January 2009, Crisis Breeds Opportunity

In a December strategy + business article, authored by several senior partners at Booz & Company, they urge CEO's to rethink their strategy in light of the ongoing events since September 2008 so that they can move to aggressively seize new opportunities.

These are perilous economic times, but with crisis, often comes opportunity. It may be human nature to wait and hope that your company will emerge relatively unscathed from this downturn, but waiting or hoping is not a viable option. Instead, you need to look objectively at your business and decide: what must be done to survive and ultimately thrive. The first objective is to become as strong as possible, as fast as possible. To do that, the authors suggest five main courses of action.

Focus on the future. Reexamine your portfolio of businesses or products and shed the marginal ones (recall Jack Welch's philosophy of being number 1 or 2 in the market). Stay focused on your best businesses, your best products, your best customers, and your most distinctive capabilities.

Prepare to weather the storm. Pressure on prices and margins will only increase. You will need to generate as much investment capital as possible from within your company. Cash is king. Maximize it by focusing your business on core activities.

Anticipate the future industry structure. This downturn may present the type of opportunity to redefine your competitive position. Look no further than foreign auto companies and their reaction to the problems of the Big 3. Can and should you push a competitor to the brink? Should you sell your business even though you may be a strong player? Create an industry road map and decide where your best position lies in the landscape.

Resolve your game plan: Don't think of R&D, new product development, and capital expenditures as fixed costs. They are investments - places to set priorities. By the time your new products are ready, and your new facilities are in place, they will be sources of competitive advantage.

Prepare to take intelligent risks. No one knows for sure what is around the corner. How and when will the proposed stimulus package affect economic conditions? Will we enter a period of deflation? Will we see another cycle of demand-triggered, speculation-driven price spirals as a recovery takes hold? Protect your business for the short term by making good, informed decisions, while watching for signals that will call for more aggressive actions.

By all accounts, it certainly appears that the current economy will not get better immediately. While we are in for more rough weather, we are also entering a period during which the value of being able to act strategically and decisively for the long term will increase enormously. Preparing for this moment of opportunity is of paramount importance for your businesses' position for years to come.