The current economic downturn has focused managerial attention on and fostered a spate of articles about how to manage effectively in difficult economic circumstances. A recent and particularly good -- possibly iconic -- example of advice about managing in a downturn is provided by David Rhodes and Daniel Stelter in a recent Harvard Business Review article. Their approach is positive, comprehensive and considers both the immediate exigencies and future potential. Their key recommendations include immediately focusing on:
• Monitoring and maximizing cash
• Optimizing financial structure
• Reducing cost and increasing efficiency
• Aggressively managing the top line
• Rethinking product mix and pricing strategies
• Shedding unproductive assets and divesting non-core businesses.
Reviewing these recommendations reveals three fundamental truths:
1. Each of these recommendations applies equally well in good times and in bad. The only difference may be that in bad times, managers facing the prospect of ruin bring a renewed intensity and focus to these basic and essential business practices.
2. ‘Humaneness’ in Managerial Decision Making
By serving the needs of an often-forgotten population, smart businesses are making billions, and case studies show that companies that seek to serve these markets foster technological innovations that enable them to attain very low price points. As they seek to better understand and serve these markets’ needs, further technological innovation results that stimulate new and better products that then can be targeted to higher income segments. The Tenet Group in IIT Madras, a collaboration formed of electrical engineering and computer science professors, is a good example of such aspirations and resulting innovation. Started with the intent of bringing broadband communications to rural India, the venture’s initial strategy was to reduce the cost of the broadband communication technology by an order of magnitude and to make the technology viable without connection to an electrical grid. An epiphany of understanding of the customers’ basic needs changed the initial and quite successful strategic focus from reducing the price point of existing technology to developing broadband technology, both hardware and software, to meet the three essential needs of rural India – health, education and livelihood, as the professors phrased it. The resulting breakthroughs in technology have created the potential of global billion-dollar businesses.
[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto's Rotman School of Management]