Short-Term Focus
Clearly, when the economy contracts, so must many businesses. Leaders have had to focus on tightening their belts in ways, and at a rate, most have not seen before. Pressures were being applied from many directions: the marketplace (competitive pricing, decline in demand), the Board, employees, the credit markets and (for some) regulators. The circumstances were further complicated by the fact that almost all current leaders have matured into their senior roles long after the last deep recession of the early 1980s; many, therefore, have little direct experience to guide their thinking and reactions to the current situation. Regardless, this work must be done to make businesses viable in the near term. For some, this is a matter of survival.

The danger is that the expense focus can create business myopia for some leaders. They may deal disproportionately with contracting their businesses, thereby running the very real risk of not doing the necessary work to prepare their businesses for growth when the economy turns. And, they must, with confidence, spend the necessary time understanding their future business models, e.g., how their companies will provide market value in new ways that yield income and growth once they are on the other side of this recession.

What percentage of leadership’s time in your company is being spent on execution and cost management versus developing the growth strategies for the future?

Looking Forward:
Not a Mirror of the Past
There are many indications that growth, when it returns, will not be symmetric with the recent contraction.  Companies may not just return to their pre-recession product and service portfolio mix. This asymmetric expansion will occur for several reasons.

Many companies will have a new cost or expense equation from which to compete in the market because of the belt tightening; this could constrain automatic resumption of pre-recession positions. But, more importantly, fundamental shifts in the marketplace will require that the growth occurs in new areas.

There are forces at play that have the potential to change dramatically what markets will look like and how businesses will sell to and service customers. Consider, for example, the 40-50% reduction in retirement savings and likely longer careers of would-be retirees, a consumer attitude of need versus want and the expanded definition of discretionary spending, and an overall lack of confidence in the financial system.

Who will step into the space to rebuild the capital markets in the absence of investment banking as we knew it?  Which companies will be able to redefine themselves as IBM (for different reasons) did?  Services that barely existed in the early ’80s (reengineering services, 10-year contracts to run data centers) were its business drivers in the late ’90s.  What will emerge from Oracle’s purchase of Sun Microsystems?

Companies aiming for growth in this new marketplace will likely spawn a new wave of innovation.  Less agile businesses may struggle to keep up.  If this notion holds true, what must senior leaders be doing now to prepare their business both from a growth strategy and a talent capability point of view?

<< go to page 1  |  go to page 3 >>