Why are Cannabis Companies So Tough to Fix?
“Das Wahre ist das Ganze” - Hegel, translated as 'The truth is the whole'
Last week, Canopy Growth posted their Q3 2023 results where they put up another quarter of big losses (but showed improvements in other areas). I am not picking on them but rather trying to illustrate the challenges of improving cannabis businesses – even when you have capital, scale and talent.
By fix I mean hitting target profitability.
Typical management remedies boil down to 3 approaches, in no order of popularity-
1) Focus your efforts against one aspect of the business such as reducing cost of goods sold or enhancing your sales force effectiveness.
This tack usually addresses symptoms (versus root causes) and will often create problems or generate costs in other parts of the business.
2) Sell or close an asset or facility.
This move can free up cash but often does little to solve the underlying business problem.
3) Exit a geographic or product market. This approach often works but can leave in place a sub-optimal business model and high-cost structure.
In my experience, many cannabis problems belie simple, canned fixes.
The issues are more holistic and deep rooted, with no single point of blame or accountability. This is not surprising given the sector's newness, dynamism and regulatory environment that encourages Frankenstein-type business structures.
Furthermore, every cannabis firm has a unique set of problems, culture and constraints that demand a bespoke remedy.
There is no cookie-cutter panacea to boost profitability.
Finding and implementing a solution requires an unconventional approach to problem-solving and tactics development.
The military calls it Combined Arms Warfare. This is about having all services and units pursuing the objective in a concerted, integrated and coordinated fashion. In business, it is about holistic management (HM)
HM is not about defining ‘what’ you do but rather ‘how’ you approach the fix. I have seen these 4 methods lead to breakthrough results-
> Define/re-align around your consumer ‘Why’
Centring on your North Star will bring strategy clarity and improve resource & capital allocation;
> Blend some roles & tasks (but not departments) on major initiatives
Collapsing artificial silos (plus data sharing) will catalyze more integrated problem-solving;
> Align around fewer but more strategic, profit-impacting KPIs
The firm’s performance measurement system needs to incentivize these KPIs;
> Insist your senior managers ‘lead from the front’
A ‘hands on’ management style increases their understanding, fosters creativity and drives operational urgency.
Your fix could still employ the above 3 approaches but they will do so with an appreciation for the whole business and root cause problems.
#strategy #problemsolving #operations #canopygrowth #military