Strategy, problem or opportunity?
Game changing innovation, digital transformation, cultural and demographic evolution, and so on, can be disruptive and huge opportunities to who can build and maintain competitive advantages, staying fit for the future, ready for the next big thing and positioned for success.
Failing to adapt to changes in the ecosystem or to other constraints and the loss of competitive advantages can make business models obsolete. Business distress can eventually be triggered by failing to secure and maintain financing. Cause and effect are distinct.
Excessive indebtedness can be a result of a weak business strategy, unrealistic financial projections, complacent working capital optimization and failure to divest not strictly necessary assets. Financials are an easy quantification of the success of the company interacting with its environment, challenges, market disruptions, industry trends, rivals’ moves, with such as operational improvement, innovation, securing a good project pipeline, portfolio transformation, people development, including succession, social acceptance and so on.
Any problem can be solved – eventually. Else, it is an inconvenient fact to be coped with, or stuff for philosophy and mathematics scholars. Some problems can be anticipated, prevented or even become opportunities. The earlier you approach them, the better. Challenge your own stories, biases and resources allocation.
If you can’t solve the issues yourself, you can use help. Professional consultants can speed up aggregation of knowledge into actions. You can benefit from a fresh approach and inputs from outside adding resources for quick action.
Steps to be taken practice
Asses your situation. Reckon need to change. Decide to solve the problem. Secure survival and conserve value. Control liquidity for day to day operations to avoid insolvency.
Find the real exact problem causing the effects. Understand it and its causes, break it down A Turnaround Dashboard helps collecting most relevant information to separate value creation from destruction.
A structured way to approach the problem is key to solve it and develop solutions and alternatives. Scientific enquiry and creative thinking, helps to synthesize facts and prioritize actions. No financial restructuring can be successful without removal of the strategic, operational or personal causes of the distress.
Disciplined implementation of actionable plans and measures for re-allocation of strategic resources. productivity improvements, capital injections, or divestitures of assets or businesses needs also an adequate communication and stakeholders involvement. Adequate control mechanisms shall be in place for the future.
In normal conditions, funding new projects or strong growth generally need re-allocation of strategic resources through productivity improvements, capital injections, or divestitures of less necessary assets or businesses, which takes quite some time.
If the company is only marginally or not so successful necessary new projects and even restructuring or working capital and then get difficult to fund. Financial constraints or evident insolvency risk require quick action.