

There is a “brave new business world” coming via the New Normal and I see only quantifiably value-offering businesses surviving, much less thriving.

SHORT-TERM GAME PLAN – the first step in your Restoration is to deal with all of the aforementioned. In addition, have a Restoration Game Plan that you look at EVERY day, THROUGHOUT the day. Each day should involve laser-focused attention to balancing:

 

  • Delivery Cycle Excellence – if your offering is still relevant in the marketplace then there will always be Customers for those who can deliver real value quickly, cost-effectively, and with superior quality.
  • Liquidity Management – in the early stages of the New Normal, liquidity hiccups can be deadly. Constant vigilance and constant communication backward and forward in your Value Chain is critical.
  • Culture – remember your employees are no longer coworkers. If you have made the management to leadership       transition effectively they are your “Battle Buddies”, your

“Foxhole Friends.” Communicate, communicate, communicate.

LONGER-TERM GAME PLAN – obviously the longer we look into the future the less clear our “crystal ball” will be. However, looking into the future is something we all must do – the alternative is to face the professional ignominy of being a “Reaction Manager” versus a “Proactive Leader.” Note, this “looking into the future” is where the art and science – and trust me it is clearly both – of Strategy comes into play.

The fact is that we may not make strategic decisions daily, but in a lifetime of developing and executing strategy, I guarantee you that you are exposed to “strategically-relevant” information EVERY day, throughout the day.

If you don’t have the processes and tools to capture in real-time you should at least set aside some time at the end of every day and ask yourself, “what did I learn today that may impact my long-term direction at some point in the future?” This observation can involve the market in general, Customers, Competitors, Offerings, or the underlying technology that is part of your marketplace. Sometimes it is nothing more than a “tidbit” of news – you need to learn how to identify “potentially” important strategic data (ED: it is a sad testimony to our Business School educational system that many professionals have never been taught to be “Strategic Thinkers”).

An additional observation based on a little bit of experience on the topic is to understand what is becoming LESS important in the marketplace. Many professionals only try to understand the emerging or growing trends – remember how we said that is the “essence” of strategy – and that is a good thing. However, what is often ignored from a resource planning perspective is also trying to understand what is becoming less important. It is amazing how many times I have found organizations still investing significant resources – time, personnel, and capital – on items that are becoming less relevant in their marketplace.

Bottom line, the objective is to gather and organize strategic information in a way that it is useful when you formally sit down with your Team to refine your strategy – whether that be monthly, quarterly, semi-annually, etc. (ED: timing is a function of the “velocity” of your particular marketplace).

“It’s amazing how a little tomorrow can make up for a whole lot of yesterday.”

~ John Guare, American Playwright

FINAL RANDOM THOUGHTS

Given that in recent years I have worked with a lot of Private Equity organizations, a comment or two about how they will play and play into the New Normal seems appropriate.

First and foremost, they will be laser-focused on the survival of their current portfolio companies. They always hold back extra capital – i.e., “dry powder” – to further invest in their portfolio companies when either things have not gone as planned or there is an opportunity to grow even faster. Obviously, nothing prepared them for this economic calamity of a global scale. It is likely that some “fire sales” will be taking place as they identify portfolio businesses that simply aren’t relevant in the New Normal and need to be jettisoned.

That said, once their portfolio is relatively stabilized, expect them to be on a “rollup” frenzy – where a “rollup” is when an investment firm buys multiple smaller companies in the same market with the intent of developing economies of scale and becoming more of a dominating force in that particular marketplace. With the expected business casualties of the New Normal, it is likely to be what we refer to as a “target-rich environment” for buying distressed companies.

As a business professional, it would be to your benefit to follow these rollup activities and look for opportunities for your own business. Ahhh, but that is a topic for another day.

SUMMARY

As we come to a close on our look at restoring companies in the New Normal, let us review what we discussed:

  • We are NOT going back to normal, there will be foundational changes in our society, our culture, and the manners of how we conduct commerce.
  • Surviving – much less thriving – will involve far more involved techniques than normally associated with “Restructuring” or “Turnaround” – though the actual stages remain the same
  • Successful business Restoration will require innovative approaches to managing Cash, Customers, Culture, Community, and Commerce itself

So. we are headed for a New Normal – of that, I have no doubt. Here is to hoping that we can use these “interesting times” to our advantage and make a better world for all.

