Turnarounds, bell curves & opportunites

One of the defining features of our business is that we are emerging out a major crisis after 18 months of hard slog. Now, as we (investors & leaders) settle back after 18 months, I can feel an irresistible urge to congratulate ourselves and feel that this will never happen again. But, as I survey our capabilities, products, resources and the markets we operate in, the dominant metaphor is a ticking time bomb. Before I go into details, let me describe my perspective on turnaroundsStages. I believe all successful turnarounds go through 4 stages: Survive, Stabilize, Grow and Sustain. Interestingly enough, perhaps all start-ups also go through the same four stages. So what is the difference? Usually, the challenge before a startup is to prove the business model, while the challenge before the turnaround is to prove the leadership and management model. At the risk of exaggerating, I suspect that more than 80% of turnaround cases happen because of poor leadership or management capabilities inside the company.

Now, in the four stages I mention above, there is a big moment that comes after the Stabilize phase. This is the moment, when the company is ready to emerge from under water (for want of a better metaphor) and move in a specific direction. This moment has the potential to be mundane or momentous depending on the thought that will go into the debate and decisions. This December we will arrive at such a moment. Fortunately for us, we have another 2 months to build some intensity into the thinking and debate that I triggered yesterday in the monthly update to investors. So what are my concerns about the businesses we are in?

First, we design and market health products via direct sales force and TV to the end users. This market we operate in is at the intersection of 3 industries: health, wellness and complementary health products. So one hand, I fear that our opportunity size is constrained on all sides and on the other hand we have the looming threat of health care giants.

Second, I am worried that our total addressable market is very, very limited. As the chart below shows, the question we have to address is, are we in the beginning of a big opportunity, or are we reaching the peak of a very shallow opportunity curve. My fear, given the energy that we put into reach the marginal customer, is that we will hit the ceiling of the market very quickly unless we do some reinvention thinking in place.Bellcurve

Third, even if we are the base of a huge mountain of opportunity, we still have the get all the resources and our strategy figured out since the opportunity will attract a lot of bigger and better equipped competitors. In an ideal world, we will have all the resources, people and time we need to realize this opportunity. But this is not an ideal world; so we have to make some tradeoffs and come up with innovative ways to take the market.

As I said earlier, we have just started this debate and I am quietly hopeful that all the work we have put in the last 18 months to change the mind-sets, operating mechanisms and internal confidence levels should start delivering results now.


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