Not everyone will survive the crisis. But most will. And the future success of these companies will be influenced by the decisions and actions taken during the crisis. Those who haven’t prepared may survive the recession only to find themselves overtaken by their competitors as the economy gets back to normal.
Take a look at these figures from an article in the Harvard Management Update (Baveja, Ellis, Rigby March 2008): a recent study of more than 700 companies over a six-year period found that “twice as many companies made the leap from laggards to leaders during the last recession (90-91) as during surrounding periods of economic calm.”
And most of these changes lasted long after the recession was over − a clear indication that what you do during the crisis determines your position when it’s over. Or, just surviving the crisis isn’t enough.
So the point is: you need to start – right now! – to prepare for recovery.
This article is the first in a 3-part series. All three articles will help you prepare for recovery, each one tackling recovery from a different perspective. This first article looks more closely at the upcoming strategy review that will take place (for most companies) during the next 3 months. The second article covers the budget cycle, and the third addresses the people challenges.
Part 1 – Go beyond the classical Porter analysis
The crisis is in full swing. And most corporations are downsizing: from trimming the fat to crash diets. And, as a result, the long-term focus gets buried under short-term priorities.
But that will soon end, as most companies start their 2010 budget cycle. That’s when those forgotten strategic topics will pop up on the radar screen again. And you will probably agree with me that it won’t be business as usual … the world around us has changed dramatically in the last 12 months.
Your strategy review – the kick-start of every thorough budget process − needs an extra punch. You want − and probably need − that something that helps you and your company digest the changed environment and prepare for a strong recovery.
I believe the classical elements of a sound strategy review (like a sound analysis and scenario planning) remain the basis − but that’s not enough. You need to dig deeper into existing analysis areas and be creative by looking at others.
So, here’s a list of 8 dynamics you should integrate into your upcoming strategy review process. Some build on classical strategy analysis and will hold no surprises for you; others are probably new analysis areas and challenge you to look beyond the obvious.
1. Economic dynamics:
This is the obvious one. The one you hear on the news every day. The one you most probably know best and have integrated already. This is all about macro indicators telling us what happened in the past, while economists (try to) predict what is going to happen and politicians try to stabilise the market. These dynamics should definitely be included, but only in your basis as you start. Don’t limit yourself to listening to what others write or say, but dig in. What does it really mean? How acute is the danger (think of the Mexican flu)? What does it mean for my sector, for my company?
2. People dynamics:
It’s impossible to win without the right people. So ask yourself the following questions: Who’s still in your company? Are they going to stay, or are they just waiting for the right moment to leave? As you know, the job market follows a pattern different from that of the economy − so, when do you expect the job market to pick up again?
3. Budget dynamics:
How fast can we make budget changes? An interesting question, when you know that the 2010 budget will be made in the midst of one of the largest economic crises of all time. Most probably, your – and your colleagues’ – current budget ideas are coloured strongly by the current crisis and are very cost-driven. But watch out for the boomerang! If the financial climate improves, you might be stuck with an inflexible budget. So, look at the budget dynamics in your company and evaluate the time needed to shift gears when necessary.
4. Industry dynamics:
Some of your competitors won’t survive the crisis. Others will, but they will definitely look different. They might have had an extreme makeover. And there will be new players on the market − competitors, suppliers, and customers too.
In order words, business won’t be as usual. You’ll need to find out how the crisis has affected − and will continue to affect − the dynamics in your industry with all the different players involved: from customers and private and public investors, to suppliers and partners, to existing and new competitors. KPMG research involving 852 companies in 29 countries indicates that about 50% of the companies are changing – or planning to change − their business model (reported in De Tijd, 3 June 2009). Find out why changes have occurred in your industry, predict what is going to change, and see how all this can be played to your advantage.
5. Customer dynamics:
You were well aware of your customers’ needs before the crisis. But do you still know what they are today? Chances are that the difficult economic climate has altered your customers’ ‘needs’, or loyalty, dramatically. So, don’t rely on past research − do your homework. You might be very surprised by the results.
6. Decision dynamics:
The crisis has scared many executives. They have become hyper-vigilant and avoid taking risks. Long-term decisions are postponed until things stabilise. Be bold and put this on the table. I’m not saying that you need to take risks. You might want to be more careful about certain decisions than you were before − but you don’t want to become paralyzed either. Each executive team should put this foremost on the agenda.
7. Execution dynamics:
Take into account what you can do. Restructuring has a negative impact on morale and impacts your change capacity as well. Good people have left or are leaving. The amount of stress your remaining managers are experiencing is very high. Proper supporting processes might be at risk. I’ll touch upon this in more detail in other articles. The key take-away is: a previously approved strategy could very well be less realistic today, due to reduced execution capacity in your organisation. It’s crucial to take this into account now!
8. Leadership dynamics:
Last but not least, you should examine the captains on your ship. How well did they perform during this extreme crisis situation? Any signs of burn-out? Is their style suitable to guiding the company through the recovery period?
You might want to put these dynamics on the table during the first step of your strategy review process, use them to animate a lunch or dinner discussion, or spend some time analysing these dynamics before you start your strategy exercise and discuss with your team. Whatever approach you choose, I’m convinced these 8 dynamics will bring creativity to your strategy review discussions and realism to its execution: two crucial elements for success.
