Extraordinary Leadership Needed for Extraordinary Times

I still see a number of companies whose leaders appear to think that this recession is something that they can survive by simply cutting costs arbitrarily. I don’t believe that is a strategy for success.

Visionary leaders will act as results deviate from plans and disruptive events occur

Booz & Co. says this recession is a “once in a hundred years event” that is going to take out the weak and marginal players in many industries. The winners will be those who are conservative financially, retreat to their strengths and study the emerging business environment, watching for opportunities and disruptive events. Today’s news of GM losing $9.6 Billion in 2008Q4, an expected 2009 US deficit of $1.75 Trillion, and rising unemployment claims support that this recession is going to be very bad.

Leaders must focus on strengths and capitalize on opportunities

In its report, Booz says now is the time to shed “me, too” type operations and focus on corporate strengths. Expect that this recession is going to last longer than most economists currently predict and the competitive landscape will be radically different when business growth begins again. Look for opportunities to recapitalize your debt, focusing on creating a stronger cash position to carry you through the next couple of years. Look for emerging opportunities to create new business and products, but make sure these are truly “A” class opportunities that won’t rob needed funds from your core profit-making business.

These are all tough actions to take, unless you have a vision. Smart leaders will revisit their vision after every disruptive event.

• If GM and/or Chrysler collapses, how will that affect your organization directly and through changes to your customers and suppliers?
• Will you be affected directly or indirectly by Washington shifting money from its current programs to infrastructure or health care initiatives?
• How well is your money and financing protected if the current bank and insurance company problems grow worse?
• What will happen to your organization if your municipality or state slashes services that you or your employees rely upon?
• How will your firm be affected by the changing regulatory environment?

There is a lot to think about as the chaos in our economy unfolds in unexpected directions. Now is the time when knee-jerk responses to unplanned events can really harm your company. You need to lead with a vision of what may happen and how you want to respond to it. Simply being conservative may not be a recipe for success. The entire business world will be changed by recession - and the winners will be those who look for opportunities that emerge from the chaos.

Reference

Branstad, P., Jackson, B., and Banerji. S. (2008). Rethink Your Strategy: An Urgent Memo to the CEO. strategy+business: Resilience Report. December 15, 2008. Booz & Co. Retrieved on December 16, 2008 at http://www.strategy-business.com/media/file/resilience-12-15-08.pdf.