Why Businesses Fail in Today’s Economy & How to Avoid Business Doom

The number one reason why most businesses (small and large) are failing today is:

They did not recognize the need for a transition nor did they manage the transition effectively.

See, business leaders are told all the time that they need to change but it goes in one ear and out the other. And, if by some chance the advice soaks in, most business leaders do not know where to get started and how to make the changes that will ultimately impact their bottom line revenue growth.

Why You as a Business Leader Must Embrace & Manage Transitions

If only the business environment were stable. It’s not and that is the reality of being in business today. The reasons change with every downturn in the business cycle, but the consequences stay the same. A business must adjust and adapt to survive – no matter the economy. This means, you must know how to manage the transition effectively.

They need to understand and be responsive to changes in the marketplace.  This requires strong leadership, a strategic plan and good information about the marketplace.

While leadership, strategic planning and good market based information are important, they are only a component of business success. We have known companies with charismatic leaders who had a detailed strategic plan supported by very good market information – yet they failed. And, they failed because they thought…

  • Change is about having a plan
  • Change is about saying you are going to change
  • Change is about collecting information.
  • Change is about one leader looking to make a difference.

Well, we have news for you. That’s not what change is about!

What Change Should Mean to Your Organization

Real change is about doing something about it. It’s not the failure to identify change that hurts organizations. It’s the failure to implement change that hurts organizations. And implementing change is a transition.

The difference between change and transition is like the difference between reducing inventory and having a well-managed supply chain process. Reducing inventory will free cash and improve the balance sheet (inventory reduction represents a change). Keeping the inventory low through an effective supply chain process (the transition) will result in sustained benefits to the organization. It is much more difficult to transition than it is to change.

An Example of a Poorly Managed Transition – And What You Should Do Instead

A hospital executive team in the southeast was struggling with implementing its strategic vision. They did an excellent job in identifying the vision, communicating it to the hospital staff and getting Board support. The executive team was committed to the vision. A year after the vision was rolled-out, little progress had been made and the Board expressed serious concern.


Because, making pronouncements about the need to change and how changes will create results did nothing for this health care organization. There was no follow-through! The hospital in the southeast’s executive team went back to their daily activities shortly after the plan was announced.

There is a saying that goes like this: “When you get tired of talking to your staff about what needs to be done in the organization, saying the same thing over and over again until you can’t stand saying it anymore, that’s when the staff begins to hear you and take you seriously.”

This is a classic example of a transition. We had one client who said to us that he did not do what his boss asked him to do until he was asked at least three times. Then he knew the boss was probably serious.


Not really.

An isolated example?


We don’t resist change as much as we are uncertain about what’s going to happen during the transition. Every employee, and we truly mean every employee, wants to know “what’s in it for me” if we change. Plans don’t answer that question. Most employees don’t care about shareholder value. Most don’t even understand it. They care about themselves and what’s going to happen to them.

More Proof Demonstrating the Need for Business Leaders to Go Beyond Business Strategy

A midsize publicly traded information technology consulting company was adversely affected by the downturn in the technology market. The new President assembled the senior management team and after a three day planning session, he rolled out a new strategic direction for the company. The plan was to migrate away from a reliance on information technology consulting and move to re-engineering, supply chain process improvement and financial services such as accounts receivable reduction. Everyone left the room agreeing with the new direction for the company. Yet, nothing and we mean nothing happened after the meeting. The senior managers went back to their offices and continued to manage the technology business. There was no transition plan.

Remember: Strategy Points Your Organization in a Direction — Managing the Transition Gets You and Your Organization There

It’s important to look beyond strategy when you are dealing with a business downturn or a new opportunity. Strategy will help you identify the direction you should move in. But, if you want to move your organization in that direction then you must deal with employee concerns and uncertainties. You must adjust as you move along the process. This all involves managing the transition.