Navigating the five stages of decline: learning from those we’ve lost.

The current headlines are about the struggles of Wilko, a 90+ year old British institution of which I have personal experience having spent seven years of my career there.

But previous headlines covered the decline of a multitude of other 'established' businesses over the past 15-20 years as customer behaviours and online shopping disrupted the markets of previous industry leaders.

At the point of administration, fingers get pointed, blame gets laid at the door of various people and 'circumstances beyond our control' becomes the justification for the inevitable failure of said business.

However, as the dust settles, it becomes evident that the death of the majority of previous giants cannot be attributed to single events or actions, and certainly aren't solely down to unforeseen circumstances.

It becomes evident that the warnings signs were there but not listened to or understood. That cultures of denial or indecision became ever presents as complacency set in. That ill informed strategies for growth and expansion sucked up vital capital, created inherent risk and isolated core customer and employee groups. That, actually, the root cause of failure was not in the period of decline itself, but in the period of growth and success.

This is a risk that NO business is immune to.

If you've not read it before, the book 'How the mighty fall' by Jim Collins provides an excellent insight into the actions, decisions and events that led to the loss of previously successful businesses. The subsequent outputs highlight five stages of decline:

1. Hubris born from success: When success breeds overconfidence, the foundation of caution weakens. It's crucial for companies to continuously challenge themselves and avoid complacency.

2. Undisciplined Pursuit of More: Pursuing growth without a clear strategy can lead to a loss of focus and a deviation from core strengths. Wilko's (and those before them) experience underscores the importance of strategic alignment and disciplined decision-making.

3. Denial of Risk and Peril: Ignoring warning signs or downplaying potential challenges can accelerate decline. Open and honest assessments are essential to address issues before they escalate.

4. Grasping for Salvation: Frantic attempts to reverse decline often fall short without a well-thought-out plan. Adapting with agility and making informed changes can prevent a last-minute scramble.

5. Capitulation to Irrelevance or Death: Ultimately, if decline persists unchecked, the outcome can be dire. Wilko's situation emphasizes that acknowledging vulnerabilities and taking corrective action is vital to survival. But this must be done soon enough to ensure cash runways will enable a last attempt to turn fortunes around, and / or provide an attractive enough proposition for potential investors, lenders or acquirers.

Let's learn from Wilko's journey and those of so many others before them. As business professionals, let's stay humble, adhere to our core values, and remain vigilant in assessing our organisations. Let's foster a culture of open communication and accountability to address challenges head-on.

Let's learn from the demise of others to secure the long-term future of our current and next generation of businesses.

At Beating Hearts we work closely with a number of businesses to help achieve scalable profit while continually evolving the strategic and operational building blocks that secure a company’s long-term future. Contact us to find out more.