Arizona economists are predicting that our state will lag significantly behind the national rebound from the recession. While some business people may choose to be patient and wait for local conditions to improve, others are weighing their options.

Some companies are considering exploring greener pastures,expanding or revising their product and service offerings or making wholesale changes to their business in order to recapture revenue streams.

As you re-examine the economic landscape and plan your business strategy for 2010, what new or revised directions are you considering for your business?

Replies can be posted on this blogsite or you can reply privately to: http://www.od-consulting.com/content/contactus.html.Replies to the OD-Consulting website will be summarized and posted on this blogsite next week.

    “Every time we've moved ahead in IBM, it was because someone was willing to take a chance, put his head on the block, and try something new.”

- T. J. Watson, Jr.

Recent earnings reports from some of the leading financial institutions have revealed that their profits in the third quarter are largely attributable to investment returns and not from their lending business.Analysts speculate that the banks do not yet have confidence in the lending sector as a viable line of business.

Bank lending practices are an important fuel in stimulating and sustaining economic growth, but if the banks are reluctant to engage in their core business, what impact might that have for economic growth in general?

Hopefully, other industries are attempting to leverage their core businesses instead of relying on their treasury strategy to create profit. However, if you find that the market is not ready for the expansion of your business, where are you putting your retained earnings?

          
“I never worry about action, but only about inaction.”

-Winston Churchill

ASU’s W.P. Carey School of Business announced that it will honor Jan Hatzius (chief U.S. Economist at Goldman Sachs) with the 2009 “Lawrence R. Klein Award for Accuracy”. Hatzius forecasted the unanticipated global financial crisis more accurately than 50 other top forecasters who participated in an ASU survey.

Hatzius predicts slow growth for the remained of this year and an unemployment rate of 10.5% by the close of 2010.

However, unemployment is a lagging indicator and those who want to take advantage of the economic rebound as early as possible look to leading indicators.

With investor confidence rising in the equity and commodity markets (with major indexes surging and gold reaching an all-time high) and Australia leading the way by being the first major economy to hike its benchmark interest rate (making American exports more attractive there), some business leaders are preparing for expanding markets.

What things are you doing to prepare for success in the new economy?  

Follow up to the briefing: " What Leading Indicators Do You Use to Make Important Decisions in your Business?"

A recent survey of business managers revealed the following results (numbers are approximate):

         40% use unemployment numbers

         20% use consumer confidence polls

         15% use stock market indexes

         10% use home sales

         10% use GDP

         5% other

If you haven't weighed in yet and would like to, add your comments to this blog.

              "I never worry about action, but only about inaction".

                    - Winston Churchill

As if in a race against time, many businesses are reorganizing the way they do business in order to not just salvage what they have left after this devastating recession, but also to prepare for the new, emerging marketplace.

“When one door closes, another opens: but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us.”

- Alexander Graham Bell

Recently Fed Chairman Ben Bernake announced that the recession is probably over. Indeed, there are a number of signs that the economy may soon be turning around. But, once stung, many of us are loath to jump back in with both feet.

We’re waiting for the right moment to make financial, operational and other
types of commitments that will launch our business back into the new economy.

Depending on the industry and sector, different business people rely on different indicators to make these decisions.

My question is, “In order to determine when you will pull the trigger on important business decisions, what leading indicators do you use and why?

“Next in importance to having a good aim is to recognize when to pull the trigger.”

-Elmer G. Letterman

Current economic conditions are wreaking havoc on businesses of all sizes. When demand for your products or services are down, revenue decreases.It’s obvious that variable costs decline when volume decreases, but fixed costs allocated to working capital remain, squeezing margins.

So, the question is, how do we take more cost out of the business when some expenses are fixed, at least in the near term?

Short of liquidating hard assets to keep the ship afloat, one response to taking cost out of your business is to utilize the remaining variable resources in a way that they become more productive. Easier said than done, right?

