The Foxtel IQ product was world leading technology throughout the 2000s. However, Foxtel faced allegations in 2015 of rushing out new boxes to customers to counter the threat of Netflix to its business. Foxtel (and many others) failed to identify early enough the threat of new entrants with new technology (streaming) that could completely transform the market away from lineal distribution channels for entertainment into the multi-channel world we live in today.
As a business owner, it’s important to not only monitor the market to adapt to disruptors, but ask yourself how could I be the disruptor? Strategic business planning can help you to quickly identify shifts in the market and act accordingly to maintain market position and capitalise on opportunities before your competitors.
Business planning – zero basing your business
Business planning provides a framework to effectively address the challenges facing businesses. By starting with a well-designed plan, companies can strategically navigate the turnaround process, improve performance and increase the chances of long-term success.
- Assessing the current state: Foxtel conducted a comprehensive analysis of its operations, financial performance, market trends and customer feedback to gain a clear understanding of the challenges and areas that required improvement.
- Realigning the business model: Foxtel identified the need to adapt its business model to the changing media landscape. This included diversifying its offerings, embracing streaming services, exploring digital distribution channels and introducing new content formats to meet evolving customer preferences.
- Cost optimisation and efficiency: Foxtel identified that its traditional business model had a limited lifespan and the cost to acquire new customers was capital intensive. It needed to diversify its revenue streams.
- Customer-centric approach: Foxtel deep dived to understand its customer base, their preferences, and emerging trends. Through this, the company could tailor its offerings and customer experience to better meet the evolving demands of its target audience. This included launching new services such as Kayo and Binge.
- Embracing technology and innovation: Initially, Foxtel was slow to adopt innovative technologies to enhance its content delivery, user experience and operational efficiency. However, through strategic planning, it invested in streaming platforms, advanced analytics for personalised recommendations and digital marketing strategies to reach a wider audience.
- Strategic partnerships and acquisitions: Foxtel identified the need to pursue strategic partnerships and acquisitions to access new markets, gain competitive advantages and expand its content library.
Undertaking a regular business planning process is critical for startups through to mature companies. Following this, you must have a system in place to maintain accountability and ensure your key goals are actioned – this process is often overseen by an independent advisory board.
The urgency of Foxtel’s turnaround was increased by the emergence of COVID-19. One of the direct impacts on Foxtel’s business was that no live sport could be played during the initial wave of lockdowns. Foxtel had to move quickly to protect cash flows needed to survive and it did so by gifting movie packages to sports subscribers to reduce cancellations.
The most likely cause of failure by a small business is running out of cash and not being able to pay critical costs such as wages and rent. Accurate three-way forecasting (Profit and Loss, Balance Sheet and Cashflow) is crucial to assessing the critical payments, when they fall due, what assets are available to meet the payments and whether a funding shortfall exists. Without this knowledge, it would be impossible to implement any kind of strategy to counteract the crisis.
Culture. Perhaps one of the most critical elements that can transform an organisation.
Initiating internal disruption within a company necessitates a cultural transformation and Foxtel CEO Patrick Delany took inspiration from other disruptors by operating in a distinct office environment (Fox Sports), separate from the one that had nurtured a culture of complacency at Foxtel HQ.
For leaders, it’s crucial to surround yourself with high performers. A well-crafted remuneration strategy holds the power to not only attract, retain, and motivate employees but critically drive them to achieve the strategic goals and objectives for your business.
An effective reward system goes beyond monetary payment. To align employees with organisational goals, consideration should be given to structuring a remuneration strategy that encompasses:
- Base compensation
- Short-term and long-term incentives, and
- Non-monetary benefits or rewards.
At the time of its turnaround, Foxtel was part of the News Corp empire and could rely on related party support to fund the process. As an SME business owner, it’s unlikely you’ll have this type of funding available. Considerations for SMEs when undertaking a financial restructure include:
- Resisting unreasonable requests from creditors for funding support in short-term. The granting of unreasonable security may conflict with your duties as an owner/director to consider the interests of all stakeholders.
- Any financing obtained should include an exit plan. Typical short-term financing options such as debtor factoring can be expensive, so should only be used to execute a turnaround plan and return a business to sustainability.
- Can a balance sheet deficiency be addressed by future trading profits or does a more drastic restructuring need to occur via a Deed of Company Arrangement or the Small Business Restructuring regime.
Foxtel’s turnaround is a great success story. Importantly, the strategies highlighted above can be applied to almost any SME to improve its performance and add value. To discuss strategies to turn your business around, please reach out to your local William Buck Advisor.