The Ten Commandments
A crisis is a terrible thing to waste
-Paul Romer
2008 has been like a rollercoaster ride with no tracks leading upwards. The recession has well and truly set in with the global economy shrinking for the first time since the world war II.The year started with the subprime crisis on the fringes. The pinch was being felt by the developed economies and the disaster was just waiting to happen. The year ended with serious challenges to the existing beliefs. The term Investment banking became a hallow phrase and sales of Das Kapital increased.
This New Year the demand for good news is bound to outrun the supply. The governments and corporate are trying to understand what hit them and what to salvage from the ruins. The things are looking bleak and the basket of ideas is half empty. The world need to do some serious rethinking if it has to return back to the promising sunshine from the days, which appear to be the darkest since the pre war depression of 1929.
There are several lessons which we can find looking back into the past and thinking ahead into the future. The set of things which can help the global company remain competitive; have been summed up in these Ten Commandments:
Thou shall raise your Doubts: The subprime crisis resulted from belief that the values of houses can go only one way. The collateral Debt Obligations and Mortgage Backed Security mangers where confident in their beliefs. It looked like they had hit a gold mine. But had they been more respectful of the past, the realisation would have struck them that price of houses, like most of the assets, follow a cyclic pattern, with large rises accompanied by small drops. This fact was overlooked and the domino effect was triggerd.The rise in the interest rate led to the drop in demand for the houses and a decrease in the repayment abilities of the borrowers. The underlying assumption behind any decision must undergo a “what if” analysis. It is time to look beyond the eureka moments and exercise a more contemplative approach.
A brief background search and analysis will expose the hidden side of the deal, thus saving a
lot of future trouble.
Thou shall be Imaginative: Business that can dream of the future is most likely to formulate it. IBM always saw PCs as “entry”, level systems (everyone’s going to own a mainframe sooner or later), rather than an entirely new paradigm. Intel and Microsoft, who partnered with IBM in the initial phase, saw the bigger picture. They started off as minor partners to IBM, which had a greater muscle and more initial control. But these companies imagined the next revolution and gained better returns from it.
The companies which see tomorrow’s industry today will outshine the competitor. These Davids with the right slingshot will slay the Goliath. The larger organization can learn from them and incorporate their principles to reap rich rewards.
Organizations need to get the climate right. This can be done through “carrots and stick” policy, giving the employees bonuses and discipline, in the right measure.
Thou Shall Execute: Great Idea badly executed fails to meet its objective. Ideas are worth only if they are put into right practice.
Nicholas Negroponte, the founder and Chairman Emeritus of Massachusetts Institute of
Technology's Media Lab had the right idea when he setup the One Laptop per Child association (OLPC). In November 2005, at the World Summit on the Information Society, Tunis, Negroponte unveiled a $100 laptop computer, The Children’s Machine, designed for students in the developing world. He had an idea which was technologically sound and he was clear about his vision of helping the downtrodden. But what Negroponte underestimated was the problem associated with handling and maintaining the Laptops. OLPC argued that it is very easy to use and little support was required, but the countries writing the checks don't appear to have bought the argument. Nigeria, for example, backed out of a previous commitment to buy a million laptops from OLPC, opting for Intel's Classmate PC instead. Intel's superior support was cited as the major reason for the decision.
Negroponte deserves credit for pioneering the concept of producing cheap laptops for poor children, but coming up with the idea is, relatively speaking, the easy part. The many problems associated with execution needs to be taken into account. For an enterprise to be successful, it must think through all possible causes of failure, policies to fall back upon and the prevailing external conditions.
Thou shall Employ Thrift: The companies need to go short on cost and long on innovation. The strategy to reduce the cost by applying target costing and Kaizen techniques will yield benifits.They will have an two prong effect in the sense that it will improve the company’s bottom line and serve as an constant drive for the employees.
At Toyota, the top management believes that they are facing once in a hundred year crisis. The exposure to global markets and their expansionary plans have left them further vulnerable. But crisis is not unknown to the world’s largest automaker. They have embarked on a cost cutting programme, which involves use of thrift at every level. They have been turning down the use of heat in factory, asking the workers to wear extra pullover , the executives have been using cars instead of expensive trains and the showroom have been used as makeshift conference rooms. These efforts are expected to yield an additional saving of $1.4 billion, helping Toyota ride through the storm.