We’ve all heard about the business process improvement and lean strategies that promise to improve productivity by orders of magnitude. But for small to mid-cap businesses, the time and expense of implementing a highly structured cost reduction program of this type is usually not realistic.

Instead, a simple, straightforward approach to streamlining your service or production operations can be implemented without much difficulty. Often referred to as the Valued-added Approach, an activity should only be done if it adds value, i.e., if it meets one of these criteria:

1.    An activity adds value if the customer cares about it.

2.    An activity adds value if it physically changes the thing.

3.    An activity adds value if it is done right the first time.

You may be surprised how many things you find that don’t meet these criteria and are just draining time and resources unnecessarily.This is an important examination of your business and it may be a good time to do it.

In addition to taking direct cost out of your business,the Value-added Approach has other,more sustainable, benefits:

1.    Service or production processes experience reduced cycle or turnaround times.

2.    Quality improves because there is less need for inspection and audit.

3.    Waste is reduced because there is less rework.

4.    Customer acceptance is improved because quality is higher and potentially lower costs that you may pass on are reduced.

And the best part is, you can do it on your own – or make it a job for one of the employees you might otherwise need to layoff. It will pay for itself very quickly.

As a discussion item, I welcome readers to comment with additional input on this, or other, cost reduction strategies so we can all learn each from others’ best practices.

“Laws and institutions, like clocks, must occasionally be cleaned, wound up, and set to true time.”

-H.W. Beecher

Question: How does a leader achieve a balance between a compelling leadership style and promoting a high-involvement ‘followership style’ among subordinates?

Recently, while conducting a strategic planning session with a CEO and his immediate staff, I observed a common phenomenon.

The group consisted of seasoned members of the executive team except for one, who was new to the company. The CEO asked his staff to give him input on problems and opportunities facing the firm. After a little coaxing, some tame input was finally offered from some of the seasoned executives.

After getting the ‘lay of the land’, the new executive decided to participate and make his contribution. However, his input was met with serious critique from the CEO. While initially surprised by this response, the new executive felt it was his duty to stay in a role of advocacy for his point of view rather than be seen as a’ shrinking violet’ in front of his boss and peers.

However, the CEO continued his berating and prevailed in the confrontation as the new executive backed down before it could be interpreted as insubordination. What lesson was learned by the executive? Don’t argue with the boss.

While the rest of the meeting continued without further confrontations, the CEO appeared to be disappointed with the quantity and quality of input from his team and he couldn’t understand why, as he confessed to me in a later conversation.

An important part of a vibrant team is the high quality interchange of insightful minds at work. It’s as true in the mail room as much as it is in the executive suite. However, many of us with experience in organizational life can attest to the power struggles that interfere with otherwise collaborative meetings.

Almost like a Dilbert cartoon, our role in the organization translates into status that then translates into how much ‘power’ we have in meetings. This perceived power appears to dictate the type of input that we are allowed to provide and more importantly, the type of feedback, or critical analysis of other people’s input, that is acceptable.

As a result, the business of the group degrades to the point of showing deference to those who have more power and the quality of the meeting outputs become merely a reflection of one or a few, rather than the combined efforts of the whole team.

How do you handle “Telling truth to power”?

“The best leader is the one who has sense enough to pick good people to do what he/she wants done, and self-restraint enough to keep from meddling with them while they do it.”

- Theodore Roosevelt

In my last blog, I introduced the two components of strategic planning, vertical and horizontal, where ‘vertical’ represents the long-range perspective and ‘horizontal’ represents the linkage and alignment of the organizations objectives, plans and resources.

In my first Strategic Planning segment, I mentioned that I often provide an overview of strategic planning to a client before I actually begin providing these types of services.

 While there are many different methods for undertaking strategic planning, most can be grouped into two categories - ‘Rational’ and ‘Emergent’.

