10 April, 2012

New good business won’t fix old bad business

Your core business isn’t doing very well, but you’ve uncovered a great opportunity for a new complementary product with low overheads, great margins and - best of all - recurring revenues. Wonderful! You’ve saved the company. Actually, no, you haven’t; not if your main business is still broken. All you’ve done is find some marginal new income which, more often than not, you’re hoping will disguise your poor performance elsewhere, hoping that a miracle will occur, hoping that the market for your old business will rebound, and hoping that your competitors won’t still eat your lunch.

Time and time again, I see firms - IT services, energy supply, retailing, telecommunications, consulting, manufacturing, etc, etc - chasing shiny new marginal revenue while avoiding the hard decisions in the core. Don’t kid yourself. New revenue might buy you time but, one way or another, you’ve still got to fix the broken old business; fix it or get out of it.

Flashback: first posted 21 February 2010, but it's a message that I have to send again and again.