- All
- Customers
& Sales - Leadership & Management
- Marketing
& Strategy - Productivity & Execution
Have you got a wet weather game plan?
22-Jan-2009
Derived from an article appearing in Fortune Magazine Jan 2009:
- Confront the new reality.
In good times, growth can cover up a lot of mistakes. Previous iterations of your strategic plan may have involved expanding into new markets, hiring new people, and growing earnings. Make sure you update your strategic plan to confront the new reality. The assumption of continuous growth is not true. Recession requires a different mindset. Think carefully about every expense and investment - because you won't be bailed out by growth.
- Keep investing in your core.
When the recession ends will your business be more competitive or less competitive? Successful companies never stop funding their core competencies and value disciplines - product innovation, customer intimacy, operational excellence etc. Keep developing your people. Many companies cut training and coaching budgets in a downturn. The best never do.
- Communicate more frequently - balancing realism and optimism.
Don’t hide away, keeping quiet until you have some answers. In a recession all stakeholders are nervous: employees are worried that they'll be laid off, suppliers that they won't be paid, customers that quality will decline, investors that the company’s value will fall, communities that operations will close down. Your silence just makes them worry more. Good leaders respond by communicating even more than usual. You may not have all the answers, but be honest about conditions you face, and find ways to keep hope alive.
- Customers have new problems, so give them new solutions.
Spend plenty of face to face time with your customers to make sure you understand their current needs. Can you redefine your value offering to meet their needs?
- Don't rush to cut prices.
McKinsey research shows that a price cut of 5% has to generate increased sales volume of 19% in order to pay for itself - and that almost never happens. Holding prices steady may cause sales to decline – but that still might be your best course of action. Now is the time to study price sensitivity in your markets much more closely than before.
- Focus on capital - how you're getting it and where you're using it.
Remember the most fundamental rule of business: that you must earn a return on capital that exceeds your cost of capital. Neglecting this rule really hurts now that capital markets have become tight. Companies that are managed for capital efficiency are in strong positions now.
- Reevaluate your people - and find some good ones.
As Warren Buffet said, “You only find out who is swimming naked when the tide goes out.” Anyone can look like a genius in a growth market. If you need to lay people off, now is the time to identify the imposters. If salaries or bonuses need to get trimmed, don’t reduce them equally across the board. Reward your best workers well, even in a recession. Then scout for competitors that are sharing the pain equally and employ their best performers.
- What behaviors are your incentives encouraging?
Do your incentives encourage unrealistic growth and excessive risk taking?
Consider adopting more appropriate incentives that encourage long-term thinking.
- Be smart about mergers and acquisitions.
Recession is a great time to buy assets cheap. Yet strangely, companies are 2 X more likely to acquire businesses in during an upturn than they are during a downturn - the opposite of what makes sense. Of course if you're cash strapped, you can't follow Warren Buffett's advice to be greedy when others are fearful. But if you're financially strong, this is your moment. This is a great opportunity to strategically acquire other companies and their talent.
Do you want growth tips sent to you weekly?
To ensure your Weekly Growth Tip does not end up being blocked by your spam filter make sure that you whitelist info@RESULTS.COM in your e-mail and with your ISP.
Follow Us
RSS
At your weekly management meeting (you do have one don't you?) - share the latest Growth Tip with your team and ask the question: "How can we apply this information in our business?"
Commit to taking some form of action. You will be glad you did.
Comment