Tag Archives: Uncertainty

How Do You Survive a Maelström? Seven Strategies

Situation: Edgar Allen Poe’s “Surviving the Maelström,” is a tale is of three brothers whose fishing boat is caught in a monstrous whirlpool, and how the reaction of each brother determines his fate. Similarly, in times of uncertainty, our ability to react with either panic or a rational, reasoned response determines our fate. How do you survive a maelström?

Advice of the CEOs:

  • Based on Poe’s story, you need to replace fear with assurance, uncertainty with boldness, and doubt with conviction.
  • There are several potential financial bubbles forming including student loans and negative interest rate loans to sovereign governments. Both, in their own way, pose a threat to the international and domestic financial systems and could rapidly impact borrowing costs for companies. The solutions are to stay in ongoing contact with customers, and to stay light and flexible as companies so that you can adapt to market changes.
  • For Internet companies, the shift to Freemium offerings (a base product for free with pay as you go functional add-ons) makes it more difficult to design viable business models, and means new competition for established companies in low capital cost businesses. Again, a solution is to stay in ongoing contact with customers, constantly reinforcing your value proposition and the reality of switching costs.
  • Creative Destruction – particularly the emergence of new companies that threaten large customers and can change the value perception of suppliers’ core competencies. Solutions include ongoing communication with customers seeing what they see as “the next big thing,” focusing on continually improving our own core competencies, and possibly teaming with the more promising emerging companies.
  • The illusion that advertising will pay for everything – in reality, advertising dollars are a scarce resource like all other resources. Solutions include testing our own value-adds as an ongoing process, and creating fast-fail models to cost-effectively test our own promotions.
  • Definitions of value and productivity are no longer stable; all depends on the method of measurement. A solution is to remain aware of the innovator’s dilemma and to continually renew our value propositions.
  • A workforce in flux where young people don’t want to work for what they perceive as “old line” companies, as well as early-retiring baby boomers who may learn in 3-5 years that they can’t afford retirement. Solutions include focusing on employee engagement, building more flexible and “liberating” business models, and teaming younger with more experienced workers to cross-train each other.

What Impact Will Rising Interest Rates Have on Business?

Situation: A CEO notes that the national debt has nearly doubled over the last 8 years and the Fed is talking about raising interest rates. It’s not clear what impact the debt, or rising interest rates will have. Has this impacted your business and how are you coping? What impact will rising interest rates have on business?

Advice from the CEOs:

  • Impact on business and customers.
    • The prospect of either rising interest rates or taxes increases uncertainty – customers are taking longer to make purchase, expansion and other decisions.
    • Companies are not spending the cash that they have out of concern over possible future expenses or the possibility of a downturn. Large companies have trillions of dollars of cash on hand. Some of this is held off-shore because of the tax consequences of repatriating the funds.
    • Lack of consumer demand holds back investment in production expansion.
    • Feeling of loss of control.
    • More concentration of wealth in fewer hands.
  • Other impacts
    • More people, old and young, are opting out of the business economy.
  • What are you doing to cope?
    • More involved in collections to keep this under control.
    • Delayed payments from big customers are part of the problem – conservative financial management.
    • Manage liquidity and cash – cash is king!
    • Adjust lifestyle and delay purchases – for example buy smaller cars.
    • Scrutinize contract terms – especially AR.
    • Scrutinize our business model. For example look at subscription models or Great Game of Business models.
    • Utilize those who are normally unemployable but trainable for repetitive task jobs. They work hard and produce good work.

How Do You Create Clarity About the Future? A Simple Method

Situation: A company finds that new opportunities are coming in more slowly than they had planned. They have work now, but no confidence that this will continue long term. This is frustrating because they are in the middle of a transition in their business model. How do you create clarity about the future?

Advice from the CEOs:

  • There is a lot of uncertainty in the business world. Low oil prices are depressing investment in the energy sector. Global political and economic uncertainty are not conducive to bold expansion plans. This uncertainty may last for some time. Companies have to adapt.
  • A mapping solution is a used by some companies use to create clarity between alternatives:
    • Start with box representing where you are now.
    • Draw boxes representing each of the alternatives that you are considering.
    • Map the paths that will get from where you are now to each alternative. Draw them out, including what you have to accomplish and what resources you have or must acquire to get to each.
    • Do a SWOT analysis (strengths, weaknesses, opportunities, threats) for each alternative.
    • This will help you to think through each of the options and identify the benefits and pitfalls of each.
    • This is a great exercise to do with your management team, as others will add their own perspective and insights.
  • Tools: use Post-it notes – either easel pads or larger (5” x 8”) Post-it notes. Put these on the wall, and start sketching out your ideas with boxes and paths. Revisit the charts for at least a few minutes a day for the next 3-5 days. You will be amazed at both the number of new options you generate and how the obvious options rise to the top.
  • This is much easier and more productive than it may sound. Don’t fear the process.

