How to save a company: What every business leader should know

When a company is in trouble, it takes something special to turn it around. One study shows that approximately 30 per cent of all large organisations are seeing significant drops in performance, while at the same time, only 20 per cent of turnaround attempts are successful. These are worrying numbers.

So, how can a successful outcome be achieved? The first step is identifying that the organisation is in a phase of decline.

This may be indicated by a long period of low performance, financial issues, or external factors such as an economic downturn or new competition entering the market. The second step is to take swift but well-planned action – and I’ll talk about this in more detail here.

We will look at how two of the world’s biggest firms – IBM and Apple – have both navigated significant turnarounds and while they are both giant organisations, there is much to learn from these examples for the entrepreneur or small business owner.

Let’s now look at how to work through the process of saving a company and bringing it back to life.

Identifying the problem early

The decision to initiate a corporate turnaround should not be taken lightly. It requires a clear-eyed assessment of the company’s current standing and a willingness to acknowledge that continuing down the same path could lead to decline or even failure.

Senior management or owners may be unwilling to acknowledge this reality, making it imperative for an incoming CEO to execute the plan effectively to steer the struggling company back on course.

How leadership can approach rescuing a company

Before tackling the tasks at hand, it’s crucial to acknowledge the looming pressure from various directions to expedite the turnaround process. Therefore, my initial suggestion is to refrain from panicking. Secondly, avoid attempting to tackle every aspect simultaneously.

A methodical and strategic approach is required, maintaining ongoing engagement and communication with stakeholders throughout the process.

By being transparent about the company’s challenges and the turnaround strategy, you can cultivate the essential trust and commitment needed to make the necessary changes.

Let’s look at a step-by-step process that would fit within any turnaround strategy:

• Start with strategy: Conduct a thorough examination of the company’s strategic framework, encompassing its mission, vision, and long-term objectives. This may entail refining target markets, revitalising product offerings, or adopting innovative business models.
• Review operations: Identifying and rectifying inefficiencies is paramount. This could involve optimising processes, integrating advanced technologies, or enhancing supply chain management.
• Restructure finances: Actions such as renegotiating debts, pursuing fresh investments, or moving resources towards more lucrative ventures are vital for financial stability.
• Work on company culture: This is about cultivating a culture of urgency, nurturing innovation, and aligning the workforce with the revised strategic trajectory. In short, getting everyone on board with the proposed changes will help bolster company morale.

IBM and Apple – How two tech giants were rescued

It’s useful to look at how those key steps play out in real-life scenarios, starting with a company that has been around for more than 100 years: IBM.

The organisation was dealing with all kinds of challenges in the late 1980s and early 1990s, facing intense competition, outdated business practices, and technological shifts. After innovating for so many years, IBM was now being left behind.

Lou Gerstner came in as CEO in 1993 and implemented a series of bold strategies. Among these was a shift towards services, particularly consulting, IT services, and software. This was a significant move away from the company’s traditional hardware business. Gerstner also streamlined operations by cutting costs, instigating layoffs and restructuring.

He also moved the company to a more customer-centric approach, pivoting away from proprietary systems and embracing open standards. By the end of the 1990s, IBM had returned to profitability and regained its position as a leading player in the technology industry. It should be noted, too, that it wasn’t just what Gerstner did, but also how he led his team. It takes a strong figure to lead such a significant turnaround of any company, particularly a multi-national organisation with such a rich history.

Now let’s turn our attention to Apple and its resurgence under Steve Jobs’ stewardship. Upon his return to the company in 1997, Apple faced bankruptcy, prompting Jobs to streamline operations and refocus on innovative, high-quality products that resonated with consumers.

Jobs’ leadership also included crucial financial manoeuvres, securing investments and restructuring debts to stabilise the company’s finances. This action bolstered investor confidence and provided a solid foundation for future growth.

By revitalising Apple’s culture of innovation, groundbreaking products emerged such as the iMac, iPod, iPhone, and iPad, all of which reinvigorated the company’s brand and re-established its reputation as an industry pioneer.

The importance of visionary leadership

Lou Gerstner and Steve Jobs provided invaluable lessons on successfully rescuing a company from the brink of failure. Gerstner’s tenure at IBM and Jobs’ turnaround of Apple highlight key principles essential for corporate revival.

Firstly, both leaders emphasised the importance of strategic vision and bold decision-making. Gerstner redefined IBM’s focus on services, while Jobs streamlined Apple’s product line, demonstrating the necessity of aligning strategies with market demands.

Secondly, the two leaders prioritised operational efficiency and organisational culture. Gerstner streamlined IBM’s operations and fostered a culture of excellence, while Jobs instilled a culture of innovation at Apple. These actions are a great example of optimising internal processes and nurturing a cohesive and well-motivated workforce.

Thirdly, financial restructuring played a pivotal role. You can’t do anything if the finances are not in order. Gerstner’s negotiations and investments stabilised IBM’s finances, while Jobs secured investment and restructured debts for Apple. Sound financial management was crucial in restoring investor confidence and ensuring long-term sustainability.

Lastly, effective communication was key, whether that was internal or external. Both these leaders articulated their companies’ visions to their various audiences, rallying stakeholders behind their strategies and speaking to customers in a way they understood.

The bottom line

Company turnarounds pose significant challenges but can bring rewarding outcomes. Effective leadership is paramount for tough decision-making and inspiring others to embrace change.

Although the examples of Jobs and Gerstner provide valuable insights, similar challenges are prevalent among companies worldwide. In the UAE, recent examples include Union Properties and Amlak, both undergoing corporate and debt restructuring.

Following these transformations, both entities have experienced significant financial improvements, with Amlak’s shares surging over 25 per cent and Union Properties witnessing a 12 per cent increase.

Whether drawing from the experiences of global leaders like Gerstner or Jobs or observing successes closer to home, it’s clear that guiding a struggling company through adversity towards a prosperous future is achievable.

The writer is head of revenue and strategy at SPC Free Zone.

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