30/07/2014

Lost in transition?: consultancy in times of slow recovery

A business model may be in troubles due to two main groups of issues. A business may work but it may be unable to sell enough. Also, a business can run into liquidity problems because banks do not provide funding, customers make late payments and defaults or because your suppliers do not allow flexible commercial credit.

In the first case, the root of the problem is usually a mistake in strategy. This strategy might have been good before but after changes in the economic environment it has to be reformulated. In this case it is not sufficient to apply cost control, re-engineering and restructuring. These measures correct part of the strategic mistakes but they will not lead to success in the mid term.
Lack of liquidity may be a result of poor performance and lack of self-financing of the company. In times of uncertainty, lenders, investors and suppliers are even less willing to give credit if it is not clear as water that the company has the ability to pay back on time. In this case, the most likely solution focuses on re-engineering  and operational restructuring.
So, why do you need an external consultant even if you have experts inside your company? It is proven that the executive body performs worse in times of crisis if the team feels alone, trapped in the loneliness of management. It is quite natural that the management team are immersed in the daily problems but everyday problems can block the mental capacity to find other solutions or make room for new ideas. A business that needs to be improved should be reviewed with new eyes in order to find new opportunities and take advantage soon.



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