Media Nearly Unanimous: 'Recession' Inevitable
Networks overwhelmingly predict
recession in 2008 but ignore surveys of economists showing majority do not expect
recession.
By
Nathan Burchfiel Business & Media Institute
A
January 12 "Saturday Early Show" report from Kelly Wallace acknowledged
that "economists disagree over whether we’re headed into a recession."
ABC, CBS and NBC reported
"more signs of a looming recession," "deepening troubles,"
"new fuel for recession fears," "rattled consumers," "an
economy on edge" and "bracing for recession," or some scary variation
a total of 32 times.
ABC reported “growing concerns the economy may be heading
toward recession." CBS mentioned that "when companies stop hiring, it’s
often a sign we’re slipping into a recession." NBC noticed that in a speech
about the economy, President Bush "stopped short of warning that America
may be sliding into a recession."
On the "Evening News" January 9, Anthony Mason
reported that Goldman Sachs became the third "major Wall Street firm in the
past week to forecast a recession," neglecting to mention a survey of economists
showing most did not predict a recession.
A survey of 62 economists conducted by Bloomberg News and released January 9 showed those economists predicting 1.5-percent growth in the first half of 2008. While that rate of expansion would be the weakest since the last nine months of 2001, it would still be growth. The economists also put the chances of recession in 2008 at 40 percent.
PACIFIC BUSINESS NEWS Feb 26, 2008
Excerpts
from an article, The Hawaii Department of Business, Economic Development
and Tourism
The 2008 forecast of wage and salary job growth has been lowered to 1.4 percent from 1.5 percent in the previous forecast, DBEDT said. Job growth in 2009 remains unchanged at 1.3 percent.
Visitor arrivals are expected to decline 1.4 percent in 2008 caused by sluggishness in air travel and the departure of the two NCL Corp. cruise ships. DBEDT said it projects 1.2 percent growth in visitor arrivals in 2009.
Inflation is expected to rise 4 percent in 2008, 0.2 of a percentage point higher than in the previous forecast. Inflation for 2009 remains unchanged at 3.4 percent.
"We still expect continued job growth (1.4%) in professional and business services, construction, food service and health services that should counter weakened visitor activity (-1.4%)," said DBEDT Director Theodore Liu. "As a result, we continue to forecast moderate economic growth during the next few years."
DBEDT's quarterly statistical and economic report is available at: www.hawaii.gov/dbedt.
In Hawaii we have a few additional challenges. With Hawaii being the most oil-dependent state, fuel prices will significantly affect shipping costs which will affect goods prices. Then there is the State of Hawaii tourist survey results released late last year (2007) about the expected decline in tourism. The majority of Hawaii visitors are basically saying in various ways, "...been there, done that," and unless something changes, they don't expect to be back. They are looking for something different that the typical vacation. Additionally, the two NCL Corp. Cruise ships will not be returning for at leat two years, and instead will be cruising in European waters. On the opportunistic side, the dollar has decreased in value compared to the Euro, so Euopreans will be visiting the USA for shopping and vacations this year. Will they come to Hawaii is our question?
What to do? Be proactive and be prepared
Being
prepared for economic or environmental circumstances by taking a proactive approach
is a very good business practice whether or not a recession is on the horizon.
All of the actions you take will be sure to progress your business and potentially
increase your top and bottom line. For
example, the high tech industry has certainly had its share of ups and downs over
the past 10 years with the dot.com bust, massive downsizing in large corporations
and major restructuring. According to Rob Preston in
InformationWeek, "Clearly, the major tech
vendors aren't sitting around waiting for a recession to dictate their next move,
as evidenced by the blitzkrieg-like consolidation in
the business intelligence sector last year, Oracle's $8.5 billion deal in January
to acquire BEA Systems, and Microsoft's current $45 billion
takeover bid for Yahoo. Tech vendors are
looking to boost revenue and profit (37%), expand market share (26%), and acquire
intellectual property and other tech assets (24%)".This is balanced by setting priorities Preston continues, "For
the fourth year in a row, the No. 1 business priority among CIOs surveyed by Gartner is to improve business processes, followed by attracting
and retaining customers and creating new products. Business intelligence is the
No. 1 technology priority for the third consecutive year.Businesses, and especially the board directors and investors who
gauge their success, don't always behave rationally in an environment of economic
and political uncertainty, so 2008 represents something of a perfect storm in
this regard." Is this time of uncertainty your perfect storm?
