When is 70% off too much?

Last week both Dick Smith and Laura Ashley (Australia) went into administration. They were founded within 3 years of each other;  Dick Smith (1968), Laura Ashley (Australia, 1971).

They both beat most of the odds for a long time. They could have been in the 40% of businesses that fail to reach their 4th birthday, or the 50% that fail to reach their 5th. The odds on getting to 40 years plus are very slim, probably less than 1% of companies achieve that.

There may be similarities between the two beyond their indebtedness but that will have to wait until the dirty laundry has been sorted through. To me its always such a shame when venerable, enduring companies with a rich heritage decline and fail. Its clearly sad to lose the brands (although unlikely in Dick Smith’s case) but its clearly worse for those whose jobs are impacted and the investors and creditors who have done their dough.

Last year saw two, albeit different, chocolatiers go into administration, Ernest Hillier and Koko Black. Darrell Lea suffered the same fate in 2012.

What’s going on or is all this just normal?

A study into the companies in the Fortune 500 in 2015 showed that the average life expectancy in the list has declined from 75 years to 15 years over the past 50 years. In addition, only 12.2% made it from the inception year 1955 to 2014 (59 years). By that measure, albeit in a different country, Darrell Lea did well surviving its 85 years. The good news, as with Darrell Lea, is that when an iconic brand goes under, someone normally puts their hand (and money) up to retain the name and continues trading it.

We could speculate as to why companies aren’t lasting as long….
More takeover activity
Deeper credit markets to fund that
Incentives to motivate that
Or is there faster change, more technology advance and more disruption acting as catalysts in the erosion of business models?

It’s certainly possible, if not likely, that on-line sales impacted Dick Smith and Laura Ashley. It’s also very possible that the concentrated buying power in the Australian retail segment made it tougher to earn a good margin in the retail chocolate game. Or more than that, it could just have been ranging and shelf space through that same dominated distribution channel of the Australian supermarkets.

Suffice to say that when more of the big companies are lasting less and less time, it sure is time to sit up and take stock of what has changed in your world, your customer’s world and your customer’s customer. And based on what you find, you can make your plan.

Here are some tips:

Move from doing stuff to Analysing stuff – treat your analysis like research into yourselves. Objective data collection. Try to blow up your theories and be relaxed if your analysis returns what you expect but be OPEN to it if it does not.

Move from managing tasks (all those things that walk in your door every day) to Challenging your current assumptions, challenging yourself, your colleagues and your staff to greater heights.

Move from defending your hobby horses to Exploring new ways, new segments, new paths – experiment and test on small swatches of your business fabric. All progress is based on testing theories, assumptions or by accident. But I am not sure accidents are a viable commercial strategy…

Go on, be A.C.E, I dare you.