Particularly in challenging times, success is NOT about knowing the answers to tomorrow – few have that prophetic ability.

Future success is based on asking the right questions today.

Good luck. May you and yours be safe and healthy.

Don Turner, 24 Apr 2020

Don Turner

Don Turner is a serial growth and turnaround executive with success in a broad range of marketplaces and business situations. He is also an internationally recognized Strategist who has deployed his VOGI® Strategy Methodology in over one-hundred organizations ranging from startup to NYSE and NASDAQ public companies. Routinely called in to deal with some of the most difficult business problems, one executive summed it up as, “everything Don touches is better as a result.”

From the mind of Don Turner – ‘Creating Clarity in a World of Complexity’

Contact

don@turnerworld.com

678.361.3313

www.turnerworld.com

Thank you for visiting our blog.

Jim Weber – Managing Partner, ITB Partners

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COMPANY RESTORATION IN THE NEW NORMAL ©2020 Donald H Turner – PART 3 – 5 C’S RESTORATION STRATEGY – THE FIRST 3 “C’S”

From the mind of Don Turner – “Creating Clarity in a World of Complexity”

In Part 2, we discussed the underlying factors of the New Normal that will force a more intense way of looking at “fixing” companies that have been broken by this global calamity. Building off of “Restructuring” and “Turnaround” approaches, we identified the increased difficulty and complexity associated with the New Normal and introduced the concept of “Restoration.” Restoration efforts will require fixing distressed businesses in an environment where not only they themselves but their entire marketplace – Customers, Suppliers, Lenders, etc – are distressed also.

We suggested this will require an evolution of traditional “Restructuring/Turnaround” perspectives and approaches to successfully restore a troubled business back to prosperity.

With this third part of our series, we introduce the first three of five activity topics we suggest should be addressed when “restoring” business in the New Normal. These topics – Cash, Customers, and Culture – are shown in the following exhibit:

5 C Restoration Strategy    

Before we go into further detail for each of these topics, a couple of important thoughts:  First and foremost, these activities don’t happen in isolation – there are strong interrelationships and interactions between them.

  • Secondly, given the interrelationships, they must all be executed simultaneously with an eye to integrating and balancing focus and resources
  • Thirdly, are there other activities to execute? Certainly, however, I believe they can all be covered under one of these 5 C’s

Let’s take a look at the first three:

CASH

Cash combined with courage in a time of crisis is priceless ~ Warren Buffet

The proverbial “Cash is King” saying is never more relevant than it is today. For a company to “restore” itself and survive they must determine how much liquidity runway they have at the current burn rate – most likely under various pessimistic to optimistic scenarios.

These scenarios take into account your entire value chain – from Suppliers to Customers – and are based on the multitude of creative cash optimization tactics one can employ.

Not Enough Runway

Not enough runway? Then obviously some hard decisions must be made. The point is that as we enter the first phase of the New Normal, we need to determine how much runway the company has. The length of the liquidity runway dictates both the urgency and types of decisions to be made.

Anybody who has done turnarounds knows the endless variety of decisions that can be made to improve liquidity. We won’t go through all of them here but suffice it to say your initial Restoration decisions will almost always involve prioritization and retraction. You must prioritize those activities and resources that are MUST HAVE to restore the business. Based on that prioritization you need to identify where retraction makes sense – at least in the short-term. As mentioned in Part 2 of our discussion, this retraction might include determining what Customers you can’t serve, what products or services you can’t offer, what delivery channels are superfluous, what resources – both in personnel and facilities – are not absolutely necessary.

Remember this retraction requires focus and that focus is on the “Delivery Cycle” – those activities directly associated with selling, delivering, and servicing your offering. These activities are all Customer-facing and have a direct and immediate impact on your revenue. Longer-term activities like identifying and creating new offerings associated with the “Development Cycle” can wait.