What and How
Recently, there
have been many articles of how to recession-proof your business. I concur with
many of the suggestions; however, the suggestions seem to be a laundry-list of
what to do or what not to do. Lacking is a systems approach to identifying, selecting
and implementing the suggestions that are best for you. When making significant
changes, one must consider the impact to the entire business system. Too many
times eager business leaders have addressed one area to have an unintended consequence
occur in another area. For you, the Hawaii
business person, take an objective look at your business ecosystem as a whole
and specifically your business within it. Identify the areas most likely to need
improvement and identify areas of opportunity to take advantage. In regards to
the external ecosystem, look for opportunities to take advantage of a competitor's
hesitation, or to open new markets, or address emerging market issues. Within
your internal ecosystem-your business organization-look for ways to reduce waste,
increase efficiency and cut areas of costs that are not giving you a good return.
Here are some general principles
to follow and then I will give you some specific actions to evaluate.
Ø Allow new leadership to emerge. Some leaders operate well in a growth economy and others
in a flat or declining economy. Let leadership emerge during the different economic
environments. You don't have to change the leader in a position but do allow new
ideas and attitudes guide your business during the changing economic environment.
Ø Take a proactive approach. By instituting solid business practices, implementing
process improvements and keeping waste to a minimum and making customer satisfaction
a priority, your business will be in very good shape to weather the cyclical changes
in the economy.
Ø Be creative in your planning and decision-making. It's easy to say let's cut this cost or that cost,
but that may be counter-productive to your business strategy and goals. Look for
creative and different solutions to address emerging issues. During difficult
times, companies have asked for and received approval from employees to take a10%
temporary pay reduction. Look for creative and innovative ways to add new products
or services, collaborate with new partners, or deliver your business in a different
channel. This is where your people and key stakeholders can have valuable insight
and input.
Ø Balance the short term actions within the long term
view. It may be too tempting to take
an action that will give you a quick return but may be detrimental in the long
run. Yet, there actually may be some short term actions to progress you in the
long term. Look at these short term actions within the bigger picture of your
strategy and plan. Insure your core competencies are strong and secure. Insure
your leadership and people are well trained and resilient. You don't want to be
caught without the resources to quickly bounce back when the tide turns.
Ø Success and happiness is having a Plan "B".
Taking a proactive approach means that you have considered
various scenarios for the future. Having a Plan "B" in case the economy
takes a dip or having a Plan "C" in case there is a surge, will keep
you in a great competitive position. Doing the proactive thinking in advance will
insure a flexible and agile response.
Below are my suggestions using an ecosystem approach, followed by the method for analysis and implementation. I use two models to demonstrate the systems view. The first model is of a generic business ecosystem that is external to your business organization but may have significant impact to your business when it changes. The second model is one of an internal business organization with all the components that makes it operate.
External Business Ecosysterm: Your Product/Service, Industry and Market, Direct Customers and Channels, Direct Suppliers/Vendors, Competitors, and the Economy.
Fig. 1: External Business Ecosystem model
1) Scan your Business Ecosystem. Business intelligence is a key factor in long term business success. You can begin by initiating a scan of your business ecosystem. This can be a quick one or two day scan to produce informative, valuable data. Do some planning in advance. Bring the appropriate people together-customers, employees, industry players, vendors and suppliers, channel and distribution partners. Select people with whom you have strong relationships. If relationships are so-so, now is a good time to build them. Be in service to the whole system of customers, suppliers, industry experts and watch them respond. Everyone has a piece of the puzzle and they will want to participate because they will get to see the entire puzzle also. Know that you are providing a valuable service. So, put that puzzle together by mapping on a wall board or poster papers, step back and evaluate. Look for trends, patterns and notice any "ah-ha's".
2) Analyze your Business Ecosystem to identify opportunities and threats. Analyzing your map, focus on the areas where you have control or influence. Look for obvious opportunities to take advantage of solving a market issue or introducing a new product/service because of an emerging need, or expanding the market because the economy is affecting a broader area. Identify "low hanging fruit"-those areas that can be quickly changed, added or eliminated without disruption to your business ecosystem. While you have everyone together in the same room, look at ways to solve any impending issues and collaborate on ways to move forward together.
