Tuesday, July 17, 2018
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Bits & Bytes e-zine, Vol2 #8 Strategies for Business Transformation

Excerpts of a presentation by Dr William Lawrence to the JCS members’ meeting (Open Session) on August 28, 2014

 

INTRODUCTION

Title – Strategies for Business Transformation

I am pleased to have this brief discussion with you on strategies for business transformation. Although Government policy is very important, my presentation focuses mainly on how firms can help themselves. Business transformation refers to radical change in the behaviour of a commercial entity for quantum performance improvement (Blumenthal & Haspeslagh, 1993). My presentation looks at the need for business transformation and how this can be achieved through appropriate resource acquisition and deployment. I will also suggest how the Jamaica Computer Society and Mona School of Business and Management may collaborate to provide a commercial solution for business transformation.

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What do these companies have in common?

The six companies shown on screen were all listed on the Jamaica Stock Exchange at some point in time and were major players in their respective industries. However, the three companies on the left of your screen did not adjust sufficiently to new environmental conditions and succumbed to financial hardship. Yet, the three companies on the right of the slide transformed their business models to enjoy subsequent prosperity over the long term.

KIW Group , a metal fabricator, continued to depend heavily on revenues from the ailing manufacturing sector despite the adverse impact of trade and foreign exchange liberalization in the early 1990s. In contrast, beverage producer, Desnoes & Geddes transitioned from being a family-owned business to a subsidiary of a multinational corporation (Diageo) and refocus on brewed products, the core strength of its parent. Bryden & Evelyn was a dominant goods distributor that ran out of cash after losing control of its accounts receivable during the oil crises of the 1970s. On the other hand, Grace Kennedy transformed from a private company to raise equity capital as a publicly-traded company and diversified its portfolio of businesses. CCJ Daily News focused on newspapers and was unable to retool and upgrade technology because of price pressures from intensifying competition. The major rival, Gleaner Company remained viable by entering the book industry, through acquisition of Sangster’s Book Stores, and started operations in the United Kingdom to add another revenue stream.

Indeed, of the 106 firms listed on the Jamaica Stock Exchange (JSE), since its inception in 1969 (including Junior Market firms), 51 have experienced severe losses at some point and only 28 recovered. Interestingly, some of these companies incurred losses while recording substantial revenue growth. Also, economic recession, measured as real growth of Gross Domestic Product, explained only 18 % of the losses by JSE firms. Performance decline often arises from a weak business model.

In the small business sector, data from the Planning Institute of Jamaica shows 45% decline in the number of firms filing General Consumption Tax returns over the last ten years. Most of the attrition has incurred in real sectors such as manufacturing. Logically, these firms either ceased operations or retreated to the informal sector. As a Trustee of the Small Business Association of Jamaica, I have observed that more than 80% of the members who were active in 2004 are no longer in business. They did not retreat to the informal sector but instead succumbed to financial hardship. The Global Entrepreneurship Monitor Jamaica Report (2010) has expressed grave concern about the high level of business closures. This reality is alarming because there is a strong positive correlation between the age of small firms and the number of employees (Lawrence, 2007/8). Merely starting new businesses is insufficient to offset job destruction and missed job opportunities from the closed entities.

Again, business transformation refers to radical change in the behaviour of a commercial entity for quantum performance improvement. The difference between success and failure of transformative activities boils down to the firm’s ability to change its business model to suit the environment. There are two generic types of business transformation: proactive and reactive.

Category: Bits & Bytes