Development – Delivery Cycles

A final thought on Cash is that it is also important to identify creative ways of extending or even using non-cash transactions. Again, mentioned in a previous part of our discussion, some of the obvious ways are bartering and consignment. However, I also expect to see in the early stages of the New Normal businesses negotiating concurrently with both the Supplier and Customer side of their business to ensure optimal cash flow. Remember, EVERYONE is in the same boat and has a common objective of survival! If there ever was a time to conduct creative transactions now would be the time.

CUSTOMERS

Without Customers, there is no business to restore.

In the New Normal, you will find yourself engaging with your Customers more honestly, period. Restoring your business concurrently with your Customer restoring their business will require a new level of transparency and openness in your discussions.

In the New Normal, Customer communication will take on an entirely new level of importance. Embrace it, this is a good thing in the long run!

My personal and professional hero has always been my Grandfather. He started me off in the world of business by reading Horatio Alger to me as a child sitting on his lap (ED: while listening to Eddie Cantor records, I remember the time fondly and well). He had me work in his real estate and construction office before I was ten, driving our supply truck to deliver material to the crews as soon as my feet could reach the gas pedal, clutch, and most importantly, the brake. My fundamental view of business, hard work, and dealing with people, in general, all came from him. Ahhh, but that is another story.

I remember one of the most profound things he ever said – and Grandpa had a lot of them. After meeting with someone in his office where I was allowed to sit in the corner, keep my mouth shut, listen, and watch, he once said, “You know Donny, 95% of all the problems you could ever have with a Customer are based on poor communication. The other 5% is a rounding error.” As I said, Grandpa was a wise man.

In the early stage of Restoration, you cannot over-communicate with your Customers. Yet, in the New Normal, you should do be doing more than just communicating. You should be interacting, engaging, finding new ways of working together, new definitions of mutual benefit. In the New Normal, your Customers will exhibit a level of vulnerability that you’ve never seen before. Use this time to strengthen your relationship with them.

Value Proposition

Evolve the value proposition between the two of you. How can delivery costs be reduced?          Can packaging be done differently? Can services be bundled? These and many questions should be asked in an attempt to creatively increase the real value between you and your Customer.

Of course, in the New Normal if your business offering is not as important to your Customer as it was before, or worse yet, no longer relevant to them than you have a fundamental “going-concern” problem. Remember, without a clear value proposition you simply aren’t relevant to your Customer – they are restoring their own business with the same intense concentration on prioritization and retraction.

CULTURE

Collectively, people are your culture and it is the culture that helps drive business success.

Yes, your people are valued individuals. However, even more importantly, as a group, they represent the culture of your organization, and in the New Normal that culture will require a new perspective on how to effectively manage.

It is your collective culture that creates the “Customer Experience” as it defines, creates, and delivers your offering to the marketplace. Better culture, better offerings, better delivery, better Customer loyalty (ED: I have strong opinions of loyalty versus satisfaction, for a GREAT read “Customer Satisfaction is Worthless Customer Loyalty is Priceless” by Jeffrey Gitomer, it will radically change your view of “satisfaction”).

Firstly, let us get the unpleasant stuff out of the way. You may have to downsize – in fact, you most likely already have and will downsize even more as you restore your business. One strong suggestion is to cut as much as you think you need for the foreseeable future. Nothing destroys culture like a Damoclean sword over everyone’s head. Once you conduct a reduction-in-force (“RIF”) you need to start rebuilding the Team culture.

Yes, part of this RIF from the reduced level of your present business. However, it is hoped that during this current isolation phase of the New Normal, you are learning how to “do more with less” via the effective use of technology and processes. This is an unpleasant reality but if you haven’t already figured this out, you haven’t been paying attention.

That brings us to our second point, defining the “New Normal Work Environment.” If your management style hasn’t in the past, I hope it is now evolving to focus on deliverables, not hours.

