Knowing When To Pull The Plug On A Dying Business

Change is the only constant thing in life. Some changes are favourable, some aren’t. To succeed, whether in life or in business, you must be willing to accept change regardless of how it comes. This unusual article is about a particular kind of change in business, a very rare one indeed, disruptive market changes.

Disruptive market changes are ground breaking inventions or innovations that utterly redefine the nature [characteristics] and structure [organization] of a particular industry, niche, business or market.

They are also known as disruptive innovations or disruptive technology and here’s a definition from Wikipedia;

“A disruptive technology or disruptive innovation is an innovation that disrupts an existing market. The term is used in business and technology literature to describe innovations that improve a product or service in ways that the market does not expect, typically by lowering price or designing for a different set of consumers.”

They are disruptive because of their enormous impact on the market; they create new trends in the marketplace. Examples are; social media, the internet, telecommunication, smart phones, iPod, etc.

Don’t be deceived, the odds of being in business are very high. Business whether you like it or not will go bad at some point or the other during your entrepreneurial journey. This is just the mere reality of life, there are no permanent conditions. The good and the bad times all add up to make the journey worthwhile. So brace yourself up when the bad times rear up their ugly heads.

For the record, especially if you are new to naijapreneur, I will like to mention the businesses I am involved in concurrently; a cybercafé business [Lighthouse], an I.T. consulting business [Newchild], a people, business and life development company [MADphilips] and a Network Marketing business [Avenues To Wealth].

Why the list you might want to ask?

Because one of these businesses is currently going through a disruptive market change and I want you to pay close attention to the lessons I am going to share in this unusual article.

When business goes awry – The Prophecy

In September last year [2010], I lost the opportunity of receiving an executive business education on scholarship in the most prestigious business school in West Africa – Lagos Business School. What happened?

The program was being sponsored by one of the banks in Nigeria – Diamond Bank, for small and Medium Scale enterprises [SMEs]. It was a nationwide search for 50 worthy entrepreneurs in their Building Entrepreneurs Today [BET] Program.

The criterion for selection was very simple; showcase your business track record. I decided to pick the cyber café business and presented our financial report, market share and future projections. They were impressed, so I made it for the interview with the bank team were the final 50 entrepreneurs will be selected.

“Tell us what you do” one of them said to me after a brief introduction

“I co-own an IT consulting company that manages a cyber café with 1700 members”

“Oh really? That’s nice. But the cyber café industry is dying due to the wireless and emerging mobile technology”- said one of them

“Absolutely not!” – I replied “In fact, it is just growing because there’s an increasing internet awareness amongst Nigerians now than before”. I continued

“True, but it’s this increasing awareness that is going to kill the cyber café industry as more and more alternative internet access technologies are being introduced into the market” –said another

“I quite agree with you, but with a slight hesitation, these alternative technologies are quite expensive and not affordable for the majority of people” – I responded

“Anyway, I wish you good luck. But I still have my reservations about the cyber café industry.” –One of the ladies chipped in.

We went ahead to talk about other things like how I cope being an entrepreneur full time and being an undergraduate [final year part time student of Business Administration] at the same time. And so like that we concluded the interview for the scholarship.

The truth is; I didn’t make the final list of entrepreneurs who were given the scholarship. My guess is, they still weren’t convinced about the future of cyber café businesses. Thank God it’s a yearly program; I intend to apply again this year, now that I know better.

When business goes awry – The reality

I am writing this unusual article in June 2011 exactly 9months after the interview and guess what? The prophecy is now reality.

Our once profitable 1700 member’s cyber café business is on the verge of closing down, not because of our incompetence or poor services to our customers, but because of a disruptive market change –the emergence of better alternative internet access technologies and solutions, eventually at affordable prices.

Let me give a glimpse of how really bad things are currently. We’ve cut down our staff from 4 to 2, our sales have dropped from 15,000 naira daily average to 5,000 naira and 350,000 naira monthly average to below 100,000 naira. I haven’t earned any income from that business from October 2010. We’ve been keeping the business afloat with money generated from other businesses, covering monthly recurrent expenses such as; staff salaries, monthly internet access subscription, to rent and many more. Yet, we are still running short!

I’m sure by now you get the picture.

At first we thought sales plummeted as a result of the poor economic conditions in Nigeria currently, but then on further examination we found out more. As I have written about in previous articles: what to do when business is slow and how to diagnose the problem of low sales. The steps I shared were the once we applied to uncover the cause of our predicament.

When business goes awry – The Cause

You are in business for this principal reason; to meet and solve the problems of your customers better than anyone else, period.

When your customers find a better alternative for meeting their needs and solving their problems, then you are out business.

In most cases, negligence is often the reason why majority of businesses lose their customers to a competitor who offers something better –internal forces, but again that is in most case. I wish this was our own experience.

In rare cases, a bigger cause is at work –external forces. Like in our case, a disruptive market change due to the emergence of smart phones and other wireless broadband internet access devices that enabled people to access the internet either through their phones with GPRS enable features or on their PCs via USB wireless devices.

