Good Strategy for Crisis Times

Last month, I proposed that Good Strategy was a thought-out response to a major difficulty; a way through a problem, comprising diagnosis, guiding policy and a coherent set of actions.

We have an elephant-sized problem in the room right now! – the crisis which President Obama and many others have described as “the worst financial crisis in living memory”. All economic commentary of recent weeks highlights deteriorating conditions in global finance and markets – the European news is dire. Our Reserve Bank’s MPS gloomier Box B scenario of last Thursday reflects the world peril. It is futile to hope that the manufacturing giants such as China and Germany can be our Atlas – supporting the whole world while all profligate consumer nations are forced by debt ceilings to restrain purchasing. Only Ayn Rand could find it amusing.

So, what must we do? How must our strategies be directed?

The fundamental duty of directors is to add value. In this crisis, I interpret that as a duty to ensure the survival of the Business. In most cases, but depending on your firm’s particular circumstances and development stage, the guiding policy will be conservative, and the coherent strategies will likely include:

  • Revenue Strategies – to grow the top line by customer responsiveness, self-funding marketing and sales initiatives, and greater speed-to-market
  • Margin Strategies – to protect the margin dollars, both on the Buy and Sell sides (percentage being less important short-term)
  • Cash Strategies – to work even harder to release cash from receivables and stock, and to put the daily updated cashflow forecast in the centre of your dashboard.
  • Debt Strategies – to secure your current debt finance and its rate, in a climate where money is tight and bankers are nervous
  • Learning Strategies – for the organization to learn how to make incremental progress in the “new normal”, and to celebrate small wins

Other initiatives – “Lean”, business process improvement, skills development, right-size staffing, brand and product line development, capital expenditure for productivity gains – are probably too slow to make a difference in this recession scenario. However they are still good business in preparing for a resumption of growth, whenever that may occur! (the RBNZ central (higher) scenario has growth recovering to 3% in 2014).

This is a climate tailor-made for alliances. To jointly pursue an initiative with a non-competing buddy firm may fit your purpose, in that complementary resources may be harnessed, project costs and risks minimized, capital conserved, and new markets or supply chains developed. This partner may be Kiwi, but as likely Australian or beyond. So, in a seasonal spirit of Christmas and goodwill among people, may I challenge you to spend your slow fishing days thinking about joint ventures, alliances, licences, complementary product kits and packages, shared sales engineers or buyers, sales offices, stands at Trade Shows, even sharing warehousing or back office resources.

Now may I propose a toast to all of you who have worked so hard this year so that your Business has survived. Congratulations everyone, and renewed strength for another challenging year!