Yes, there are certain jobs that are fundamentally based on “hours” – e.g., Customer Service Representatives. Yet, there are countless other jobs where the number of hours you put in is not as important as the deliverables you produce. That is a fundamental change in perspective for a lot of Managers who must learn to manage in that environment. The bottom line, I envision remote working to be a seminal change in the New Normal. Do we still need offices? In many cases, the answer is “yes”. However, do we need as much space, and do our employees need to be in there five days a week, eight hours a day? I don’t think so.

Technology will help enable a significant amount of the New Normal. Remote Team Management tools have been around for a while and continue to grow in their adoption. Video Conferencing will evolve. Electronic whiteboards will be the norm for Team brainstorming. Workflow Management solutions will increase the velocity of deliverables through an organization. We will find that the effective use of technology will not only enable business in the New Normal but evolve and enhance it like never before.

One positive of the New Normal is that there will be shorter, more focused interactions – particularly in the use of meetings. I have had several executives tell me of late that what would have been an “in-office” meeting of an hour to an hour and a half was done via a video conference in half an hour – and they felt more was accomplished.

When I worked in major corporations, I always told my Team that independent of “emergency meetings” that are occasionally required, they had my permission to completely ignore any meeting request that did not include an Objective, an Agenda, and an Expected Deliverable twenty-fours in advance of the meeting. It is amazing to see the increased meeting productivity simply having those items identified ahead of time. Maybe even include “prep work” prior to the meeting (ED: it may worth your time research the meeting culture of Amazon via Jeff Bezos – something to be said for it).

By the way, unless it is a general presentation, during a working meeting anybody that hasn’t had anything to say probably shouldn’t have been invited anyway. They can read the meeting summary later – don’t waste their time. Remember, this is “live or die” focus time.

During this same time, you should be looking at how you “re-engineer” your processes – i.e., simplify, streamline, make more efficient, more effective. The best time to reengineer processes is when you have to because that is when the organization puts up the least resistance to change.

The critical question going forward is how to compensate employees when cash is limited. You will likely have to be creative with the employees you retain. Some form of reduced pay with a clear game plan for making them whole sometime in the future through future cash flow or equity. However, no “creative” payroll strategy will work without a new level of transparency into the financial realities of the business. That said, you would be surprised how many employees when given the “naked truth” of a Company status will nod their heads and say, “okay, I understand, let’s make this work.” Who knows, you might build an even stronger, more cohesive, more dedicated, more productive culture as you continue your Restoration.

There is a bond that is created between those who suffer together. Between those who face life-changing events together. Who lay it on the line together. They call it  Foxhole Friendships.

At this point, I’m hoping that there are no surprises on what will be required for restoring business in the New Normal. Yes, it will be difficult – most likely excruciatingly so. If there is any consolation in what we all will be facing it is that: a) we will be doing it together; and b) for those of us who successfully restore our businesses and survive we will be undoubtedly stronger for it.

Okay, we looked at Cash, Customers, and Culture. Tomorrow, Community and Commerce.

Don Turner

don@turnerworld.com

678.361.3313

www.turnerworld.com

 

Thank you for visiting our blog.

Jim Weber – Managing Partner, ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

Jim Weber – Managing Partner,  ITB Partners

 

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COMPANY RESTORATION IN THE NEW NORMAL ©2020 Donald H Turner From the mind of Don Turner – PART 2 NOT YOUR DADDY’S RESTRUCTURING, BUT RESTORATION

In Part 1, we identified some of the more important characteristics that will be driving the New Normal. In this discussion, we will focus on how business professionals should be looking to respond to the New Normal.

First and foremost, it is clear that many companies are and will be faced with survival, pure and simple – doing whatever they can do today to ensure they are in business tomorrow. This is a reality that must be dealt with. Some will make it, many won’t.

That aside, if the company has enough “liquidity runway” to reenter the marketplace than the question is “how?” As we return to the world of commerce, it will be clear to all involved that is not going to be “business as usual.”

Given the current situation, the natural tendency is to turn to the methods that fall under the topic of “Turnaround” or “Restructuring” in an attempt to return a company to prosperity. Even so, I believe we will quickly find that these traditional ways of  “fixing” organizations are insufficient. I believe these Restructuring/Turnaround approaches must be modified and evolved to reflect the realities of conducting business in the New Normal.

