There is a brutality when a PE firm enters a troubled fashion business with unrealistic expectations for change, innovation, and adaptive behaviors to suddenly transform a (usually) failing organization into a successful one. The fundamental problem is that the timing for a meaningful turn-around is never as tight as a PE firm would prefer because issues such as excessive development cycles, weak leadership, lackluster technology, ineffective processes and/or uninspiring product must be overcome to make progress. In a short amount of time, what do you choose to prioritize?
Risk, product innovation, modernization, brand identity, and efficiency are seriously lacking in many organizations, a combination of which is likely a contributing factor to their (near) demise. These very factors take time to germinate within an organization to overcome entrenched culture. Most importantly, they require strong, forward-thinking leadership.
The PE timetable doesn’t generally allow the luxury of cultivating successful practices. Perhaps because sometimes they start behind the eight ball. Evaluating a business solely from a balance sheet misses the mark on several valuable elements that could propel a company forward more quickly. We typically see the following issues arise when PE firms get involved in a distressed fashion business:
Examples of the above cause many more issues than they should in today’s marketplace. Whilst it is true fashion companies need operating capital, perhaps it’s time for a new model that emphasizes brand longevity over quick profit.
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Nancy is an avid speaker, writer and educator. She has been quoted in numerous articles over the years and here imparts knowledge based on projects undertaken and current practices.