Friday, December 25, 2009

Preparing for the Upturn: Part III

The second implication for business leaders is planning. Vision helps stay focused on the big picture, so we don’t miss the woods for the trees. Planning ensures that the vision is articulated and the organization works towards achieving the vision.

Vision, by definition, is warm and fuzzy. It lacks structure, but provides purpose. It is all too easy to get lost in the swamplands of the downturn. Planning helps the organization to stay on track.

And this process begins during the downturn, concomitant with the vision.

Based on the vision, a long term plan needs to be drawn up. This plan should reflect not just short term measures to negotiate the downturn, but also long term strategies to capitalize on the recovery. And the short term measures should be evaluated in the perspective of the long term strategies. Each measure should be judged by the value it adds or subtracts from the achievement of the long term strategies. This ensures that short-sighted measures that dilute the resources of the firm are not chosen over actions that will silently reinforce the ability of the firm to accelerate its growth when the upturn begins.

Some of these short term measures that add value to the long term strategies have been discussed in earlier posts, and juxtaposed against those measures that detract from the firm’s long term abilities and resources.

I can hear howls of protest from certain quarters when I speak of long term strategies during a downturn.

The volatility and uncertainty engendered by the current global recession has given rise to a short term mindset.

Where is the ability, you may ask, to forecast sufficiently accurately in the long term, when short term visibility is low? To use the analogy of the ship again, this is like steering a ship through a dense fog, aiming for land thousands of miles away, when you cannot see three feet ahead in the mist.

There is certainly logic in this suggestion. But there is also a solution. And I will explore that solution in my next post.

Wednesday, December 16, 2009

Preparing for the Upturn: Part II

Following up from the last post, the first implication for business leaders is the need for consistency of vision. Vision is long term and by definition, cannot change irrespective of the change in the external business environment. If this sounds like a paradox, consider this.

Imagine the organization to be a ship that sets sail from Port A, with the destination as Port B. There are several routes across the ocean that can be followed to get from the port of origin to the final destination. There will be a direct route, but that may have challenges and dangers that lie in the path of the ship, which could endanger the ship and crew (read the business and its human capital). So, the ship will need to take a route that circumvents these ocean based perils, which may involve tortuous detours and the deployment of additional resources. Based on the knowledge of the ocean, a route is fixed (read strategy for business).

However, there will always be dangers that are unknown or that may come upon the ship unexpectedly. For example, the weather could change suddenly while at sea; storms can blow up and ocean currents can change without warning. These are changes in the external environment of the ship that cannot be predicted. At best, the ship’s captain and crew can anticipate the probability of encountering such unexpected challenges and prepare contingency plans to counter them.

Does this sound familiar? Can you relate this metaphor to business?

So how is this related to vision? The long term vision for the ship is not confined just to the ship’s journey. It relates to the big picture: the fact that the ship must make multiple journeys back and forth across the ocean and must remain sea worthy to do so.

What is true of the ship is equally true of the business enterprise. It is an animal that needs to endure the hardships and challenges of the business environment, weather all kinds of economic and financial storms and skillfully negotiate the adverse currents of risk.

It must do so to survive the short term and make it out of the downturn, much as the ship must emerged unscathed from the storm. But, as importantly, just as the ship needs to stay seaworthy to make all those future trips across the ocean, the enterprise must stay equipped to flourish in the long term.

This is the vision that must guide business leaders through the downturn. And this is the first step to prepare for the upturn.