MAKE STRATEGIC CHANGES FROM POSITION OF STRENGTH, NOT WEAKNESS

Why do leaders and companies seemingly wait until crises occur before making the tough go-to-market and organizational structure decisions needed to ensure healthy sales and profit generation?  I break no new ground by reminding you that the best time to make changes is when your company is doing well and can adjust to the change rationale and ramifications in a positive environment. It just doesn’t seem to work this way, though. Perhaps no action is seen as being easier or safer, even though it’s the calm before the storm in many cases. A famous advertising tag line for FRAM® oil filters sums it up best: “You can pay me now or pay me later.”

Cal Baseball Example
In September 2010, UC Berkeley Chancellor Robert J. Birgeneau announced that the number of varsity sports would be reduced from 29 to 24 at the end of the 2010-2011 academic year: baseball, women’s lacrosse, and men’s and women’s gymnastics were identified for discontinuation. The reason was to reduce costs, as the university said the “steps [would] generate an estimated $4 million in direct and indirect cost reductions for Cal Athletics beginning in the next fiscal year, while limiting future growth in expenses.” Director of Athletics Sandy Barbour added, “Clearly, this is a painful outcome after months of deliberation, analysis, and the examination of every viable alternative.”

Sound familiar, corporate warriors? Fortunately, this story has a happy ending along with an important lesson, as the baseball program has new life.

University officials announced on April 8 that $9 million of the $10 million required to support the team for the next 7 to 10 years had been raised, with the expectation that the remaining funds would be attained. The school said the “team’s supporters have not only raised significant one-time funding, but are also working closely with the university to develop a strategic plan to raise significant additional annual resources, beginning with the 2011−’12 season. This strategic plan will focus on improved game-day revenues, as well as additional annual gift and special event revenue. The plan being developed also calls for a substantial increase in the sport’s permanent endowment, seeded by some of the gifts already raised.”

Learn to Re-imagine Before Crisis Strikes
The marketing and fundraising campaign included a Save Cal Baseball website and Facebook page. Those tactics were to be expected, but the core idea was much deeper and more strategic: it would be a campaign to re-imagine and re-engineer the operating model and revenue-generating capabilities of the school’s baseball team.

Writing in The Wall Street Journal, Hannah Karp detailed some of the changes, including the installation of lights at the baseball field to help increase game attendance and revenues. She explained that other new ideas, such as ”voluntarily limiting scholarships, selling naming rights to the diamond, offering electronic game-day programs for smartphones, and even squaring off against major-league teams,” were under consideration. And the role of the baseball coach was expanded to include fundraising and marketing duties.

Think about the lessons for your company. The underlying go-to-market strategy for Cal baseball—university funding of the operating budget—was no longer viable. Barbour talked about how everyone learned ”important lessons that will serve us well in the future” and ”the degree to which we need to rely on private philanthropy.”

The painful truth is that Cal should have gone down the re-engineering path sooner instead of announcing the baseball shutdown. However, in this case, it’s possible that the crisis was, in fact, the reason for the program’s salvation. Maybe raising $10 million couldn’t have been done any other way. Regardless, at your company, don’t expect to be as fortunate. Take action before allowing a deteriorating situation to go too far.

By the way, as of May 16, the Cal baseball team was rated number 25 in the country, and special fundraising has saved the other sports as well.

Embrace Reality
Former Kodak CMO Jeffrey Hayzlett has written an engaging book on business health. In encouraging fashion, he declares, “If you are willing to look at what’s working and what isn’t—and take the necessary steps to fix things, no matter how drastic, difficult, or different they may be—you can succeed…Remarkable opportunities exist for any company willing to change the way it works—or change back to the way it once worked.”

Headline for Leaders
Don’t wait for crisis to make the strategic changes your company needs to ensure growth and prosperity. The best time to take action is when the company is doing well and can process the change rationale and ramifications from a position of strength. Remember the FRAM advertising tagline and make your payment now. Paying later usually costs a lot more and is very painful for all involved.