Surviving the Recession: It’s Back to Basics

As we enter what looks like a global recession, business leaders are scrambling to cope with significant and sudden changes.   Credit is in short supply, demand is slowing, sales cycles are increasing, and employees’ confidence is eroding.

Their concern is understandable.  Here in the U.S., the unemployment rate is expected to reach double digits before the end of 2009. And as of Christmas 2008, the Dow Jones index had lost 36% of its value since January.

In times like these, it is crucial to quickly determine which of your assumptions are still valid.  In other words, you want your organization to answer the question, “What is true now, and how do we know this?”

Begin by developing a deeper understanding of your current and prospective customers. What do they see happening in their world and why?  How have their priorities and strategies changed? What opportunities exist for new products and services that address the changes your customers now face?   Commit to making this not just a short-term project, but an ongoing activity, where you and your people keep setting more and more ambitious learning goals.

We have yet to encounter an organization where executives feel entirely satisfied with their understanding of customer needs.   When things are going well, there is often more tolerance for ambiguity.  But in a recession, time is short and resources increasingly scarce.  It therefore becomes urgent to improve the relevance of your offering.  This requires you to work harder to learn about the outside world in a time when the news is depressing more often than not.   But be relentless.  When capital is scarce, knowledge is a greater source of leverage than usual.

As a parallel effort, work to improve operational clarity.   Make sure that everyone has a shared view of how the business currently works, who is doing what and why, and how efficiently and effectively the business is working.   Operational ambiguity increases business risk, slows execution, hurts quality, and hides waste. When everything is going well, it is easy to get sloppy about operational clarity.  In an economic downturn, however, clarity is essential in order to make better decisions faster.  It is also absolutely needed for improving business performance.

Once operational clarity improves, you can make changes to reduce waste and focus better on meeting customer needs faster.   Such changes can often yield dramatic initial results.  To remain competitive, however, it is crucial to keep going.  Continuous improvement never stops, and everyone should be involved in identifying and implementing improvements.

As the external business environment changes, so must your strategy.  While operations is about delivering on current commitments, strategy is about the future.  I always ask CEOs, “What is your strategic destination?  What changes must be made in the next 1-3 years, what will the organization and its offering look like at that time?”  A strategy is simply a plan for making that transformation happen, and in the current economic climate it probably needs to be revised, perhaps heavily so.

In many cases, strategic execution is held up because the strategy is not clear to people.   Strategic clarity often requires more research, more thinking, and more uncomfortable conversations than people anticipate.  You know you have strategic clarity when everyone knows what needs to change and why, and when that understanding has been refined to specific projects with clear goals and milestones.  It is a misnomer to think of strategy as a planning process, however.   It is really about problem-solving.

Business leaders who are working to attain more clarity, improve performance, and accelerate their strategic execution may want to learn more about Lean.  By launching a Lean Transformation, you will ensure that executives, managers, and employees learn practical tools and techniques to implement the steps outlined above.

Lean practices will help your people identify and quantify customer value, provide rapid and ongoing operational clarity, improve quality, and dramatically reduce waste.  You will also be able to institute a continuous learning and problem-solving process on all levels, from strategic goals down to individual business processes.

Another useful framework is David Allen’s “Getting Things Done” (GTD) methodology, which does for individual productivity what Lean does for organizational productivity.  We use GTD with clients to help them organize change projects and ensure that everyone knows what the next action is on every project.  Watch for David’s newest book, “Making it all Work: Winning at the Game of Work and Business of Life”, available in stores on December 30.

Facing a deep recession is very much like facing a turn-around situation.  It’s back to basics.  Get perspective, take control, innovate, execute, and keep learning.   But a recession is also an opportunity to create new growth.  If you can adapt and innovate faster than the competition, you will be closer to your customers than before, and you will increase your market share.