 Rational design methodologies typically rely heavily on quantitative data analysis. They are also usually employed in a ‘top-down’ approach, but are amenable to both ‘bottom-up’ and hybrid methods. examples include:

SWOT Analysis

Five Forces Strategic Analysis

Strategy Mapping

Balanced Scorecard

Scenario Planning

The strengths of rational design methodologies are their more objective approach to gathering and analyzing data and developing choices for action. Those who favor these approaches cite the formula-driven and quantifiable techniques that produce sound and defensible decisions.

Critics argue that these approaches do not take into consideration the emotional and motivational elements of the wider array of stakeholders who may be affected by the subsequent actions of the organization.

 Emergent design methodologies typically rely more heavily on qualitative analysis, usually employing a ‘bottom-up’ approach and frequently including a wider array of stakeholders. Examples include:

Search Conference/Future Search

The 7-S Model

The Galbraith Star Model

Real Time Strategic Change

Open Space Technology (OST)

Appreciative Inquiry (AI)

 The strengths of emergent design methodologies are openness to a wider variety of data sources (stakeholder groups) who have an interest in the future of the organization as well analyzing data in ways that consider human factors rather than just economic criteria.

 Critics don’t like the subjective nature of gathering and analyzing data and discount the value that non-management groups can bring to the strategic planning process.

 Depending on the objectives, as well as the anticipated challenges, of the strategic planning process, an organization will use the methodology that best suits its needs. And occasionally, a hybrid approach is developed to meet a complex array of challenges.

 For followers of this blog who would like to learn more about any of these strategic planning methodologies, I will be happy to provide more detail or direct you to on-line resources to explore on your own.

 A future blog on strategy will focus on strategic thinking – how to strengthen strategic thinking capabilities for yourself and others as well as how to apply strategic thinking in your organization.

“You have to be fast on your feet and adaptive or else a strategy is useless.”S

- Lou Gerstner, Jr.

As the economy begins to turn around, I am receiving an increasing number ofrequests to conducts strategic planning for new and existing clients.Repeatedly I hear, “We think our industry has hit bottom and is on the verge of rebounding so we want to be ready to take advantage of opportunities as they begin to emerge”.

Interestingly,the term ‘strategic planning’ or even just ‘strategy’ or ‘strategic’ has been a much misunderstood and maligned concept. What do you think when you hear the word, ‘strategic’? Do you think “long range planning” or “big picture”?

Because there are so many different types of business planning, I frequently find my self helping clients sort out what they really want before I start providing strategy planning services. 

To start off on the right foot, I suggest we take Plato’s advice: “Every discussion should begin with the definition of terms”.

First, there are two dimensions to strategy: vertical and horizontal.

Strategy is often associated with strategic planning, so most people think of strategy in only the vertical dimension, or the long range perspective.

However, the horizontal dimension is just as important. The horizontal component of strategy is the linkage, alignment and integration of objectives, plans and resources, etc. This alignment is just as important as long range thinking in order to ensure that all the components of the organization and its competing priorities are working in concert with each other.

How often has your organization invested valuable time and energy on a strategic plan only to find it ending up on a shelf gathering dust?

Often,the blame is attributed to faulty assumptions, excessive analysis or lack of support.  Many plans often become an exercise in futility - a 'blue-sky’ forecast that no one really uses. 

We all know the drill:

1.    Clarify business mission, vision and values

2.    Conduct a SWAT analysis (Strengths, Weaknesses, Opportunities and    Threats)

3.    Conduct a trend and forecast analysis

4.    Identify strategic objectives

5.    Design organizational structures (form follows function)

6.    Allocate and align resources (financial, physical, technological and human)

7.    Develop metrics for tracking progress

And, while each of these steps is important, the key to making it happen involves more than merely constructing the plan. Often, selecting the right planning method has more affect on the potential success of the plan.

In my next blog, I’ll discuss the two major approaches to strategic planning: rational models and emergent models.

“If you always do what you've always done, you'll always get what you've always got.”

- Ed Foreman