To differentiate this new perspective,

I’m suggesting that conducting commerce in the New Normal will require a “Restoration Strategy” mindset. We aren’t simply “restructuring” companies, we are “restoring” them to going entities. We aren’t simply “turning around” companies, we are “restoring” their business models modified for the realities of the New Normal. Restoration will require answering questions, developing approaches, and executing tactics that have never been part of a “typical” Restructuring or Turnaround effort.

I’m suggesting that the fundamental difference between Restructuring and Restoration will be the underlying environment. In a Restructuring situation, the company itself is distressed. In a Restoration environment not only the company, but it’s a marketplace – Customers, Suppliers, Lenders, everyone – are distressed also. This extra level of calamity will force us to conduct commerce in entirely new ways with new levels of focused cooperation.

TYPICAL RESTRUCTURING

To understand the concept of “Restoration” – which builds on “Restructuring” and “Turnaround” methodologies, let’s make sure we understand what is typically involved with the Restructuring/Turnaround.

Please note, we are taking the concept of “Workout” out of the equation here. In my distressed company lexicon, a “Workout” is when a company is already in or close to some form of receivership and it is likely no longer a going concern. In this case, the focus is working with Banks and Creditors to maximize asset monetization. Workouts in the New Normal will clearly be common, but the focus of this article is with businesses that have the potential to restore themselves and prosper.

In contrast – as someone who has been involved in a few turnarounds over the years – I view a Turnaround as a situation where the company is distressed and clearly in trouble but there is a possibility of “fixing it” and making it a healthy, growing concern again. I would be the first to admit that it doesn’t always end that way but the difference is the intent going in. That intent drives what you immediately do in a Turnaround situation.

As a common discussion point, let’s all reacquaint ourselves with “Turnaround 101” by discussing the four major stages – as shown in the following exhibit:

Let’s briefly review each stage.

Stage 1 – TRIAGE – this first stage is the most critical and essentially represents a “GO” or “NO

GO” decision. You must quickly assess the company in terms of liquidity, resources, operations (ED: “processes”), and its marketplace. Note, a comment on this last item. Some turnaround efforts ignore an effective look at the marketplace and after fixing the company find out that it should not have been fixed in the first place because of an unattractive market based on size, growth, competitors, profitability, etc. – i.e., remember to look at the external marketplace during Triage. Back to this initial assessment, you are trying to answer the question, “do I have something worth saving as a going entity?” Your focus is on items such as liquidity, burn rate, and Customer communication (i.e., read “retention”). The bottom line, you are focused on what we call “stopping the bleeding.” Further, what is often not realized is that in this early stage of triage, you must simultaneously start developing a “vision” for the future of the Company that can be communicated to Customers and Stakeholders (i.e., employees, board, investors, creditors).

Stage 2 – STABILIZE – this second stage is focused at creating consistency and predictable operations – particularly in terms of burn rate. That is Revenue less Expenses on a cash basis. One of the fundamental tenets of Japanese Total Quality Management developed back in 1954 is that to “fix something” you must do whatever you are doing – no matter how badly you are doing it – in a consistent manner. Starting your “fixing”, your initial focus is outward-looking – repairing/improving any and all Customer-facing activities such as product quality and delivery. At the same time, you communicate to Customers the actions you are taking to assure them of the company’s health and ongoing vitality. Internally, you concentrate on those items in the “Delivery Cycle” – specifically Sales, Delivery, and Customer Service. Generally, these can all be fixed relatively quickly. As the “Delivery Cycle” is stabilized you can then later turn your attention to the “Development Cycle” that includes Marketing/Development/Engineering (ED: this latter cycle has a slower “velocity” or “cycle time” and requires more time to change). In stabilizing the company, your greatest focus is on those items that can make an immediate, positive impact on Cash, Customers, and Delivery. During this stage, you also begin communicating the “vision” that was developed in Stage 1 to Customers, Shareholders, and Employees. Particularly with Employees, you must encourage your top employees to stay and embrace the vision (ED: in a typical distressed situation your best employees most likely already have their Resumes “on the street.”)

