Platt Perspective on Business and Technology

Rethinking exit and entrance strategies 33: keeping an effective innovative focus while approaching and going through significant business transitions 23

Posted in strategy and planning by Timothy Platt on July 5, 2019

This is my 33rd installment to a series that offers a general discussion of business transitions, where an organization exits one developmental stage or period of relative strategic and operational stability, to enter a fundamentally different next one (see Business Strategy and Operations – 3 and its Page 4 and Page 5 continuations, postings 559 and loosely following for Parts 1-32.)

I have been working my way through a to-address list of closely interrelated topic points since Part 28 that address a set of issues fundamental to that overall business challenge. More specifically, I have discussed its Points 1-3 in a relatively significant level of detail and have offered at least preliminary, orienting comments on its Points 4 and 5 too. My goal here is to at least begin to more fully discuss those last two points, and I begin doing so by repeating this topics list as a whole, for smoother continuity of narrative and for greater clarity as to what, overall, I am addressing here:

1. Reserves as a cost because they represent assets and in fact liquid assets that cannot be turned to and used, except in what might be more emergency situations – and the need for larger reserves as risk increases: a situation that arises when facing real novelty, and unknowns and unexpecteds as would be found in true transitions.
2. Changes in goals and scope of action, and in the level of detail of processes under consideration that have to be monitored, and how that overall form of course correction can be intentionally proactively sought out and developed, and how it can be reactively forced upon a business and its leadership.
3. And in a more strictly project context, or at least in more strictly project-oriented terms: consider scope creep and scope expansion in general, and its opposite with scope compression and simplification where details are dropped and goals reduced …
4. With and without organized, strategically aware planning and forethought to back such decisions.
5. I added that I would discuss these issues at least in part in terms of goals and priorities collisions, where more strictly cash flow and financial considerations, and risk and benefits considerations, and overall business goals can all come into conflict and even direct collision with each other. And my goal there is to at least begin to offer some approaches for both better understanding these scenarios and their dynamics, and better addressing and resolving them. And then after addressing all of that, at least for purposes of this series, I will proceed to reconsider exit and entrance strategies per se again, this time from the perspective of this developing narrative.

To be more specific as to what I have offered up to here in at least starting to address the above Points 4 and 5, I raised a complex topics point in this context that I have in fact explored on multiple occasions in this blog, from a variety of perspectives and that all relate to the challenge of balancing consistency in what is done in a business and how, with flexibility as that would be called for when addressing change and particularly the more disruptively unexpected. And perhaps more to the point, at least for what I would offer here moving forward, I wrote in Part 32 of change in the basic intentions of the business itself, that might arise as the cumulative consequence of drift and that might be entered into in more definitive steps as well. And in this context, I offered the following question and accompanying comment:

• What is the overall goal of the business model in place? (Note: this is not a trivial question; answering it is not just an exercise in blowing the dust off of an old and even original business plan document from this business’ founding to repeat whatever was offered there. This is a question of what the business does now in practice and with what actual current goals and priorities.)

I said that I would address this question and its issues, among other topics in this and upcoming series installments and I said that I would do so in the context of an at least briefly and selectively sketched out working-business example. And I at least begin doing so here, by turning back to reconsider a business example that I have already offered in another series in this blog:

• ClarkBuilt Inc. is a small to medium size business by head count and cash flow that was initially built to develop and pursue a new business development path as built around its founders’ jointly arrived at “bold new innovative products” ideas. The Clark brothers, Bob and Henry came up with a new way to make injection molds for plastics and similar materials that would make it cost-effective to use injection molding manufacturing processes with new types of materials, and cost-effectively so. They have in fact launched their dream business to do that, and have developed a nice little niche market for their offerings, providing specialized-materials parts to other manufacturers.

I initially began actually discussing this business in Don’t Invest in Ideas, Invest in People with Ideas 41 – the issues and challenges of communications in a business 8 and in subsequent installments to that series, there focusing on how the founders and owners of that venture sought to maintain their initial vision, focus and goals. And I pick up on that case in point example again here, reconsidering it from a somewhat different perspective: one of change and of what can with time become compelled response to it.

To start this narrative thread, let’s consider a phrase that I added into this posting and its initial orienting note, as to the nature of the types of change that I would address here: change “that might arise as the cumulative consequence of drift and that might be entered into in more definitive steps as well.”

I have written in my Invest in People postings, about how the Clark brothers have actively worked to keep their business centered, and essentially entirely so, around their initial injection molding technology, only actively considering and supporting change in what they do or in how they do it there, that would serve to keep their specific innovation as competitively close to cutting edge as possible. But this, of necessity means allowance for drift in what they do, and particularly if they find over a period of years, that essentially all of the key steps and processes that enter into using their innovation as an ongoing manufacturing process, have been changed from what they did when first opening their doors for business.