3)
Analyze your product/service
industry and your market. Hone into your specific product or service industry area. Talk to your
manufacturers or your partners in service delivery. Work as a team. You depend
upon them in order to deliver to your customers. They depend upon you because
you buy from them or use their services. You are all in the same boat and you
may sink or swim together. Determine if your market will continue to support your
product or services. Be realistic. What are your strengths and weaknesses within
this market? If this analysis indicates a change, look for ways to change or expand
your product line/service or expand your market beyond its current boundaries.
4)
Analyze what your competitors
are doing. Your competitors should
be part of your ecosystem map and to the extent that you can, include information
about what they are doing, where their focus is. Are they introducing new products,
are they expanding or consolidating operations, are they marketing in new areas
or opening new markets. Look toward the leaders in your industry. You don't have
to copy them but see if you are in the same ball park and how you can make your
offering unique for your market needs. Your customers and suppliers may be willing
to share information they have that is part of public information. As tempting
as it may be, don't ask for confidential information as you don't want your confidential
information shared with your competitors. Strange as it may sound, you could work
with some of your competitors. Are your offerings targeting a different niche
than theirs? If so, maybe you can cross-refer. Brainstorm more options and be
open to new possibilities.
5) Involve your customers. Find out what their business forecast is. Find out what they are facing. If they are in trouble and have to cut, you may be part of that cut. Get creative and problem solve. Be open to making accommodations of different shipment sizes, alternate ways of delivery or even different products or services. Ask for referrals and give incentives. Together you might find new income streams for both of you by identifying viable new ways of continuing business.
6) Ask for honest feedback from all your customers. If there are some areas you need to improve upon, be eager to listen. This can be invaluable information for improving your service or product. Each time you complete a transaction, ask for honest feedback. Assure them that you really want to know in order to make improvements. Offer an incentive for them to fill out a postcard survey or questionnaire. Take their suggestions seriously. Remember it costs 5 times as much to attract a new customer as to retain an existing one.
Internal Business Ecosystem: Strategy,
Structure & Processes, Product/Service, People Capabilities & Incentives,
Finances, Metrics
Fig. 2: Internal Business Organization Ecosystem model modified from Jay Galbraith’s star model
1)
Scan your Internal Business Ecosystem. Build
your organizational business intelligence. As you did with your external ecosystem
scan, plan your meeting to maximize the amount of information and the value of
the data you gather in the time you have allocated. Again bring the appropriate
people together-managers from every department, front-line employees, back-end
employees and multiple levels in the organization. Selecting people will be a
key factor in what happens in the room and what happens in the hallways after
the meeting. Select individual contributors from the front-line and the back-
end who are respected by their peers and who have emerged as informal leaders.
Also select contrarians to keep you honest and balanced, and innovators to infuse
much needed creativity.
With this mapping session, you want to take time to set the context for this scan. People in your organization will be aware of the environment and economy and you don't want to create misperceptions, rumors or fear. Honestly communicate the purpose of your scan and that you value their input or they would not be in the room. Set the rule that all stripes are left at the door and set whatever ground rules are appropriate to the success of the meeting. Many times people have valuable information but do not want to voice it because it may negatively reflect on a peer or upper level manager. You are responsible for insuring people feel safe in sharing information. (In extreme cases of information hording, I recommend confidential interviews).
When people are asked and encouraged to participate in a lively discussion, it is amazing how many exceptional ideas emerge that can save you time and money or can actually create new money. General Electric's "Work-Out" is a good model for doing this. Have some pre-designed questions to get the information out. Examples: "What projects should we eliminate because of cost or because results may be 'iffy'? Where do we have waste in the system? What should we change to improve in area xyz? What should we be doing more of to increase revenue/sales?" As managers and leaders, you set the example first of identifying waste in the system, such as, questionable travel expenses or exorbitant expense budgets. Again, puzzle-piece together the information by mapping it on a wall board or poster papers, step back and evaluate. Look for trends, patterns and notice any "ah-ha's". Also look for gaps or overlaps. Identify "low hanging fruit"-those areas that can be quickly changed, added or eliminated without disruption to your business operations.
