As many of you know, in addition to doing work as a business consultant, speaker and executive trainer I also own a small advertising firm called Flycaster & Company, which specializes mainly in the marine/sportfishing industry. Last week my partners and I traveled down to Miami for the boat show and I believe there are some great lessons to be learned from the turmoil now facing that troubled industry. As you read what I have to say about the boating industry in this blog, just keep asking yourself: “How might this apply to my business and my industry?” I have a feeling you’ll likely see many strong similarities.
As I walked the floor of the show I met with dozens of boat manufacturers, boat dealers and numerous vendors that supply the boat building, recreational boating and sportfishing industries, and the vast majority of them look like a deer caught in the headlights. They were dazed by the nearly 70% drop in their market over the last 18 months and kept saying that they “hoped” that things would turn around soon, they “hoped” they would sell a few boats, they “hoped” they would have a good show… and if not that maybe, just maybe they could find a way to get some of the economic stimulus package money! Well, hope is not a strategy and if some of these folks “hope” to still be in business at next year’s boat show there are a few harsh realities they are going to have to accept.
1. Things are not going to get better any time soon. I am not a doomsayer, far from it; I am actually one of the most optimistic people you will ever meet. But I’m also a realist, and it is clear to see that at least in the pleasure boating industry (and many, many other discretionary income-based industries) there is absolutely no way that they are going to see any significant improvements for the next 18 to 24 months… and probably much longer. It is time to stop hoping for things to turn around soon… and start figuring out a way to do whatever it takes to weather this storm.
Let’s be clear: The game has changed in the boating industry. The economics have changed, the financing has changed, the distribution channels have changed, the customers have changed — and you will likely need to make some extremely big changes in the way you do business if you want to stay in business. That is not fun – but it is the truth.
Unfortunately, a lot of the people that I’m talking about have been in the marine industry for 15, 20, 25 years and simply don’t want to change. They are comfortable. They have a set pattern and a way they like to do things — and they feel that after 20 years in the business they’ve earned the right to do it their way. I understand that it must be very hard to be faced with a severe economic downturn and a huge shift in the industry right when they were planning to coast into the end of their careers… but ending up bankrupt is an even less appealing scenario.
Several years ago I attended a conference of bankruptcy lawyers, not exactly the most jovial crowd I’ve ever spent time with, but I did learn some extremely important ideas from them. When I asked one of the most senior bankruptcy lawyers in attendance what he felt caused most companies to go out of business he replied that it was very simple and he saw it over and over again. He called it the four “I’s” of bankruptcy.
Ignorance: Not paying attention to the marketplace, to competitors, to what is actually happening in their industry and their own business. This is a company that puts their head in the sand and hopes that things will be better when they finally look back up – that someone will come to save them. Not a very effective tactic to put it mildly.
Inflexibility: Even though they see that there are changes in the marketplace… the people in this sort of business (employees and leaders alike) are simply unwilling to make the changes necessary to adjust to the new reality. They’re caught in the “we’ve always done it this way” trap and are inflexible in adapting to the shifts in their market. They resist change and refuse to adjust… leading to their eventual demise.
Indifference: This is an organization that thinks that because they’ve been in business for 30 years; or they are the largest; or have the widest array of products; or have always been the industry leader… that they do not have to worry. They keep telling themselves that they are unique and will not be affected by the same challenges and economic problems facing other businesses. Indifference to the reality of the situation is what almost drove a $90 billion IBM into bankruptcy in the mid-1990s and it will most assuredly claim many companies in the marine industry before this downturn is over.
Inconsistency: Due to the lack of clear vivid compelling vision and a focused plan of action for success, this sort of business is constantly changing their direction and priorities. They waste time, money, and precious resources chasing one idea after the next. Because they can never agree on one focused direction to move in, they never gain any traction or momentum and eventually fall by the wayside.
Far too many companies in the pleasure boating industry (and in numerous other industries, think: Ford, GM and Chrysler) suffer from one or more of these four fatal issues. Here is the hard truth:
- Things are bad and they likely will not get better in the foreseeable future.
- The way you have been doing business for the last 5-10 years will not work in this economy.
- Stop fighting the situation and start making the tough decisions you need to make to keep your business out of bankruptcy court.
- And by the way, don’t take my word for it, simply look at your real numbers and study the marketplace — the answers, though extremely uncomfortable, are obvious.
2. Make sure that everyone in your “value chain” is actually adding value. From vendors to dealers to customers, it is critical that right now every business focus on only the areas that add real value and generate positive cash flow and profits. When business was good and there were customers lined up around the corner you could afford to have a vendor that delivered things a few days late or an employee who wasn’t truly top notch and completely customer focused. Not anymore. With things as tight as they are, there is absolutely no way you can afford to carry any level of mediocrity in your organization. Vendors must deliver the best quality, on time, at the lowest reasonable price, and be responsive and proactive in being a trusted advisor to your business. Every single employee must give 100% of their discretionary effort and work hard every day to help the company improve, save the company money, and ensure that every customer is highly satisfied. And as hard as it might be too to admit this, trying to make every single customer completely satisfied is one of the surest ways to drive your company out of business. Customers that make unrealistic demands, complain and create significant additional work, are probably not the right kind of customer in the first place and do not add value to your business. Again, in an economy like this answer is obvious: if it doesn’t add real value it should not be part of your business.
3. Now, more than ever, is the time to deliver the best products you have ever created and back them up with consistently superior customer service. The number of qualified customers, with lots of discretionary money to spend on a boat (or lots of other types of products), is getting smaller and smaller. The only way to win these incredibly precious customers is by creating a total buying and owning experience that is so spectacular that they cannot resist making a purchase from your company! There is no escaping the fact that “good” customers have all of the power and the only way to get and keep these valuable customers is through superb quality and extreme customer focus.
So as I step back and look at an industry I have been involved with for nearly 25 years, it seems clear to me that the folks who sell recreational boats and boating/fishing supplies are in the midst of one of the most traumatic and difficult industry downturns that they have ever encountered. To survive this challenge all of them must: A) take a very hard look at their business model and make the tough decisions about how they need to change the way they do business. B) make sure every single step in their value chain contributes to the revenues and profitability of their business C) and then focus all of this on delivering the best quality they have ever brought to the market while combining it with absolutely superb customer service.
My question to you: what parts of this might apply to your industry and your business?
I hope this helped — I welcome any feedback, questions or comments you might have to offer.
Take good care — John Spence