Melissa’s, once a much-loved Cape Town café, restaurant and retail franchise business, is to be no more. It will be liquidated to cash in assets to pay unsecured creditors. That’s a big blow. Not only to those of us who have come to enjoy a quick shot of robust Melissa’s coffee, the wholesome comfort of a gourmet soup, or the indulgence of a sticky-sweet chocolate brownie, but especially to the 400-plus people employed by Melissa’s nationwide.
What went wrong?
Many factors are likely to have played a part, but from a customer experience perspective, we can draw some inferences.
In an earlier blog, Navel-gazer or Let’s Mover: Which will it be?, I wrote about two types of companies. On the one hand, you have the Navel-gazer; on the other, the Let’s Mover. The latter will remain agile, constantly busy and curious about new developments—ready to invent and reinvent themselves as needed and as they mature. By contrast, the Navel-gazer will grow older in a comfort zone, with little appetite for change. Navel-gazing companies have a tendency to be internally focused to the point of placing comfort and self-satisfaction ahead of customer.
Melissa’s has been a very successful brand for well more than 20 years, although it must have suffered setbacks in the last few years. This makes for a classic case study of some of the reasons behind business failure. Six navel-gazing traits spring to mind.
1. Growing too large too fast
Unless you do your homework in painstaking detail, fast growth can destroy your business just as easily as not. If growth gets in the way of your running your business properly, you are courting disaster. More sales is not synonymous with profit. Every successful business reaches an optimal size, beyond which it may well find itself on an unsteady footing unless a very clear growth plan is in place. This kind of growth can cause a loss of focus, while overhead expenses steadily creep up.
Rapid growth beyond an optimal size doesn’t necessarily translate into financial viability and business owners should never assume that it does. It is dangerous to base your decisions around growth on what you want instead of analysing and understanding the market. Another complication is that management may be spread too thin, with people having on to take on too many day-to-day duties, while the quality of the business offering may suffer because of the shift in focus to quantity.
A business can also become financially strained, with difficulties in managing the increasing complexity of the financial accounts and collecting monies owed fast enough.
2. Losing interest in customer feedback
Being slow to respond to customer complaints or not responding at all will put you in the fast lane to perdition. The last thing you want to do is ignore what your customers want, and it is essential to stay in touch with their needs. Customer feedback is what will determine your forward planning and product or service offering. In today’s business climate, placing your customer at the centre of your focus is what will give you the competitive edge—not doing so will relegate you to the ranks of the mediocre or even the failed.
Pay close attention to what your customers feed back to you via the channels of customer communication you have available, be it online, telephonic, or in-person customer support, or responses on the social media. The latter has become integral to our lives—ignore negative comment on the social media at your peril.
Tesla and SpaceX founder Elon Musk has said, ‘Find everything that’s wrong with [something] and fix it. Seek negative feedback.’ In other words, don’t just listen to how wonderful your business is—it’s more valuable to hear what people tell you is wrong with it and then to do something about it.
But over and above listening to and acting upon customer feedback, you need to take proactive measures to define and get to know who exactly your customers are. This can be done by personal, telephonic, online, or paper-based surveys, or a combination of these. The secret is in how the data you collect from customers is interpreted and responded to. You may need the services of a customer experience specialist to design meaningful questionnaires and arrive at helpful conclusions. nlighten offers a customer journey mapping workshop to demarcate the customer experience.
3. Failing to reinvent yourself
The Let’s Mover is always on the lookout for ways in which to stay relevant, while the Navel-gazer prefers to look inward and ignore what is going on in the real world. This can come at a high cost, as any of the captains of Kodak could tell you. At the rapid (and ever-increasing) rate of change in the early 21st Century, no modern business can afford not to innovate, and businesses should do everything in their power not to lose their innovators. So, hang on to your innovators—this may well stave off a ‘Kodak moment’ of your own.
A good example of a business that could well have faced extinction is South Africa’s premier bookseller. Publishers and booksellers throughout the world have taken a knock in the face of online content and e-books. Finding the very existence of their core product offering—books—threatened by modern technology, Exclusive Books has reinvented itself as a chain of bookstore-as-a-lifestyle centres, where customers can relax over a cup of coffee and a meal. It is probably too early to make predictions, but the EB Café and EB Social Kitchen and Bar may just be a solution to the very real danger of becoming irrelevant in an age where paper-based products are becoming less viable.
4.Forgetting the art of humility
Humility is a virtue, everyone knows that. But does that apply in business, where you need to be assertive and have a lot of confidence to succeed? Self-confidence and faith in your offering are essential qualities when promoting yourself. However, confidence is not to be confused with arrogance, and a healthy dose of humility will keep things real.
An example of a company that owes its demise—at least in part—to arrogance is the South African group, Steinhoff, whose ethos has been described by a former employee as ‘a domineering, patriarchal, misogynist and racist culture in which no human emotion was spared when it came to those all-powerful aphrodisiacs: profit and money’.
Arrogance will render management incapable of self-reflection, which is a prerequisite for good leadership. It will further create a toxic work environment characterised by a competitive, unwelcoming and ultimately counter- or unproductive work ethic. Arrogance can also create a false belief in your offering and tempt you to overinvest in expansion.
Authentic, honest self-reflection and a rigorous assessment of your business will create a collaborative atmosphere, inspiring confidence among staff. And happy staff translate into happy customers. Every time.
5. Underrating the importance of human capital and staff training
To represent your brand authentically, your staff need to be properly educated and trained. But many employers resist opportunities for staff training, arguing that it is expensive and employees miss time at work while getting trained. This attitude is short-sighted because an investment in staff training will improve your employees’ knowledge and productivity, ultimately benefiting the business and profitability.
You also need to make sure you employ the right people for the right jobs when hiring, because employees incorrectly placed will not be happy and thus productivity will suffer.
It is essential to keep the lines of communication open between management and workers, to make sure everybody in the organisation knows about future plans and strategies, and how these are to be executed.
6. Pricing of the product does not represent value
When your pricing is higher than the value your offering represents to customers, you could be entering dangerous territory. The amount you spend to produce your product or service is its cost. The price is how much you sell it for. But the important factor here is the value your customers attach to it. Is the product or service worth the price you have put on it? Understanding this equation and getting it right can greatly increase your profitability.
To know how to price a product or service, you need to understand your market and what it is about your offering that makes people want to pay good money for it. Again, this type of information can be gleaned through online or other types of surveys.
What are the warning signs?
You will know your growing business is heading for trouble when you experience a spike in customer complaints, HR reports problems, your cash flow becomes unsteady, employees are stressed and morale is low among them. You may also experience difficulties in keeping up with demand.
In the case of Melissa’s, could it be that the very same exacting standards of quality, the quest to increase the company’s footprint and the drive to offer a wider range of products to an increasingly diverse market all eventually served to undermine the very spirit with which Melissa’s was founded?
View the previous nlighten article by Nathalie Schooling: Personalising your business – The 5 fundamentals of getting it right
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