2) Analyze your internal Business Ecosystem utilizing the star model. For this exercise, bypass Strategy until later. Before making any changes, understand what the impact will be to other areas of the organization to minimize any unintended consequences. Utilizing the information gathered during the internal scan, examine each area represented by the star model. Here are some example questions you might ask as you analyze.
Ø Is your organizational structure supporting ease of doing business? Are you organized to best execute your strategy? Does your organizational structure facilitate quick decision making and problem solving? An organizational structure organized to allow business to flow easily will increase efficiency and reduce costs.
Ø Are your processes efficient and effective? Is there any waste in the processes? Do your employees constantly have to go around the process to make things happen? Understanding how the processes are working will help you identify where the glitches and wastes are.
Ø Do your people have the capabilities and skill to delivery to your strategy and operate your business? Do they need training? Do they collaborate and demonstrate teamwork? Are they motivated to be successful and support the business success? Your people can make or break you. Know who your power players are and who your weak links are.
Ø Are your finances and cash flow currently in good shape? Can you withstand a slow down in business revenue? What is your debt level? Do you monitor your expenses closely? Do you review each expenditure in relationship to the anticipated return to your top and bottom line? Understand your cost of doing business including people costs. Maximize each dollar you spend by understanding your expenses in relationship to your strategy and goals and knowing what your ROI is.
Ø Do you have a measurement system in place? Do you have a balanced scorecard? Do you have operational reviews? Measures are important indicators but results are more important.3) Examine your strategy. I am not a proponent of changing strategy mid-stream or because of blips in the economy. However, I do think it is important to review your strategy in light of your external Business Ecosystem scan first, then within the context of the information from your internal Business Ecosystem scan. Maybe all you need is a course correction in the strategic plan rather than the strategy. Be open to making a strategic change in case there are major indicators from your external ecosystem that point to that. This can be risky so make sure you have expert consultants assisting you during the decision-making and implementation phases.
4) Make Improvements. Now that you have done the analysis of your external and internal Business ecosystem, you are ready to make decisions about improvements. From the "low hanging fruit" you identified in both the external and internal scans, make sure these improvements are not in conflict with each other. Next, eliminate any overlaps and plug any gaps in your system. Basically, you want to make all the easy, non-risky improvements right away. Utilizing your people that are most familiar with these areas will probably eliminate the "gotchas".
5) Decide on the significant changes. This will require more thought and planning. By utilizing the data from your internal and external scans, you must determine if a strategy change is required. If so, then a multitude of areas could be impacted and you must consider the changes from a system's point of view. Again, using the two models as a guide, you can determine area by area if a change is required, what to change, the degree of change necessary and the impact of that change to the entire system. Utilize your people, customers, suppliers and key stakeholders for input and to validate the change you are considering.
6) Plan and implement. Making any major change is risky; however, you must weight the risk of the change against the risk of not changing. Having qualified support to facilitate the change process is a key factor to a successful outcome.
Create implementation teams of people closest to the work. If the changes affect customers and suppliers, involve them in the implementation. Set up open forums and communication vehicles. Create a realistic plan with an aggressive timeline. Involve all levels of the organization. Leadership must play a supportive role to remove obstacles and bureaucracy in order for change to happen.
Going through significant change together can be a bonding experience. It can make relationships stronger and business better. Insure relationships are a priority during the change process. Again, I cannot over emphasize that this journey requires lots of thought, consideration, innovation and planning but it is so worth it for the long-term success of your business regardless of the economy.
SOURCES:
1) DBEDT
Sees Moderate Growth in 2008 (Hawaii
Department of Business, Economic Development and Tourism), Pacific
Business News Feb 26, 2008
2)
Pride of Hawaii gone at least 2 year
Pacific
Business News Feb 27, 2008
3) 10 Worst Innovation Mistakes In A Recession.
Business Week, Blog posting by: Bruce Nussbaum on January 13, 2008
4)
Media Nearly Unanimous: 'Recession' Inevitable
By Nathan Burchfiel,
Business & Media Institute
5) Quotes from Rob Preston in InformationWeek
6) Quote from Cyberessays.com
Sylvia
Maya Dolena
Business Innovation Lab
Winning Edge University
PO Box 986
Pahoa,
HI 96778
808 965-1899
www.winningedgeuniv.com & www.businessinnovationlab.com