Inside the cramped boardroom of ClearFit, a Toronto developer of recruitment software, is a whiteboard covered with a scribbled list of strategic commandments. About five years ago, when co-founders Ben Baldwin and Jamie Schneiderman embarked on a drastic business reinvention, they scrawled their guiding principles on that board. The notes, which have never been erased, serve as a reminder for all ClearFit staff to keep their software simple and focus tightly on customer requirements.
It's an attempt to avoid repeating a mistake that almost torpedoed a huge opportunity. Founded in 1999, ClearFit originally catered to large multinationals, selling sophisticated applicant-screening software to their HR departments. After a few years, the partners decided to adapt their system to small businesses. But the resulting product, loaded with features, made explaining it to prospective clients feel like "a slow ache," Baldwin recounts.
One day, an outspoken customer said to the owners, "Guys, you need to change your game." The system simply had too many bells and whistles for small firms to navigate. It was an aha moment. "The harder you work on a product, the easier it is to get away from your customer," reflects Baldwin today. "The technology doesn't matter if the patient doesn't desire the medicine."
That epiphany led the partners to rethink their approach as they sought to better align their service to clients' actual needs. Trying to clear their heads of daily operating routine, they turned to some distinctly non-business pastimes. "We played a lot of tennis [and] went on long walks for gelato," says Baldwin, a muscular 39-year-old with a taste for extreme Frisbee.
The ClearFit founders' experience is increasingly common among entrepreneurs as they fight to stay abreast of rapidly changing technology, innovative rivals and new market opportunities. The realization that your business is stagnating or failing to reach its potential presents a tough challenge: to come up with a fresh way of thinking when you've always done things in a certain way. Complicating matters, busy executives struggle to carve out the time to step back from their operations and reflect on the big questions: Is the business model working? Are there new opportunities to pursue? Should you be doing things in a fundamentally different way?
Trying to reinvent a business requires a mindset open to measures "quite a bit more radical than just battening down the hatches," says Barry Levine, an associate partner in Ernst & Young Canada's performance management advisory group. This exercise may lead to a decision to enter new geographic markets, launch adjacent products or services, even reboot the business model entirely, although experts point out that stem-to-stern overhauls are rare. But, Levine notes, "A lot of owner-managers have trouble stepping back from the weeds and figuring out when to do a reinvention."
The consequences of doing nothing can be a precarious sort of lethargy, or worse. Research conducted by the Corporate Executive Board, a U.S. advisory firm, shows that once companies' growth stalls, only about 10% survive.
The time to tackle a reinvention is when business is good and sales are rising, says Accenture Canada president and managing director Michael Denham. "When times aren't good, it will be too late," he says.
For those who do manage to pivot their firms, the upside is a reinvigorated operation, new clients and more sales. In the case of ClearFit, Baldwin's team put the existing enterprise business on life support and proceeded to strip the complexity from their small-business offering until they had a lean, easy-to-use service. On the advice of a fellow entrepreneur, Baldwin has augmented the technical fix with savvy marketing improvements: an 800 number on the website, free trials and explanatory videos.
The reinvention took hold with both existing and new customers. Five years later, ClearFit boasts 5,000 small-business clients. "When you get it right," Baldwin says, "it's like logarithmic growth, which is what we're going through right now."
Great companies innovate and reinvent themselves constantly. Amazon.com founder Jeff Bezos, for example, has rewired the US$48-billion-a-year company several times, expanding from its origins as an online bookseller into an ecommerce general merchant, an e-reader distributor and, more recently, a logistics and software platform for other businesses. To formulate such transitions, Bezos makes a point of going on quarterly three-day retreats by himself to contemplate the strategic landscape and game out Amazon's next moves.
It's the sort of regular introspection that all owner-operators should consciously incorporate into the way they run their companies, but few, in fact, do, says Seattle-based creativity consultant Chris Grivas, co-author of The Innovation Team: Unleashing Creative Potential for Breakthrough Results . Many entrepreneurs, he explains, have a "bias towards implementation… We don't spend enough time reflecting on what we're doing." In his view, "If you haven't reset your vision in the last five years, you're overdue."
How do you know the time is ripe for a big rethink? Paul Nunes and Timothy Breene, reinvention experts at Accenture, point out in their book, Jumping the S Curve, that most firms' fortunes follow a similar pattern: a period of slow initial growth that leads to accelerating expansion, which, in turn, yields to a revenue plateau. Even the most successful companies eventually run out of room to grow unless they do something big and new, the book argues: "The ability to pull off this difficult feat—to jump from the maturity stage of one business to the growth stage of the next—is what separates high performers from those whose time at the top is all too brief."