With Vision, there is clarity of purpose. Without Vision, there is chaos of existence.

Stage 3 – PROFITABILITY – If you have effectively stabilized the company to some form of consistency than the next stage is focused at profitability – generating EBITDA and a cash stream that ensures sustainability. There are countless techniques Turnaround Professionals use – dependent upon the situation – but some of the more obvious ones might include: product line rationalization, Customer attractiveness prioritization, revenue-generating Customer service, alternative Delivery approaches, cycle time reduction, product testing improvement (ED: product quality may take longer), etc. At this stage, you are also starting to work the “Development Cycle” including the product roadmap for new offerings that might be more attractive to your Customers. The bottom line, at this point you have a going concern and your next focus is how to put the company on a healthy growth track.

Stage 4 – GROWTH – with a going, profitable, concern you are now looking more strategically to the future in terms of markets and offerings. You are addressing questions such as: “Do I have the right offerings and business model for my current market”; “What else can I sell to my current Customers”; “Can I use my offerings or core competencies to expand to other markets” – i.e., generate new Customers. Generally, most of these questions all fall under the auspices of the Ansoff Matrix – which represents an effective framework for identifying growth/risk opportunities (ED: have used this framework dozens and dozens of times to help identify, evaluate, and select growth initiatives for an organization). The final, bottom line “big question” is “What company focus – i.e., “strategy” – will generate the maximum return for the Investors?”

These are the basic stages of a typical Turnaround. Given the many possible problems and the many possible solutions, Turnaround approaches are almost always modified as needed for a specific distressed situation.

HOW IS RESTORATION DIFFERENT?

What is different about a “Restoration” versus “Restructuring” as it relates to the New Normal? The actual stages of a Restructuring remain the same, but the underlying conditions are significantly more formidable – creating greater requirements and likely entirely new requirements to successfully “restore” the company to a healthy status. You can think about these requirements in four major categories – Environment, Personnel, Liquidity, and Emotional Intangibles. I am sure we could address more, but let’s focus on these for now.

ENVIRONMENT – as mentioned, in a typical Turnaround the Company is in a distressed state whereas in the New Normal almost every business surrounding the Company will be in some form of distressed state – i.e., everyone is “in the same boat.” The good news is that everyone around the table will be acutely more focused and amenable to “making something happen.” This reminds of the quote from the 18th century English writer, Samuel Johnson, who said;

“Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”

The environment in the New Normal will be characterized as a fierce determination to survive that will force business professionals to develop and consider new approaches to keeping their business alive – particularly through the early stages of the New Normal. Expect less long-term relationship development – “survival timing” simply won’t allow. Discussions between marketplace partners will be one of “putting your cards on the table” and asking “what can we make happen between us that will be a win-win?” Golf course discussions will become lifeboat discussions.

PERSONNEL – in a normal Turnaround situation your best employees have ample opportunity to go elsewhere – that is why they are your best. However, in the New Normal their prospects of leaving are diminished – that is the good news. The bad news is the increased challenge to motivate people when they feel they are “trapped.” That said, I envision this as an opportunity to build an esprit de corps in your company culture like never before. In our next installment where we discuss “Culture”, we’ll explore this a bit more. Suffice it to say that the New Normal will create the “potential” environment where coworkers become akin to “battle buddies” and all that implies – ask anyone who has been in armed conflict about this significance. Note, an important point is that leading battle buddies will require a far more effective leadership than supervising coworkers.

LIQUIDITY – in the New Normal everyone has limited liquidity, not just you but your Customers, your Suppliers, Your Lenders, etc. Everyone wants to conduct business but everyone also has limited buying power to purchase goods and services. Surviving and then prospering – relatively speaking for at least the short-term – in the New Normal will require creative ways of using limited capital to conduct business. I fully envision the barter system to be resurrected for certain types of transactions – particularly in the service sector – as well as creative consignment approaches for getting product in front of potential buyers.  Payment terms will have to be negotiated almost simultaneously along the entire supply chain.

