Managing Your Company In Lean Times

Managing Your Company In Lean Times

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  Browne & Mohan Board & CEO Advisors, Management Consultants Managing your company in lean times
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  Browne & Mohan Board & CEO Advisors, Management Consultants Across developing and developed world, 2. Rebuild offerings & domain government inaction, increasing cost of doing specialization: In good times, many small and business and slowing down of customer medium companies would have added “me-too” confidence is scaring many companies. Skies are product or service lines. Some companies would not falling, but with customer gains becoming far have added products or services that have little and few many companies worried about growth commonality in terms of inputs, skills, assembly, and profitability. Many businesses are prisoners customer segments, channel partners or markets. of their past success. Their business model and its Transaction cost of managing unrelated variety components (including sales, marketing and hurts them in leaner period as they do not gain organization) that served them well in the past from “economies of scope”. A manufacturing have not kept pace with current environment. company realized too much variety has increased Companies that thrived in benevolent market the number of products by 20%, but their revenue conditions are finding their naïve and growth was just 3%. The non-value added conventional approaches are not yielding results. activities in their operations increased by 46% as Revenue predictability is poor and many more time was spent on unique set-up to cater to businesses have abandoned the annual plan and variety. Pursuing a platform strategy by ensuring resorting to rolling monthly or quarterly plan. high commonality between parts and products present purchasing cost benefits, but also improve Because the market environments and product cash cycles. innovation rates differ across industries and the firms in each industry, many different strategies Lean times are also good times to rebuild new can be adopted to cope up in the lean periods. offerings. New products, services or practices that Product or service offerings, organization, sales allow the company to monetize low hanging fruits, process, competitor weakness, exploiting or help to reach out to the existing customer commonality and partner ecosystem must be needs or offer market arbitrage where they could taken into account to survive and grow in a be built in a market quickly, but monetized high in challenging environment. In this article, based on another market are the best options. Several SMB our experience and the management literature, IT companies must realize that lean times are best we summarize major approaches companies to quickly build a product based out of their should use to brace successfully. service offerings. Productized services lead them 1. Consolidate Business & get your business to higher market reach and revenues with no mix right: The worst enemy in tougher times are linear investments required in sales and support underperforming business geographies or SBU. In areas. good times, ambitious business owners would have expanded without deep consideration of 3. Discover outsourcing benefits: Unlike cost and other advantages. Lean time is a good large companies that have successfully adopt JIT moment to evaluate each SBU or geographic outsourcing and other philosophies to push their presence for their contributions and consolidate inefficiencies and cash requirements to the lower the business. Move to smaller more functional chain, SMB companies do not have great offices than ostentatious glass buildings. Put experience in outsourcing. SMB gain major emphasis on Outcome rather than on form. Many savings in terms of HR, procurement, engineering SMB find homing strategy of consolidating their services and other outsourcing. Companies realize spoils at near markets is a better strategy in lean the savings from outsourcing can be substantial, times. gain from better market information and significant savings. A life science company used e-
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  Browne & Mohan Board & CEO Advisors, Management Consultants auction to discover 15% savings for the packaging span of control across the organization, especially material, but also could reduce the total support in direct sales. Create self-directing teams that team for procurement activities. A construction bring a sense of urgency and ownership. equipment company outsourced engineering help Companies realize having an army of sales desk and parts management and gained 5% resources is not the answer, but a lean efficient incremental revenues because of inventory force lead by a senior pro and couple of junior to reduction, availability of right parts and improved do the door opening. Dump regional and product service. specific sales teams. Cross train, consolidate and upgrade sales skills. Many smarter companies find 4. Invest in customer experience: In tough mining existing clients by deepening times, investing in customer relationships, understanding of their needs, ensuring right improving the total customer experience and solutions and process can offer them better customer delight is very important. Customers revenue growth. Adopt and update KYC, measure and their businesses also face similar challenges as account mining efforts and incentivize account yours in tougher times and cost-saving or value mining by delivery or implementation teams. enhancing solution from their vendors are always welcome. By investing in improved customer 7. Bring agility, hunger and focus into relations you not only build relationship capital, teams: In good times, with the high tides, many but also defend your territories from your organizations bring in people who may appear to competitors. Another