Thursday, February 19, 2009

Rules of Business Permanently Changed - It’s Time for a Strategy Tune-up

Today, the worst thing executives can do is cut their way to prosperity. Leaders which believe in aggressive cost management as the primary tool in their company’s strategy are missing the forest for the trees. The side benefit of global economic implosion is the spotlight on excessive spending practices has been brought into focus. But this focus on lack of effective cost controls and the required changes to bring them in line should have been addressed when times were good.

It is amazing how some marquee companies have become bloated. What is really annoying to me is that they have taken advantage of writing off the “one time” costs of these reductions when they believe that Wall Street will give them a “hall pass” on the company’s valuation. Some even had their valuations increase as a result. It’s just nuts. They should have taken the opportunity to shed unnecessary costs when times were good. “Annual” Wells Fargo Executive Planning Meeting in Vegas? – need I say more!

In my conversations over the last week with CEO’s, one of the key takeaways was the business landscape has permanently changed. Changes that will shape the future are:

    - As customers come back to the table, they will be more selective and will request better value from their purchases.
    - Industry competitors and partners are changing position on the “strength chart” or are disappearing all together.
    - Government intervention and control across the globe is increasing.
    - Large pools of experienced talent are readily available.

True visionary leaders will seize this opportunity and take advantage of changing market conditions to revise their strategies adapting to the new business landscape. Others will make selective adjustments (“pruning the trees”) to their business in hope that minor changes will get them through another quarter.

With the true impact of the U.S stimulus package and changes in the tax laws unknown, it is clear that the new business rules are still under development. This uncertainty in rules of engagement is causing individual and small investment funds to hold back from financing start-ups and early funding rounds. This ambiguity will clear as the true impacts of these changes are understood. It could be sooner than most economists think. Perhaps as soon as the 3rd quarter of 2009. People of wealth are fed up with investment returns of less than 5%. They certainly won’t go back to investing in the stock market where they have no say over how their money will be used. That would be just crazy!

The time to set a new course for each business is now while the road is being paved and the sign posts are being installed. These new rules of the road will allow a clear view of the forest without getting distracted by the need to trim every tree along the way. I am convinced this is the right time for each business to take a serious look at their strategic plans. Making any necessary revisions required to leverage the changing business, competitive, and legislative landscapes. This review needs to examine all areas including people, product, and operating model assumptions to create a holistic foundation to move our industries forward – to keep a “forest” view of what is important. Sound strategic vision and plans will lead to a focus on growing our way out of this funk.

If you agree, dust off that strategic plan and take a hard look at where your assumptions need to change. If not, go back to sleep. We will see who comes out of the gate ahead with a clear path on this virgin road when the money to fuel growth starts flowing again. Let me know if you agree with my assessment or have a different viewpoint.

1 comment:

  1. Steve,

    Another great post. I tend to agree with you and the changes you talk about that will shape the future are very similar to the changes we saw happen in technology market coming out of the dot-com bubble bursting. The smart companies will take this time to position themselves for great things and will ride on the front of the wave as growth returns.


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