EMOTIONAL INTANGIBLES – by their very nature normal Restructuring efforts place tremendous stress on everyone in the business. Be that as it may, in Restoration – under the New Normal – we can expect a higher level of emotional stress throughout the organization than we have never seen before. The options we face under the New Normal are limited and with limited options comes an accompanying realization that this is truly a “do or die” situation. Decision-Makers will agonize over their choices more than they ever have – as will everyone in the organization whose livelihood is impacted by those decisions.

As we can see, these underlying factors of the New Normal will place tremendous pressure on every business professional to get creative. I believe one positive outcome – and I actually think there will be many – of these pressures is for a greater level of transparency in transactions between parties. The urgency of “restoring” business in the New Normal simply will not allow for the typical “games” often found during the sales and negotiating activities.

In many ways, the Restoration of companies in the New Normal can be viewed as “Restructuring on Steroids.”

What should businesses do in trying to respond to the New Normal? In Part 3 we’ll discuss some thoughts about specific actions.

 

 

 

Dpm Turner

don@turnerworld.com

678.361.3313

www.turnerworld.com

 

Thank you for visiting our blog.

Jim Weber – Managing Partner, ITB Partners

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COMPANY RESTORATION IN THE NEW NORMAL ©2020 Donald H Turner From the mind of Don Turner – “Creating Clarity in a World of Complexity

“I’m not Chinese. I thrive in interesting times.” ~ Charles de Lint ~

In both culture and commerce, we live in what many would consider “interesting times” – as stated in the old Chinese proverb. A proverb, by the way, that is intended as a curse, not a blessing.

Our “interesting times” have officially decimated the worldwide economy, ravaged social norms, and rattled the psyche of many. As we come out of this pandemic-driven calamity we face a truly “new world.” Whether it will be a “brave new world” is yet to be seen – but a “new world” it will most certainly be.

I have learned in a career-focused at disruptive technology marketplaces – often leading edge – is that change is a threat to the meek but an opportunity for the bold. Navigating the New Normal will take – as we will discuss in future parts of this Article – an intrepid head and an empathetic heart.

As a serial CEO and Business Strategist, I have also learned that identifying change is part and parcel to an effective strategy. In its simplest form, the “essence” of strategy is to “look over the horizon” and identify macro trends – i.e., read “change” – that justifies the investment. The need to understand what is over the horizon and see those macro trends that merit the investment of manpower, capital, and time is more important than ever.

With this four-part article – that will be published over the next several days – I thought we would explore what the future holds for all of us. The four parts are Part 1 – The “New Normal” – No Going Back to Normal Part 2 – Not Your Daddy’s Restructuring, the Idea of Restoration Part 3 – 5 C’s Restoration Strategy – the first 3 “C’s” Part 4 – 5 C’s Restoration Strategy – the final 2 “C’s”
Writing is a cathartic process for me that forces me to think more thoroughly through ideas and concepts. It is my hope with this article to prompt some productive discussion about what the New Normal will be, how companies can start moving from isolation to the New Normal, and finally, what the long-term implications are for conducting business.

Thank you in advance for taking the time to read this and even more so to comment – I am interested in everyone’s opinion since that is how we all will learn and move forward together.

THE “NEW NORMAL” – NO GOING BACK TO NORMAL
©2020 Donald H Turner

I keep hearing from both mainstream and trade media talk about “when things will get back to normal.” From my perspective, that is simply wrong thinking. There is NO getting back to normal after this global disruption of – in our lifetimes – unprecedented scale.

As business professionals, we are being forced to take a fresh look at the fundamental societal changes that exist now and will be occurring in the future and understand how they will drive new ways of conducting business.

Simply put, we must prepare for the “New Normal”

After giving it considerable thought over the past several weeks, I’ve developed four observations that I’ll share here as fodder for discussion.

FIRST, the New Normal will NOT come all at once. It will evolve in phases over the next six to twenty-four months as we move from isolation to controlled distancing to an environment that – once vaccines are readily available – will allow us to interact face-to-face again on a safer basis. One thing I know for sure is that many individuals throughout our society will be permanently “scarred” from this pandemic and never embrace face-to-face interaction as they did in the past.