How Do You Manage Change? Four Perspectives

A company is experiencing change in both organizational complexity and culture as it grows. Employees feel that the company doesn’t have the same team atmosphere that it had when it was smaller. How do you manage change associated with growth and new opportunities?

Advice from the CEOs:

  • Change is an inevitable part of growth. Employees need to understand this simple fact. Change is tied to: age and stage of growth, changes in leadership, performance challenges, changes in customers and competition, and changes in the working environment. For example, the simple addition of Millennials to the employee pool will change the nature of a company.
  • What else do we know about change? That it is: an opportunity, filled with uncertainty, complex and disruptive.
  • Typical responses to change from staff are: denial, resistance, anger, fear, confusion, being divided about the impact of change, and chaos. It is important to understand this and to communicate to employees that their reactions are normal. They will also get over these reactions as they adapt to new conditions.
  • Denison Consulting has developed a model that represents four factors – Mission, Consistency, Involvement and Adaptability – with measures under each factor. The model provides a visual representation of how the organization currently measures up in each of the twelve factors, and provides a clear and understandable map of where the organization needs to focus to make the changes required to survive and thrive.
  • Special thanks to Paul Wright of Denison Consulting for his input to this discussion.

How Do You Manage Opportunities in This Economy? Five Ways

Interview with Keith Merron, CEO, Avista Consulting Group

Situation: Ongoing uncertainty makes it difficult to clarify strategies going forward. What are the bases for these uncertainties and how do you manage opportunities in this economy?

Advice:

  • The world is moving so rapidly that they key to success is differentiation. There is so much information about how to do this that companies start to look similar very quickly. The ability to stand out as different is critical. Ask yourself:
    • What is my target market?
    • What are the needs that my offer will satisfy?
    • What is my unique approach that is distinct from other solutions which meet these needs?
    • Once you identify the answers, you need to back these up.
  • One has the opportunity to write the future. If you can get one step ahead of the curve this is a huge advantage.
    • Products that died were often two steps ahead.
    • Successful visionaries see patterns that are emerging, sense what is next, and speak to that.
  • Because information is at your fingertips through the Internet anyone can set up a business. The Challenges are viability and sustainability. If these are present the opportunities are huge.
    • The web is a place where you can share information. How to monetize this is unclear.
    • Once you have a following you can offer things for sale that are valued by your following. When this happens, the potential for fast growth is more available than ever. So is the flip side. If a restaurant gets trashed on Yelp this can kill it!
  • In a recession, M&A activity is faster. This enables one to establish a presence much more easily.
    • There are many virtual companies. You no longer have to be in the same place to work together! There are also many ways to partner or co-brand via the Internet.
    • What’s hard is to create tensile strength in the relationship. Because it is so quick and easy to cobble together relationships, the biggest challenges are creating loyalty and commitment.
    • The needs are communications, motivation, commitment and follow-through – just like in a traditional company but in a virtual space. This creates a true bond.

You can contact Keith Merron at keithmerron@comcast.net

Key Words: Uncertainty, Opportunity, Differentiation, Target, Market, Needs, Approach, Timing, Patterns, Visionary, Internet, Following, Community, M&A

What is an Agile Leadership Paradigm? Three Perspectives

Interview with Jorge Titinger, CEO, Verigy, Inc.

Situation: The environment has become more complex for leaders. Not only must leaders perform classic roles, they must also deal with increased uncertainty and change. How do you build a new leadership paradigm to address ongoing change?

Jorge Titinger’s Advice:

There are three challenges facing leaders today.

  • First, given that change is constant, what does the next likely settling point look like in your environment look like and how is this different from past settling points?
    • Everything starts with the people.
    • Once you determine the likely next settling point, do a capability inventory within your leadership team to determine whether you have the right people to handle the new reality.
    • Can current members be trained?
    • Do you need to bring in new talent?
  • Second, are your processes limiting or enhancing your flexibility?
    • Do current processes encourage adaptability and cross-functional connection and communication?
    • If not how will you change them?
    • Deconstruct/reconstruct all critical processes to make them more agile.
  • Third, how are you linking desired outcomes with rewards and incentives within the company?
    • Growth in the past focused on building up infrastructure – adding more people and capacity.
    • Knowledge management focused on tools and processes to make people more effective. Individualized assessment and reward structures became an obstacle and had to be shifted to emphasize the importance of collaborative versus individualized performance.
    • Agile leadership and management focuses on reaching outside the boundaries of your own company. To deliver differentiated value suppliers and customers must be included in the exercise. We must reinvent how we engage with suppliers and customers so that they are part of the collaboration.
    • The agile paradigm focuses on the unspoken needs of suppliers and customers. This takes the conversation beyond the transaction and includes quality, on-time delivery, and other differentiators that are mutually important. It can include competing for your competitors’ suppliers by being a better customer!

You can contact Jorge Titinger at jorge.titinger@verigy.com

Key Words: Agile, Uncertainty, Change, Paradigm, People, Training, Talent, Process, Communication, Reward, Incentive, Supplier, Customer