"BUSINESS INSIGHTS”

 

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Lessons We Have Learned From Yet Another Economic Slowdown - Again

I have been providing advice to companies through three recessions (1990, 2001, and 2007). When I look at the behavior of the companies that have survived those recessions, I come away with the same few powerful lessons that present themselves over and over again. 

These are worth sharing:.

1. Companies can end up in trouble when they are hampered by rigid, one-size-fits-all methodologies designed to deliver repeatable, predictable results. Instead of being able to adapt quickly to adverse conditions and make timely decisions, they end up getting bogged down by these bloated, over-engineered systems. The best strategy in the world is worthless if it isn’t achieved quickly. I have observed that 75% or more of the time taken in major initiatives can be eliminated by jettisoning cumbersome decision-making procedures.  The process must be streamlined. Management teams must have the power to make quicker decisions – within days, or even hours – and to shake up their systems to improve performance

2. Focus on cash, actual cash.  Cash is precious. Until recently, many healthy companies had access to an overabundance of cash and were unconcerned. Management needs to develop weekly cash forecasts for the upcoming financial quarter and update the forecasts weekly, comparing the actual figures to the plan. As the process becomes more established, the forecasts can be updated monthly instead of every week.

3.   Focus on high impact issues and take the shortest path to the goal. Companies that are hampered by “fiefdoms” and elaborate company traditions cannot act with clarity and decisiveness. This has a very high cost in terms of success and survival in difficult times.

 

4.    Management must have the courage to build a team that can lead the company out of trouble quickly. Underperforming managers cannot be left in place. When asked what they would do differently, senior management consistently expressed regrets that they hadn’t made more key management changes sooner.

 

5.  Ensure that you are cutting fat, not muscle.  Companies need to use a more surgical, refined approach when making cuts.

  

6.  Be close to your customers. Management needs to understand how their company creates value for their customers. What drives sales and margin growth? Who are the core customers? What are they buying? What value do they perceive in your relationship with them?  Management needs a very good understanding of both sides of the value equation and must be able to adjust quickly when needed.  

Those of us who have ridden economic slowdowns in the past have learned the hard lessons needed to keep our companies profitable.  Senior management must focus on more than just short-term survival; they must be aggressive with a turnaround plan, and “quick on their feet” as the economy adjusts to a new normal – moving quickly to implement the changes.  

Above all, be optimistic. Don’t assume that decreasing demand and revenue must be addressed by drastic cutbacks. Instead, take advantage of the turbulent times; rethink how your business works. An economic slowdown can be a tremendous opportunity to strengthen your competitive position and financial performance with the right mix of strategy, innovation and courage.

   

 

Ken Wilson is the president of the Wilson Marketing Group, Inc., a firm specializing in business-to-business and industrial marketing.  Ken has over 32 years of practical consulting experience in business-to-business marketing and management. He has also been a member of the adjunct faculty at the Graduate School of Business at the University of St. Thomas for over two decades, teaching graduate level courses in strategy, marketing and product management and he has lectured on planning and strategy at the University of Minnesota, Carlson School of Management, Ken would be happy to answer your questions by e-mail at ken@wmg-mn.com or by phone at 763.476.2216.

Copyright ©2010 by Ken Wilson    All rights reserved