The Secret to Change

I was astonished a couple weeks ago when I heard that some of the farmers in Wisconsin would no longer be able to sell their milk to Grassland Cooperative as of May 1st.  Grassland’s Canadian market had suddenly disappeared because Canadian farmers had found a loophole in NAFTA and were forcing United States milk out of Canada.  The new Canadian policy was encouraging Canadian processors to use domestic milk instead of imported milk.  That left Grassland without a place to sell much of the milk they had been taking.  Thus the company informed Wisconsin and Minnesota farmers that their milk was not needed. 

This was a shock to seventy farmers.  Unfortunately, they didn’t have many other companies to contact to take their milk.  Milk processors are small in number.  Finding another company to take the milk was difficult, especially since the market had shrunk.  They couldn’t stop milking their cows.  That was a daily task.  They couldn’t get rid of all their cows.  They were the lifeblood of the farmers’ income.  These farmers may have taken the only viable option and dumped their milk.  The short notice change was a threat to the existence of many these farmers.

Thankfully, three processors stepped up and offered the farmers a contract.  Initially, the one who signed the majority of the farmers suggested too low a price.  After the farmers’ refusal, the processor came back with a second offer that was better, although it still did not equal what the farmers had been receiving for their milk.  In desperation, most signed the six-month contract with the processor.

These farmers have been caught by the changing business environment.  All businesses today operate in a dynamic environment which more than ever before can change abruptly.  Those quick, unexpected changes are outside our control, which makes their occurrence even more upsetting.  What do you do?  How do you handle it?  How can your business survive these changes?

While nothing can provide a guarantee of survival, you can take managerial measures to anticipate the problems.  You can list these threats from outside your company that may arise from any environment - economic, social, political, legal, technological, competitive, and weather.  List all you can imagine from the most threatening that could close your business to the least that would be an annoyance but not serious.  This may take several sessions.  After doing that, think through your options to respond to each situation.  At first these solutions may seem hard to find and few in number.  As you continue to think about and discuss them, you will discover more options and realize the result of taking each one. 

This is akin to a fire or tornado drill for your business.  You are creating the path to take if your business is threatened by the changing business environment.  Successful people identify crisises and decide how to handle them before they occur.  When you are in the middle of a crisis is no time to consider the situation.  You are too consumed with the problem at hand.  You are overwhelmed and tired.  Your mind is paralyzed.  Your nerves are frayed.  If the situation is dire such as what the farmers were experiencing, you may not have time to consider options. 

I remember an old adage that when you are in the middle of a rushing stream is not the time to discover a leak in the boat.  My suggestions may seem monumental to address.  Take them in small steps.  Don’t think you will address all of them in one sitting.  You may find yourself adding to the list as you proceed.  Do make it an ongoing priority for you and your staff to update and discuss the threats and how to handle them.  Since the business environment is continually changing, new potential problems are constantly showing up.  Exercise your problem-solving skills regularly by identifying and considering how to handle them. 

As Socrates noted, “The secret of change is to focus all of your energy not in fighting the old but in building the new.”

This week's marketing trivia challenge is What crisis have you seen a business handle by preparation? E-mail me your answer.

The Invisible Changing Business Environment

I am very worried about every small businessperson.  We operate in several dynamic environments that are changing, and most of us are too busy to keep up with them.  Some environments are invisible, which makes their impact even trickier to detect.  One way to track them is to watch big businesses and notice how they are responding to these environments.  Big businesses have more staff, do more research, and make more decisions based on research.  Taking note of their research and response to it helps to reveal the effects of the invisible.

The invisible environment I am addressing today is the Internet.  After the holidays, several news organizations reported that big retailers including Macy’s, Kohls, Walmart, and Sears would be closing stores this year.  In the stories, these changes were tied to a 5.6% drop in sales during the holiday season.  While online sales grew during the holidays, brick and mortar stores sales were down. 

I did some research into the situation and discovered that these decisions regarding store closings were not knee jerk reactions to a bad holiday season.  Last August Macy’s had planned to close 100 stores in 2017, which is 15% of the chain’s total.  CEO Jeff Gennette stated that “Nearly all stores to be closed positively cash flow today, but their volume has been steadily declining in recent years.  We decided to close these stores proactively to invest in growth sooner and more aggressively in digital and mobile.”

In other words, the stores’ profitability today was not the issue.  The trend was the issue. 