Proverbial gold mine lies hidden within the everyday expenses. The trick is to involve the entire team to hunt out and implement right measures to dig it out.
Thou Shall Collaborate: The difficult times calls for maximum returns from minimum efforts. The companies which are in the same industry and fighting the same battle against the downturn need to help each other out. A healthy dose of collaboration, in noncore competent areas, would be beneficial for industry as it would result in reduction in duplication of efforts.
The collaboration could be of three types: Technological, Geographical or Economical
The company may be good technically but might require monetary support or geographical guidance to establish itself. Similarly a company with sound balance sheet and products might collaborate with a local company when it is moving into new territories. A company strong in two areas, can eliminate its week area by forming right partenerships.This is very important for global companies that they find right partners and avoid reinventing the wheel.
Thou Shall Explore: 4 billion people still leave on less than $2 a day. They form an untapped unexplored market which can be captured by playing according to a different set of rules.Begining of the last century Henry Ford brought about the democratization of automobile through their mass production. Hundred more products are waiting to meet a similar fate, when they can be mass produced to reach the billion hands. The developed nations need to look upon the developing nations and see how the standard of living is changing there. The best innovation and business lessons must flow both ways. There is much to be learned from “Gandhi Engineering”, which embraces resource constrains in the quest to do more with less for more people.
Thou Shall Consolidate: A bird in hand is worth two in the bush. The old saying holds true for the global companies. They must work towards delighting their existing customer. They need to formulate special schemes to remain at the centre of customer’s perception
When Nokia’s BL-5C batteries developed a problem, it made excellent arrangements to get them replaced. The condition of the battery could easily be checked on the website and suitable replacement could be obtained.
This initiative created a feeling worldwide that Nokia was a brand that could be trusted. The technical error did not tarnish the reputation of the telecom giant, rather it proved to be a stepping stone, elevating it to greater heights in the customer’s mind.
Thou shall learn: Muscle that gets accustomed to the assigned task does not grow strong. The companies with the policies that allow them to grow and adopt with the changing environment are more likely to be successful on the global scale. Company needs to develop a mental capacity which prepares for the future, by continuously picking up lessons from the past, best practises from around the world and by employing a thinking mechanism to initiate change from within.
In 1973, the oil prices rose by 4 times and the oil was no longer a buyer’s market. This rise in prices gave way to a recession in the western world. To survive through this period, Shell adopted learning as the only sustainable competitive advantage. It diversified into nuclear power, coal and metal. Most remarkable of shell’s work was developing oil field in North Sea, where the weather conditions are adverse and the instability of the sea-bed necessitated a huge investment to extract the oil.
Shell used crisis as a tread mill to improve its fitness. This attitude helped it to become one of the most admired companies and gain a foothold worldwide.
Thou shall be Diligent: The companies need to comply with the laws of the land and try to avoid taking short term measures to inflate their income. The government should enforce the laws more stringently and make sure that the functioning of economy is not affected by the individual actions.
At this time an Enron like debacle can prove to be a major setback to the recovery programmes. The stakeholders must work together to avoid any such situation.
Thou shall show concern: The unbridled expansion of our needs has left the balance of our planet hanging on a thin snap able cord. It is time to seriously start employing the triple bottom line (people, planet and profit). Companies, who have worked towards establishing a reputation of being clean, have received limited problems in terms of regulations, local unrest etc, while moving into new geographies.
J&J is one of the pioneers in this area. When it established it’s credo in 1943, it got its priorities right. The credo says that four things are important for the company. The consumer of its products, the employees and the environment. It says that if the first three is taken care of, the fourth, shareholder’s wealth, will automatically be achieved. J & J today has manufacturing presence in 57 countries and employees more than 1, 15,000 people. By sticking to the credo, it has gone on to become one of the most respected companies worldwide.
The true global company must be diverse and strong enough to take on the turbulences in the world economy. It should serve as an example to the rest and its policies should be considered standards. The present turmoil has devoid some of them of their old glory, but the winners will emerge to take their place. There is always room at the top of the pyramid, for those who choose to climb
