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New Normal

“After the fall” is from a recent special report published in the The Economist (October 3, 2009); looking at recovery scenarios. I particularly liked this chart (above). This is basically the chart that we see many executives looking at now; trying to guess which path the market will take -- trying to assess the degree of risk they will assume. The penalty for the wrong guess could be expensive.

Investment decisions that need to be made today, in order to be ready for the expected 2012+ upturn, are predicated on being able to have some degree of accuracy in predicting which path the recovery will take.

Many are anticipating that it will be Scenario 2,“Permanent Loss." You could also plot another line to accompany Scenario 2 that reflects what we see happening with resources (I added a red line). Efficiency will be forced up while fewer people do more work, greater output with fewer inputs. So, in my revised chart, the blue line is the “new normal” market and the red line is the output that will be demanded by those fewer resources that are left. Not a technically accurate chart, but rather a conceptual idea of this interaction.

Further, growth will most likely come from market share gains from competitors, rather than through double digit increases in market size, which appear to be rather flat in the technology sector for the next few years.

It is more critical now to pick the right strategies, the right focus, the right projects, the right products, the right portfolio, the right... where benefit is maximized and on things that get the biggest "bang for the buck." Every shot needs to hit in the “new normal” world.

Related | Series on restructuring and decision-making | Decision-making today and the implications to "the other side" 

Structure, Converge, Deploy

This is a process for working with executive teams trying to solve transformational business problems--many of these problems are the result of recent dramatic changes in the economy.

This process was designed for multi-variable, cross-functional problems that are difficult to solve within functional silos. They usually cut across the company.  They stretch the skill levels of the functional specialists with a vertical focus. The problems are lateral in nature.

Often the problems are poorly defined, not well understood, and as a result...the work to find solutions is inefficient (at best) unless organized. This presentation discusses a way of working with these teams to define and solve these problems.

New blog "Leading in Turbulent Times"

Earlier, I made reference to some interesting work by Don Sull -- a professor of management practice in strategic and international management, and faculty director of executive education at London Business School.

Recently, Professor Sull started a new blog with the Financial Times called "Leading in Turbulent Times." I particularly liked the post called "Five myths about business failure in a downturn." 

Specifically, Myth 1 The downturn caused our problems, supporting my argument (for example) that the problems at General Motors are not only caused by the current economic conditions ("Accelerate the Pain... at GM"). Professor Sull quotes Warren buffet, "When the tide goes out you find out who has been swimming naked" --which seems appropriate to describe what we see in Silicon Valley today. 

Professor Sull's blog is at http://blogs.ft.com/donsullblog/.

Accelerate the pain... at GM

View quicktime animation of slide (above)

Recently, a Wall Street heavyweight (Steven Rattner) took over driving the auto industry's "retrofit" program as Counselor to the Secretary of the Treasury, Timothy Geithner. I gather that Mr. Rattner had a hand in the recent decision to force GM's Wagoner to resign. I believe this was the right decision. Wagoner and the rest of the "inbred" auto industry leaders in Detroit move slowly and subscribe to the "evolution" versus "revolution" approach to change. Yet the barn is burning and they don't realize it.

Break inertia, quickly reach consensus

View quicktime animation of this slide set

The questions above are from a recent executive workshop we ran with a client. The senior manager's challenge to us was to put in place a process that would enable them to:

• Structure problems and cause a group of people to rapidly converge on the best solution--and then act (i.e. not just decide, but actually cause something to happen as a result of the decision)

This was in the context of a series of restructuring decisions they were making in order to reallocate resources to more effective parts of their organization. The challenge was...

• Break inertia, quickly reach consensus?
• Bring executive team "on board" with decisions? ...and "make-them-happen" quickly and efficiently
• Reallocate & re-calibrate...for the other side?

Series on restructuring and decision-making

The following are links to a series of related articles we've posted concerning the restructuring and resource reallocation decision-making process.

• 80-20 Rule
  
• Break inertia, quickly reach consensus
  
• Recent observations
• Force shrinkage
• Do more with less
  
• Resource reallocation, the current crisis
• Decision-making today and the implications to "the other side"
• A management simulator... what to cut in order to achieve the maximum benefit from the remaining resources?
• Viewing project portfolios against constraints....to determine what can be accomplished with available resources
• Cost Leadership Initiative (CLI) methods
• Business Process Re-engineering to Reduce Operating Costs

80-20 Rule

View a quicktime animation of slides (above)

We see the Pareto Principle at play over and over again as we model NPD project portfolios with clients. Many times, 20% of the projects (i.e. the $'s) generate 80% of the benefit towards reaching an organization's objectives. This means that 80% of the projects fall on that diminishing returns part of the cost-benefit curve.

Recent observations

We're seeing patterns of behavior resulting from the downturn. Of course each environment is different, however there are repeating symptoms of the ongoing stress associated with substantial revenue shortfalls. Most organizations have responded quickly with deep cuts, which then generate extensive re-organizations.

Force Shrinkage

 

You can view more about Jerry and George's analysis of this situation, if interested of course!

Clearly there is a lot of shrinkage going on now and like George found out, it is hard to distinguish between what is real and what is not. Rather, I wanted to speak to the term that Thomas E. Ricks discussed in his new book "The Gamble," called Force Shrinkage.

Military needs operational, portfolio, and strategic agility while making resource reallocation decisions

 Recently, I sent a close friend a link to a post discussing our change in emphasis (read post). He's in his final stages of deployment preparation to a FOB in Afghanistan.

Obviously I can't talk about what he is doing there, but I shared with him what we were doing with corporations and the parallels I saw with what I would expect the Army needs to do going forward. The "resource reallocation decision" on a trillion dollar scale! "How to do more with less" takes on a new meaning with the implications of failure having potentially "life or death" consiquences.