Suddenly the very same thing people came into our cyber café to do; send emails, check emails, Facebook, submit job applications and generally surf the net, they could now do at the convenience of their homes, offices, inside traffic and basically any where they liked.

Meaning, browsing was no longer a location based activity, people were no longer confined to one location –our cyber café or that of others. They now had absolute freedom to access the internet anywhere, whenever they chose to.

Our services did not necessarily drop, at least the last survey we did confirmed that. In fact, our customers still show up to browse whenever they needed to download, print or do other interview related things that exceeded the functions of their smart phones or that required more internet bandwidth.

This made me realize a big lesson in business; it’s not about you it’s always about them –the customers.

When business goes awry – The Solution

Cut your loss, evolve and move on!

It can be very painful, but it is just business. When your customers have found a more convenient alternative at the same price you offer and there’s no way you can provide such, cut your loss, evolve and move on.

I know this might sound like giving up, but then this is just the plain reality of life and business. As the great rapper Tupac sang; “That’s just the way it is, things will never be the same!”

So what do you do?

Again, cut your loss, evolve and move on.

• Cut your Loss

What do you think happened to the typewriter industry when the computer industry emerged? What do you think happened to the music industry when digital audio formats like MP3, and the likes showed up? What do you think happened to Myspace, Hi5, Netlog, and other previous social networking sites when Facebook showed up?

What do you think happened to Nokia, Samsung, Sony Ericson and other telephone manufacturers when Blackberry and iPhone showed up as smart phones? What do you think happened to traditional media, advertising, marketing, publishing, and retailing businesses when the internet emerged?

They all lost a sizable chunk of their market.

Don’t be deceived, when such market changing innovations come up, you are bound to lose market share drastically. So the only rational thing to do is to cut your loss by lowering your operating expenses. Acting like nothing revolutionary is happening will only facilitate the demise of your business.

When we realized we had lost the majority of our loyal customers to the mobile and wireless broadband internet access technologies, we started making plans to cut down our operating expenses. We reduced our monthly internet subscription plan, stopped operating on Saturdays since that was our lowest day in terms of patronage and we will be reducing to three shops shortly instead of the four we are currently using.

This is necessary to still remain in business as the large office space we once had in order to cater for the huge inflow of customers is no longer needed now that we are having low turnover. We are not completely shutting down the cyber café business, at least not for now. We are only preparing ourselves for the soon to happen inevitable.

• Evolve

To evolve means to change, adapt or adjust. You see both in life and in business, when competition becomes intense, only the strong will survive. This is what is known as ‘survival of the fittest’.

It will be completely foolish of us to continue with a positive mindset believing that business will suddenly pick up when the signs are obvious.

So with a lower overhead, we will be able to focus on developing other solutions that can be beneficial to our customers online. Since they are now going online through various mediums, its best we do things that will help them make the most of their browsing time online.

From inception, our promise to them was this as stated in our purpose statement;

“TO BRING THE WORLD CLOSER TO ALL THE INHABITANTS OF IJAIYE OJOKORO AND ITS ENVIRONS THROUGH THE PROVISION OF A FAST, SECURE AND RELIABLE ACCESS TO THE INTERNET WHEREBY THEY CAN:

• EXPLORE GLOBAL INFORMATION
• BUILD GLOBAL CONNECTIONS, AND

• TAP INTO GLOBAL OPPORTUNITIES ONLINE.”

Since we are losing out in terms of providing a fast, secure and reliable access to the internet, as there are other alternatives, we are now focusing on the other part of our purpose; which is helping them maximize the internet wherever they are regardless of how they access the internet. In other words, we are going to create a place for ourselves where they are going –online.

• Move on

In business, when industry or market changing innovations occur, you’ve got to go were the marketing is going. It doesn’t matter whether you are still good at what you do or not, when customers find more convenient and affordable means of meeting their needs and solving their problems, they will go for it. When this happens, please don’t take it personal. Seriously, like I said before, it’s not about you; it’s all about them – the customers!

So, right now, our focus is on creating online solutions to their every day needs in form of sites that will be useful to them. We’ve accepted the reality that location based browsing is dying and the future is more and more freedom to browsers. Therefore, we are moving on to the future!

Over to you

This must have really been a shocking and hard to swallow article, but again it’s just plain reality. One of the reasons I created this site is to bare it all open, to be as frank as possible and as realistic rather than optimistic or pessimistic as possible about business and entrepreneurship.

Friends, it’s a tough journey no doubt. But then, it’s not supposed to be a journey you embark on alone. That’s why a site like this was created, to help as many entrepreneurs out there have a place where they can relentlessly support one another in this journey of the less travelled.

Questions for you:

Have you ever been through such industry or market changing innovations as the type described in this article?

Kindly share with members of this community what the impact of such changes were, what your actions were and how you were able to survive or not survive it.