major advantage of have the right skills and tools. But in low tide, investing in relationship is you that you could plug many of the recruits fail to face up challenge, take “service recovery costs” and other leakages. A cudgels, learn and adopt new skills and pan-India business hotels chain discovered a small responsibilities. Lean times are the best moments investment in customer loyalty and CRM helped it to discover the entrepreneurial individuals and to reduce gifts and upgrades that were causing it build a many leader centred organization. to lose 7% of revenue. Resource constrained Mongolian army bet many well trained Knights simply because it consisted of 5. Beef up post-sales: Lean time is an many small groups of soldiers each unit opportune moment to discover the money your commanded by a leader and empowered to act companies is leaving from post sales service and independently in the best interest of his group. parts on table. A large industrial equipment firm The effect, loss for each team was few, overall discovered it could gain about additional 6% army was a decentralized unit each maximizing its revenue by investing few resources & integrating impact but acting under a general. its after sales operations. Integrate your post sales process, ensure parts and services are 8. Rediscover the organizational culture: monetized effectively, first call responses are high Tougher times are also ideal time to revisit the and customer feedback on services has a positive soul of organization. Evaluate the form and impact on sales. Nothing like losing markets due content of the organizational culture. Many to bad service and spurious spare parts. companies that have initiated “me-too” pizza-day, paan-day and other frivolous programs aping 6. Rebuild organization: Tougher time is a other large companies realize these investments good moment to gorge out structure and process are not what employees seek and they are a drain that were built in benevolent days. Use the lean of its cash. Identify the right programs, training times to attract and retain a team of committed, and development sessions that show your high initiative and multi-skilled resources. Reduce commitment to people’s growth. What
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  Browne & Mohan Board & CEO Advisors, Management Consultants employees appreciate lot more in leaner times is Brown, J. S., and Duguid, P (2001) Knowledge and the trust management places in them to shoulder organization: A social-practice perspective. newer responsibilities and invests in their Organization Science, Vol, 12, 198-213 retooling and reskilling. Lean times are a good Chebrough, H.W and M.M. Appleyard (2007). harbinger of positive change, rediscover the true Open Innovation and Strategy, California culture you want to embody and imbibe. management review, Vol.50, 57-75. 9. Partner ecosystem: Lean times are good Harrigan, K.R (1980). Strategy Formulation in time to increase the mindshare within partner Declining Industries, Academy of Management ecosystem. Participate in joint marketing or sales Review, Vol.5, 599-604. efforts. Invest in people to people relationships Harrison, B (1994) Lean and Mean. New York: with all your partners. Get your employee certified Basic Books. on partner products and platforms and completely use the training and development allocations from Kogut, B. and U. Zander (1992). Knowledge of the your partners for employee development. Firm, Combinative Capabilities, and the Replication of Technology, Organization Science, 10. Identify large competitor’s squeaky Vol.3, 383-397. wheels: Customers who had acquired services Kotter, J.P. (1996), Leading Change, Harvard from large competitors for brand and other Business Press, New York. considerations and disenchanted with the highbrow attitude and low service delivery are the Leonard Barton, D. (1995) Wellsprings of sweet spot. Go after these customers by offering knowledge: building and sustaining the sources of by offering better services at personalized care. innovation. Boston, MA: Harvard Business School Press 11. Brand aggressively: Tougher times Mezias, S.J. and Glynn, M.A. (1993). The three require more innovative and cost effective faces of corporate renewal: institution, revolution, product and brand engagement. Pursue low cost and evolution, Strategic Management Journal, social media and community branding Vol.14, pp. 77-101. approaches. Negotiate with media players and discover there are lots of cheaper, cost effective Spulber DF. (1998) The Market Makers, How options including unsold inventory on air, and Leading Companies Create and Win Markets, McGraw-Hill: New York. tube for a song. Employee led branding is low cost and effective approach in lean times. Involve Browne & Mohan insight are general in nature and does not employees to pursue knowledge enhancing, represent any specific individuals or entities. While all efforts are made to ensure the information and status of entities in the market influencing activities to inform and insights is accurate, there can be no guarantee for freshness of influence the purchase decisions. information. Browne & Mohan insights are for information and knowledge update purpose only. Information contained in the Selected Bibliography report has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. Neither Browne & Mohan nor its affiliates, officers, directors, employees, owners, Benner, M.J., and M.L. Tushman. (2003). representatives nor any of its data or content providers shall be Exploitation, exploration, & process management: liable for any errors or for any actions taken in reliance thereon. The productivity dilemma revisited. Academy of Management Journal, Vol. 28, 238-256. © Browne & Mohan, 2013. All rights reserved Boudreau, K. (2010). Open Platform strategies and Printed in India Innovation: Granting access Vs. Devolving control, Management Science, Vol. 56, 1849-1872.