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Faster Profits in Slowing Economies

September 29, 2009
By Don Schmincke


You cut, slashed, and hammered costs till your knuckles bled. Now what? Is there another, perhaps faster, way to grow profits?

You cut, slashed, and hammered costs till your knuckles bled. Now what? Is there another, perhaps faster, way to grow profits?

Research of successful companies find profits grow faster in
challenging times with approaches contrarian to typical slash and burn
methods. Some of these approaches have ancient roots. It’s not the
first time organizations have encountered threats to their survival.
And it won’t be the last. But managing through this current episode may
require to you to reconsider the typical approaches we so often use.

Analyzing 5,000 years of management history reveals a few insights that
prove valuable in helping us thrive. These contrarian methods prove
profitable by companies using them even today. Adding them to your
arsenal may be the best decision you make. What can you do to learn
from these leaders?


Stop retrenching. Strike instead. Historically, economic downturns show
winners don’t retrench out of fear, but strike early. They accelerate
their business by taking advantage of the fact that now their
competition is weaker than ever. But striking takes two things:
strategy and passion. Do you have a strategy? Are you sure? Studies
find that most strategic plans end up being mere tactics. Avoid this
mistake by:

1)Calling a meeting with your staff.
2)Laying out your strategic plan.
3)Probing and challenging assumptions.

Does the plan show how you shall out-maneuver the competition? Does it
show what position you seek in the competitive landscape? Or how you
will exploit competitor weaknesses?

Getting strategy is only half the battle. What about passion? Our
brains light up when we see something inspiring. Touchy-feeling mission
statements are out. Sagas that inspire perseverance, unselfishness and
sacrifice for the strategic win are in. It’s not a new idea. It’s been
used for centuries. But we don’t teach the crafting of stories anymore.

1)Have you captured your strategy into a compelling saga?
2)If not, condense your winning strategy into language that inspires passion for the strategic result.
3)Then edit and re-edit. Remember, it’s about crafting not analysis.

Hire the brave, not the desperate. Samurai training found that
cowardice stops leaders from challenging the status quo, holding others
accountable, and exposing weaknesses. Cowardice hinders decisive action
by stopping the essential act necessary to accelerate profits and
survive a recession – tell the truth.

Cowardice eats truth. Lack of truth eats profits.

Telling the truth can upset people, and desperate people don’t dare
risk it. But organizational cultures that promote bravery, and the
speed of execution that comes from it, love it. It drives
accountability to new levels. The alternative of keeping the truth at
unspeakable levels only produces collateral damage like:

Accumulating dead-weight of marginally performing employees.
Avoiding the real issues thwarting meaningful change and profitability.
Sticking with doomed projects far too long.

Strengthen your organization and enhance competitive advantage by enrolling and inspiring bravery.

Group brainstorming is good. We’ve been trained to feel that if
everyone thought like us it would be a bad thing. In some cases that’s
true. But fast companies train their employees to think alike; they
train them to think like a CEO.

Do your employees know how every decision affects the balance sheet?
Field experience finds that employees placed in simulations where they
have to run a company achieve new levels of understanding. With a
balance sheet and a P&L statement in front of them, employees
realize how every decision requires movements of cash. New perspectives
forage as they have to decide how to go to market. What price? How much
volume? Where do we advertise? Choices for growth and expansion become
visceral and real.

Not surprisingly, these employees go back to their jobs with fresh
insights on how their actions affect cash flow. They find money. They
detect waste and inefficiencies. Opportunities for improvement surface
which help companies needing to accelerate profitability.

Say “no” to customers. Ancient battles were often won by knowing where
to strike, and where not to. There was an interesting story about
Southwest Airlines. Co-founder of Southwest Airlines, Herb Kelleher
received a scathing letter from a passenger criticizing how they made
jokes during the safety instructions required by the FAA. Fun is a key
value at Southwest, and humour helps us pay attention versus falling
asleep during these standard reviews. This particular passenger was not
amused. Kelleher wrote back a one-sentence letter: “We’re going to miss

How many times do you try to do too much for too many? Such mistakes
stretch resources, distract strategic focus and decimate morale.

1)Assess what the Return-on-Energy (ROE) is for your customer segments
(how much profit customers bring for the total cost of selling and
servicing them).
2)Identify those clients whose ROE is minimum or, gasp, negative.
3)Start writing, “We’re going to miss you” letters.

Eventually, and hopefully soon, we’ll all emerge from the recession.
Until then, don’t hesitate to act now to accelerate your business.
Remember, retrenching and waiting for it all to pass, only gives your
competition an opportunity to outrun you. Take the lead. Just because
times are slow, doesn’t mean you have to be.

A dynamic speaker and author, Don Schmincke, began his career as a
scientist and engineer. After graduating from MIT and Johns Hopkins
University, he spent decades researching and applying anthropology and
evolutionary genetics to management theories. He authored the
bestseller The Code Of The Executive and High Altitude Leadership with
co-author Chris Warner.

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