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I have been in New York this week in a meeting room with a very globally diverse group of leaders. The free-floating stress is palpable. And the variety of ways that leaders are responding strategically is fascinating.
I asked a few of my colleagues about the impact of tough times on strategy. The responses seemed to group into two divergent groups: hunker down and pedal to the metal. Here are 2 dynamically opposed points of view, both from successful leaders:
COO at a process manufacturing firm: “We go back to basics. We hunker down and focus on the core of our business. I have reduced spending and time allocated to anything that is not directed at our core business. As soon as we saw the bottom starting to fall out, I reduced headcount, travel outside consulting and anything else we can operate without. If this blows a few of our competitors out of the market, so much the better. I want everyone in the place sharing the pain and understanding that we are positioning to be the last firm on our feet if that is what it comes to. Strangely, I sleep well at night knowing that we are operating lean and will likely outlast our competitors should this be a longer trudge than we all thought.”
CEO, mid sized services firm: “Our billings per client are way down and the competition for new engagements is very intense. Our strategy has been three pronged. I want our existing accounts to be unassailable. I want to make a full court press for any new opportunity that represents a new client. I have allocated staff to R/D for new service lines so that we are ready when the market turns. The bad news is that this is expensive. The good news is that no one has lost their job- at least not yet. The firm is energized, but this is a higher risk strategy than what I am seeing competitors do. I guess it is a big bet. If we run out of runway before the economy turns, it will be very painful and messy. But as it stands, we are holding our own. On the other hand, the staff is energized when there is turn, we bet the best talent in the market. I would rather that I am worried about the hit on our reserves and challenges managing cash flow than have everyone in the place gloomy and looking over their shoulders. When this all clears, we will be the guys who did not lose our heads and were innovating all the way through.”
As I listened to these two executives discuss strategy over lunch, I kept remembering the old joke about 2 shoe salesmen who leave for a faraway land. One writes back and says, “Cancel plans for factory here. No one wears shoes.”. The other cables the same day and says “Triple production forecasts, no one here has shoes”.
Only time will tell whether one or the other strategy will be more successful, but I will bet on both of these companies for their clarity and consistency of execution against what they believe to be the most sound strategy for their firm.