“TAKING” OR “LOSING” ADVANTAGE OF THE CYCLE
The business Cycle is not regular, predictable phenomenon like the swing of a pendulum clock rather erratic and to large degree unpredictable. Organisations need to have a pragmatic strategic approach or Business Plan to take advantage of these changeable times or as the Chinese proverb says, ‘ When the strong winds blow, some hide between walls and others build windmills’
There is more to surviving the ‘downturn’ than just being in the right business. Understandably the current focus for many organisations is on survival, in combating these unprecedented economically challenging times. This generally lowering your cost base encapsulates cutting costs and particularly people from all functions of the organisation who are either deemed to be non revenue producing or in the short to medium term, can be maintained at a minimal or “holding” level.
In this hard times organisations focus on lowering outgoings such as expenses, reducing stock holding and improving their cash flow with a greater emphasis on credit control. These will include the increasing concentration by organisations in the product service market on the balance between perceived organisational “need”, the value placed on that “need” and the effectiveness of the organisations products or services, in meeting that need/value combination. More potentially, it will also involve having the potential resources available to reduce turnover in ranges or brands that are more likely to be negatively affected in a down turn and to transfer resources into ranges and brands that will be given preference by customers in a “survival” market, i.e. possibly lower priced or lower specification, albeit that these goods will still need to meet the minimum need, value and effectiveness criteria of the customer. One of the largest cost of any organisations are its people, this is the toughest decision as people can be fickle and capricious. You will need to ensure that you get ‘buy-in’ so as to manage people’s expectations as to how these changes affect them.
However, due to the perceived and understandable need for urgency, such cut backs rarely take into account both the strategic direction and the current and future objectives of the organisation as they are driven by the perceived need for immediacy of situation and to cut costs. However there is an opportunity for organisation to construct a road map of the ‘as is’ or current situationand to plan for a ‘to be’ to create a flatter leaner structure. Therefore, it is imperative that prior to the cost cutting and restructuring measures being implemented, that a “vision” is promulgated to ensure that the most effective organisational structure is achieved to meet the challenges of the downturn while simultaneously reducing costs to the necessary level.
There is no ‘silver bullet’ but it does require knowledge and wisdom. Nevertheless, it is important not to confuse knowledge and wisdom; knowledge is the accumulation facts and understanding to manage your business and wisdom is often about simplification. Miles Kingston has put this succinctly as, ‘knowledge is knowing that a tomato is fruit. Wisdom is not putting tomatoes in a fruit salad’.
- Analysis of existing product and service portfolio.
- Analysis of projected product and service portfolio which is likely to be effective in a downturn.
- Analysis of projected cost reductions which will be required in a) marginal b) substantial and c) major downturns.
- Development of revised organisational and functional structure to match the requirements of 3 a, b and c.
- Development of broad implementation strategies to meet the requirements of 3 a, b and c.
“BOTTOMING OUT” PHASE
While no single individual or organisation can precisely predict the criteria to secure their organisation’s survival up to and beyond the bottoming out phase of a downturn, the creation and implementation of a road map and the ‘visioning’ of what this looks like. This needs to be properly planned for product, service and cost strategy for this phase; this will undoubtedly increase not only the likelihood of the organisation’s survival, but also secure its readiness and fitness for the upturn phase of the cycle. At this time, although the emphasis should be on consolidation of the ”downturn” changes and securing suitable revised operational and organisational structures, there equally needs to be a growing awareness and emphasis on the criteria or “trigger” points, which can reasonably be assumed to indicate the impending upturn. In these dynamic times even when you have a business plan it is vitally important to review it. Keeping in contact with your customers is a good barometer as to when the organisation has ‘bottomed out’. This continuous marketing will help to differentiate enhance the business and positively differentiate the organisation from the competition.
Therefore it is critical at this juncture of the recessionary process, to conduct an analysis of the “upturn” indicators or criteria, upon which the organisation can rely to initiate plans to capitalise on the impending upturn. Without an understanding of these indicators, both general economic and sector specific, the organisational leader and change “drivers” cannot assess at what point it will be most effective to both gain maximum advantage of the upturn, but to also be ahead of the curve their immediate sector or market competitors.
- Analysis of what are the key indicators in all market sectors in which the organisation operates, which will prove both growing confidence and ascending aspiration within the economy.
- Analysis of which criteria are more prominent or critical to substantiate market and general economic confidence.
- Assessment and points analysis of when/what point it can reasonably be concluded, that an upturn is firstly imminent and secondly occurring.
Yes, “what goes down, must also come up” and the two critical issues at this time are to have a fully prepared organisational plan with a thorough analysis of the resources and organisational structures required to profit from and realise the maximum potential of the upturn and secondly, for the organisation to maintain a continual watching brief on the economy, so as to know when the “upturn” indicators or criteria are at least close to being met or exceeded.