Change happens and both by proactive intent and reactive response. In this case, let’s assume that the materials that they manufacture their parts from are different from what they initially used, and for the vast majority of their productive output, with only a few legacy-support requiring customers still asking for their earliest products and even product types for that. They make their molds out of different materials in all cases now. They use a new centrifugal casting technology now, that did not exist when they first started out but that they added in, in order to stay current and relevant. They use different tools and types of them for final product smoothing and processing prior to packaging and shipping after removing them from their production molds. And at least as importantly: aside from their few legacy clients and for when they are explicitly making legacy orders, ClarkBuilt is now manufacturing different types of products: a different assortment of replacement and customization parts than they did when starting out, and for business clients in different industries than they ever would have expected, and certainly at first.

So ClarkBuilt is still in the injection molding business, but as a different business than they were at first, and with different types of clients than they began with too. And to round this out, their underlying business processes have significantly changed through all of this too, as their growth as a business has called for more than just a simple linear, same path forward expansion in scale for how they manage sales and even just their basic business operations. This has involved creating a few new, at least small but still significant services in-house that began more as single step processes. They have expanded these aspects of their business into small organized services and even into what amount to small departments. And this has meant outsourcing a few functional areas that they had initially carried out entirely in-house too, including on the production side, the preprocessing of some of their now-key building materials that go into their injection molds, where it is now more cost-effective to leave that to specialist partner-supplier businesses.

But let’s go back to the issues and challenges of their manufacturing processes and the business that they have built around them. And let’s add time and its complications into this step-by-step evolving story. The Clark brothers started out with a novel approach to injection molding manufacturing, and a disruptively new one at that. Let’s assume that they were able to secure patent protection for their core innovation, that would fit into what might be considered the Goldilocks limits of scope: not too narrow so their patent could not easily by circumvented by making what in principle might even just be relatively minor adjustments to what they have on record as theirs, but not so broadly staked out where any serious legal challenge to their patents would lead to at least parts of them being found overly broad and invalid. If their basic innovation really offers value: their particular approach to injection molding and basic variations on it, other competing businesses will find ways to match what they do. And if they operate out of sites where labor costs are lower and they are satisfied with producing and offering acceptable but less polished final products, and if they specialize on lower-end products and on quick production and delivery of them, they might significantly eat into what had been ClarkBuilt’s basic market and its market share there. So ClarkBuilt has two basic options:

• Their design teams are the best in their industry and they are known for that. Anything that comes out with a ClarkBuilt label on it, for its basic design is going to be seen as offering premium quality (even if, on the low end and for more routine parts this might not be seen as necessary by a wide range of at least potential-client, purchasing businesses.) So they could focus on design and even on outsource their actual manufacturing and certainly of low-end products to remain competitive there. Or they might even walk away from that end of the business, and
• Focus on high-end and specialty products and their design and production, and particularly where this involves use of more exotic materials.

What happens to ClarkBuilt Inc. if it turns into a design shop as its primary source of incoming revenue, trading on its name brand and its in-house design excellence, and perhaps its supply chain excellence too, for bringing all of the pieces of the manufacturing and distribution puzzle together for the types of products that they are involved in manufacturing? And this brings me back to a question that I offered here, towards the top of this posting:

• What is the overall goal of the business model in place? What, in fact is the actual current business model that is actually in place there now?

The answer to the second of those questions, and by extension the answer to the first of them as well, might be very different from what the Clark brothers started out with. But more importantly, realistically current answers to them might be different from what the Clark brothers still see in their business, and different from how they at heart, still think about it and plan for it. I point out here that this is a series about exit and entrance strategies and business transitions. Game changing events can be backed into or they can be entered into with open eyes and on the basis of careful planning. My goal in bringing up this case study example again, has at least in part been one of laying a foundation for that type of discussion.

I am going to continue this posting’s discussion in a next series installment, where I will at least begin to address that complex of issues and in the context of the above-repeated Points 4 and 5. Think, in that regard of this posting as setting out to reframe them in terms of longer-term change and ultimately in terms of the exit and entrance strategy issues that even just small, cumulative incremental change can come to compel – and change in general as it informs this series and its overall narrative as a whole. And as part of that discussion to come, I will raise and address at least a few more basic questions, adding them to ones that I have considered up to here in this and recent series installments, and offering them both as business analysis tools and as a means for further clarifying the basic business planning and execution approach that I am outlining here. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 5, and also at Page 1, Page 2, Page 3 and Page 4 of that directory.

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