10 May 10 Recovery Tip #4: Recession Leadership – Embracing the negative

Harvard Professor James Heskett makes a relevant observation in a HBS Working Knowledge blog post[1] where he makes the point that leaders in organizations may have the tendency be in denial when it comes to recognizing bad news. Drawing upon the work of Richard Tedlow, denial is defined as “seeing but not seeing“.

This is a critical point. Many of the organizations that I studied during the recession of the 1990s were blind to the changes emerging in the post-recessionary environment. There were two broad reasons for this. Firstly, building on the point that Heskett makes, leaders don’t want to see bad news, particularly if it presents a view of the world that the strategies that leaders have crafted over the years can’t now cope with. Secondly, the systems that have been built to help organizations see the outside world may be defective, assuming mere incremental, evolutionary change in the outside environment.

Recessions always bring a wave of creative destruction with them. In a perverse way, this wave is the silver-lining. If this apparently negative wave is recognized embraced, it is a great source of innovation. If its existence is denied, it could swamp you.

Embracing, not denying, the negative is therefore a critical part of recession recovery management.

Looking at the bad news face on could well help you craft tomorrow’s strategy.

Reference
[1] Heskett, J Is Denial Endemic to Management? HBS Working Knowledge May 05, 2010.

29 Apr 10 Recovery Tip #3: Experiment and Fail

An unusual title, but to find out how your customers’ needs are changing you need to go out and experiment.  Not just experiments around new offerings, new supporting services and new markets, but new ways of inter-acting with customers and potential customers too.

Reporting back on the learning from this “innovation agenda” should be part of regular management meetings.

But excel at analysing and learning from failure too.  In the most successful recession recovery organisations that I have worked with the best initiatives had their roots in failed experiments.

Tags: customers needs, learning from failure, recession

14 Apr 10 Recovery Tip #2: Who are your most profitable customers?

Tip #2: Who are your most profitable customers?

It’s surprising the number of businesses that cannot answer this question. A simple activity-based costing exercise, linked to the expected longevity of your client relationships, can produce rich results. You should aim to be able to populate this matrix:

This is a valuable exercise as you will probably find that:

(1)There are too few customers in the top right quadrant.
(2)The profits made by customers in the top right quadrant more than cover the losses in the bottom two.
(3)The profile of the most profitable may not follow accepted industry definitions.

Also, it’s a great way of prioritising recovery actions as different actions and questions apply to each quadrant:

Obviously, start with the top right hand box, then move to address the remaining three. Note how different actions are needed for each quadrant.

A simple, but effective way of thinking about recession recovery planning.

If you use distributors you can apply the same type of analysis too.

Tags: client relationships, losses, profitable customers, profits

13 Apr 10 Recovery Tip #1: Decision makers

This is the the first in a series of tips or suggestions to help you and your business make the most of the economic recovery.  The first tip is aimed specifically at business to business organizations:

Tip #1:  Do you understand who are the new decision-makers and what they want?

Chances are that the recession has changed the critical decision-makers in your clients’ (and potential clients’ too) organizations.  The real decision-makers are now higher up the hierarchy.  So have you found out who they are, what they want and how they make their purchase decisions?

Tags: economic recovery