SECONDLY, the New Normal will certainly contain “holdovers” from our current isolation phase that will represent – in some cases radical – changes to our lives in general and how we conduct business specifically. Yes, we will make more use of, be more comfortable with, and find ways to enhance the virtual experience that we have been forced to at the present moment. One individual I recently read said, “We’re currently in the epicenter of the biggest remote-work experiment in history….” Clearly, there will be part of the population that permanently embraces “electronic presence” over “physical presence” and will want to continue to live and work that way.

THIRDLY, the New Normal will change the commerce landscape – there is simply no getting around that. Some products and services will simply become irrelevant, while others become more important. Of even more interest are the new solutions that will arise to support – if not enable – the New Normal. Will movie theaters ever enjoy their historical attendance as many find they have enjoyed in-home entertainment more? Will discretionary “claustrophobic” air travel ever reach traditional levels as many will value individual travel freedom in a car? Will this drive more travel domestically versus overseas? Will office space ever be viewed with the same attractiveness? How will relationship-building evolve as we simply don’t have the same level of physical interaction as in the past? What will take its place? Will we focus less on the trappings of a business environment and focus more on what individuals are saying? Answering these questions and many more are all part of trying to understand the New Normal.

FOURTHLY, we – as a country and more specifically as a consumer population – are going to be taking a harder look at our trade with foreign powers. Yep, you guessed it – specifically China. China has managed to reposition itself in the global mindset from one of historical suspicion to blatant cynicism. At this point, I don’t believe anyone knows the real origin details of the coronavirus and who is responsible – or is it simply a force majeure of epic proportions. That said, this we do know:

  • China delayed letting the world know about the coronavirus – there was a government-driven movement to suppress information about the coronavirus – even threatening the doctor who warned his colleagues about a possible outbreak. On 3 Jan 2020, Wuhan police summoned and admonished him for “making false comments on the Internet” – forcing him to write a retraction. Unfortunately, this ophthalmologist, Li Winliang, later personally contracted the virus and has since died at the age of 33.

 

  • U.S. healthcare found out quickly that too many of our critical supplies – including pharmaceuticals – were made in China. Our healthcare supply chain was negatively impacted by the virus in China, creating significant problems in the U.S. Furthermore, as China rushed to provide us with needed supplies like N95 respirators, ventilators, and other medical supplies we found out they had serious quality problems and were all but unusable. There is already a movement to take a fresh look at what we allow to be manufactured in China versus in the good ole USA. Hopefully, we will recognize that having a stuffed toy being made in China is of far different importance than from having a life-saving medical device. I am all for a global economy but I’m also all for prioritizing our supply chain and identifying those items that independent of the cost are best manufactured at home.

 

  • China has both misrepresented and misreported coronavirus statistics to the world. There has always been skepticism about information from China, but now it has become blatant. In a world where we are seeing in the hundreds of deaths per million people – e.g., Spain 455, Italy 399, France 310, UK 241, with the US at 129, etc. – China reports “3”. That is right, in the country where it all started and I would suggest doesn’t have the Healthcare System of the aforementioned countries, they are reporting 3 deaths per million people. In case you’re curious about what other countries of importance are reporting numbers similar to China you don’t have to look any further than Russia – another bastion of information transparency – which is also reporting “3” deaths per million people. The bottom line, it is difficult to do business with someone you can’t believe and simply don’t trust.

So, these observations beg the question, “what does all this New Normal mean for business?”

In Part 2, we’ll address the idea that managing in the New Normal will require an approach that goes beyond what we have typically referred to as Restructuring or Turnaround. It will call for an approach that I’m referring to as “Restoration.”

Dpm Turner

 

don@turnerworld.com

678.361.3313

www.turnerworld.com

 

Thank you for visiting our blog.

Jim Weber – Managing Partner, ITB Partners

I hope you enjoyed our point of view and would like to receive regular posts directly to your email inbox.  Toward this end, put your contact information on my mailing list.

Your feedback helps me continue to publish articles that you want to read.  Your input is very important to me so; please leave a comment.

Jim Weber – Managing Partner,  ITB Partners