Big chain stores were built to offer a convenient place to shop for a wide variety of items.  Now the Internet has made the big stores’ convenience and wide variety irrelevant.  Consumers can more easily go online and shop with their fingers than get into the car, drive to the store, and hope to find the item they want.  As is demonstrated by holiday sales, more shopping is happening online now than ever.  The trend shows no sign of stopping. 

This environmental change is affecting the sales of big chains’ brick and mortar stores.  In addition to Macy’s, Sears and Kmart are closing 30 stores, and CVS is closing 70 this year.  Over the past couple of years, the big chains have closed hundreds of stores.  Their loss will impact malls.  The loss of an anchor store to a mall such as Macy’s or Sears triggers a downward spiral in the performance of the mall that puts it in danger of closing, too.  Right now, two hundred malls are in this position.

Interestingly, specialty stores are not experiencing the difficulty of the big chains.  This is due partly to their focus on a product rather than convenience.  They also have a successful online presence.  For example, Victoria’s Secret gets 20% of its sales online. 

In this Insight, I have been focusing on how the Internet is affecting big retail chains.  If you are thinking, my business is not a big retail chain so this doesn’t apply to me, you are wrong.  I absolutely guarantee the Internet will affect your business in some way.  Some businesses might be threatened with extinction, and others may be altered in a milder fashion.  All will be impacted.  The extent of the effect may change over time, too.

How do you address the invisible changing environment of the Internet?  Be certain to conduct a SWOT for your business every year.  The O stands for external opportunities, and the T represents external threats.  The Internet offers both to every business.  How you identify and react to the opportunities and the threats from the Internet will determine its effect on your business.  If your customers are leaving your business to shop online, what can you do to keep their business?  Do you have an online presence?  Do your customers know of it?

Does it offer them what they want?

This week's marketing trivia challenge is What threats and opportunities does the Internet offer your business?  E-mail me your answer.

Responding to Change

As I was finishing my online order three weeks ago, I was offered the option to ship my order via UPS or USPS. Since the price was the same for both, I thought, "Let's give the Postal Service some business. With e-mail draining away a great deal of revenue, they can use all the help that they can get."

I checked the shipping box for USPS. That was the beginning of a lesson for me.

A week later, I found a note in my mailbox that the Postal delivery person could not deliver a package, and I would have to retrieve it at the Post Office. "What's going on," I wondered. "He always brings large packages to my door."

Curious and somewhat irritated that I had to make a special trip to the Post Office for the package, I made a point to go the next day. First I mailed a book, and the lady at the window who helped me asked if I wanted to purchase stamps. "No," I replied as I handed her the notice, "but I would like to pick up this package."

When she returned with the package, I asked her why it had not been dropped off. "It must not have fit in your box," she stated.

"I've always had packages brought to my door," I returned. "Why not this time?"

"Oh, you must have had a sub. Your regular guy was gone. Do you have a long driveway?"

"Yes," I replied.

"Well, the sub won't go up a long driveway."

"The sub could have left it at the end of the driveway. I have a receptacle placed there for that purpose."

"How would she know that?"

"You should have informed her," I maintained. "I specifically asked to ship this via USPS to give you more business. I didn't realize that doing so would make more work for me."

"I should have informed her?" The lady huffed, turned, walked away shaking her head, and terminated our conversation.

While I realize that this lady specifically may not have had the information to inform the sub, someone, at least the regular delivery man, did and could have shared it. Even more, the Post Office would be wise to have a delivery policy that regardless of the length of driveway the delivery person was to do whatever was necessary to deliver the package. After all, their competition has this policy. UPS and FedEx deliver, period. They do not offer excuses. I think that my regular Postal delivery guy gets that.

Obviously, not everyone who works at the Post Office embraces his attitude.

What is happening to the Post Office is a classic case of not keeping up with and responding to a changing business environment. The Internet and e-mail are taking a great deal of business from the Post Office. At the same time, the Internet is offering more delivery business via online orders. This is an opportunity for the Post Office, but, to grasp the opportunity, the Postal delivery people must all deliver packages to the door. Expecting someone to pick up a package at the Post Office is an attitude which discourages repeat business.

It discouraged mine. Next time, I will not ship via USPS because it's too much hassle.

How is your business doing in response to a changing business environment? Are you responding to what your customer wants? Do you know what that is?