Choose A “NewCo” Mindset Over A ”Turnaround” View.

In the past few issues, I’ve discussed the importance of finding our own path forward as a company rather than trying to meet external measurements. Today, I want to focus on the influence of our own history.

None of us can recreate our past.

This is also a personal reminder. My biggest struggle is trying to replicate what I did well five or ten years ago – whether in my athletic abilities or how carefree my mind was. But I’ve realized that trying to replicate the past only drags down my ability to use the best version of myself today.

The same challenge arises for companies, which are just groups of people. Most of my career has revolved around helping companies facing challenges. I used to easily agree with the idea that we could bring back the glory days or replicate that one great year. Who doesn’t love a good challenge?

Over time, I’ve come to appreciate the fallacy in this thinking, and I’m bold enough to say:

Turnarounds are a fallacy.

Ask yourself: How many true turnaround stories can you recall? Has a 32-year-old athlete ever replicated their style and flamboyance from when they were 22?

This isn’t to say a 32-year-old athlete can’t be more successful than they were at 22. But it won’t be because they replicated their 22-year-old self. No athlete can do what they did ten years ago while also benefiting from the wisdom earned through those years.

What’s a “turnaround” anyway?

The word “turnaround” is used loosely in several contexts. Let’s consider three that most fall under.

Chapter 7 bankruptcy is essentially the dissolution of a company, where it is sold for parts. I think of this as the end of an athlete’s playing career. It doesn’t mean they won’t go on to do other things, but this is not a turnaround – It’s a new beginning. I view this as a start-up scenario. Buying the license to use a well-known brand out of bankruptcy is no different from buying any other asset to start a business. The connection to the promise of the old brand is flimsy.

Chapter 11 bankruptcy involves a company defaulting on its debt due to cash flow constraints. However, many parts of the company’s operations may still be viable. My mental model for this situation is closer to an acquisition by a new owner and investor than a turnaround. All equity owners get wiped out, and only debt holders, who are typically not involved in day-to-day operations, have any hope of recouping their investment.

In both these situations, the new owners of a company are acquiring an asset that has been deeply discounted because of how it was run in the past. So, expecting a return to the old glory days is not a rational expectation.

The third situation is when investors and owners are unhappy with a company’s present performance, which happens quite often. We want to focus on this because the first two scenarios with new owners are more obvious to internalize.

In this situation, companies replace CEOs and executives or set mandates to shift the present reality, trying to reverse unfulfilled promises or deteriorating performance. These scenarios often include past market leaders or companies that showed significant promise in the recent past. As admirable as it is to call these situations a “turnaround” and try to fulfill the difficult mandate to bring back past glory, I have come to recognize this as a mistake.

None of us deserve anything based on our past. Every game is a new game. We have to earn future outcomes. Every poker player knows that every new deal resets the odds and that past hands do not reflect the next one. The only thing we can bring forth from our past is resources – our big stack of chips if we have them.

In a company setting, these resources would be cash on hand, intellectual property, skills, lessons learned, data, or any such fortifiable walls we gained in the past. It still doesn’t change the fact that we must fight the next battle on its merits.

That’s our first takeaway:

We should limit the influence of “glory days” in our planning and rely on real and reliable resources to build a new future.

Plan for a new beginning, not a turnaround.

In October 2018, I was sitting at a bar wondering why the company-level change effort I was leading was proving so difficult. That’s when the idea of advising companies under my own brand came to me. I landed on the term “Turnaround Science” – a poor choice in hindsight.

When I launched my first website in 2019, I explained my choice of the word “turnaround” as: “The best form of defense is offense. Growing any business requires an approach that challenges and rethinks every aspect. I consider such disruptive thinking around business strategy and operations a Turnaround mindset.” I should have called that thinking a “NewCo” mindset.

A “NewCo” mindset implies we have to live as though we are in “Groundhog Day.” Nothing we did yesterday or today influences tomorrow’s outcomes except the resources we’ve gained. In a company setting, resources include cash, IP, and similar assets.

From a planning perspective:

What can our company achieve in the next cycle if we start anew, with all our resources intact but none of our expectations that our present products will remain in good standing or that people will continue to work for us?

If we tore up existing contracts and asked our customers to recommit on January 2nd, would they sign a new contract?

If we relaunched our offering on January 2nd, would our market still find it interesting?

The rare and popular “turnaround” stories – like Apple and Lego – are really “NewCo” stories. They built an entirely new offering or used an existing one as a resource and positioned it in a completely new way.

Focus strategic planning on the “How.”

My nephew and nieces moved to Tokyo this summer, and I’ve noticed a shift in their educational intensity compared to their more relaxed lives in Atlanta. My 5-year-old niece calls me for help with basic math.

Recently, we got stuck on “What is 18+18?” She was getting frustrated when she asked, “Is it 31?” and I said no. She guessed a couple more numbers, and I told her, “Don’t worry about the answer. Think about how you’re trying to get to the answer. That’s the most important part.”

I’ve said that a lot in my career.

Anchoring to aspirational goals often relates to our past performance. But our company’s past performance has no bearing on its future performance. The only concrete influencers of future performance are the resources we can bring forward from the past to power and improve the machine that is our company’s operational maturity.

Assuming our revenue or profit outcomes from the past will hold is relying on an “old glory” mindset, and it will likely distract the group from what's realistically possible.

Strategic planning is not about stating an answer and filling in the blanks with an unrealistic “how” to get there. Our company's “how” is the reality of its present operational prowess and its ability to evolve in the next few months or years. All the resources from the past can help us improve this present state. That’s all strategic planning can do.

What is the realistic power of our present operations? How much can we improve using the resources available to us?

These are the questions I suggest focusing on in strategic planning—not recreating the past.

Sidebar: Manchester United is getting worse in “Turnaround.”

For years, Manchester United was the best-known and most valuable soccer club, particularly during the turn of the century. Sir Alex Ferguson coached the club for 23 years and left in 2013. Since then, the club has considered itself in turnaround with an aspiration to return to its past.

Several coaches and players have come and gone. Yet, they have all consistently failed to return the club to its glory days. In fact, the club is getting worse, as evidenced by back-to-back losses of 0 - 3 in the past two weeks.

The decline began before 2013, with Sir Alex squeezing the last value out of the players he groomed. The last couple of years have been worse than the club's prospects in 2014 and 2015. Why is Manchester United getting worse as a club in its effort to turnaround its prospects?

The club is too hung up on its history and believes that it deserves to be the best club in the world for no practical reason. This entitlement prevents it from evolving in a world where soccer and everything about other clubs has changed.

Manchester United still has the highest salary bill of all English clubs and remains a brand any player would join. The club would be better off if it wiped its memory and started playing as though it were a new club with considerable resources.

The same rules apply to companies. Trying to replicate a past growth rate or market position is unrealistic. All we can do is use today's resources to move forward. So, let’s ask this question through planning this year:

What is the best we can do as a company if we apply all our resources and view ourselves as a “NewCo” from a problem-solving and value-creation perspective?