If you want to avoid getting burned in these tough, uncertain times, extreme flexibility can give you a strong competitive advantage
When I was in college many years ago, American Express ran a series of ads featuring people whose names you ought to have known, but didn't. If the campaign were running today, I'd recommend they use Howell Forgy's name. Forgy was a lieutenant junior grade in the Navy chaplains' corps, stationed aboard the USS New Orleans, when the heavy cruiser came under fire during Japan's attack on Pearl Harbor. The ship was undergoing repairs and was virtually without power. Shells for the vessel's guns had to be hoisted into position by hand. It was Forgy, according to historians, who uttered the rallying cry: "Praise the Lord and pass the ammunition," which composer Frank Loesser later turned into a song. Nothing in the chaplain's manual, I can assure you, prepared Forgy for the events of Dec. 7, 1941. He instinctively—perhaps with a helping hand from providence—recognized the need to act quickly and decisively at a time of overwhelming uncertainty and extraordinary stress. While a number of crew members were injured, the New Orleans survived to perform with distinction in the battles of Coral Sea, Midway, the Eastern Solomons, Tassafaronga, and the Leyte Gulf. This, too, is a time of incredible uncertainty and stress. Business executives need to be nimble and quick, like Forgy and the crew of the New Orleans. Put the playbook aside. Be ready to act and react quickly. While all actions carry with them certain risks, there may be greater risks from inaction, delayed action, or "slow-motion" action. China: more than a competitor
By now the litany of challenges faced by businesses should be embedded in every thought and move: the tough borrowing climate; persistent, high unemployment; shrinking (even disappearing) markets; vanishing suppliers; the continuing real-estate slump; the possibility—despite recent, positive signs to the contrary—of a double-dip recession; trillion-dollar-plus annual increases in government borrowing; Washington's continued lack of enthusiasm for free trade agreements (even those already negotiated, as with Colombia, Panama, and South Korea); political attacks on executive compensation; government policies that favor one industry over another; proposed new regulations affecting the financial sector and those who do business with the financial sector; the push for cap-and-trade legislation; and China's growing capabilities and unknown intentions. Uncertainty is reaching an all-time peak. But remember that times of uncertainty also present opportunity. With the BRIC economies (excepting Russia) growing robustly, new markets are opening and expanding. China, for example, should not be seen merely as a source of competition, but potentially as a source of collaboration, cooperation, and customers. I have written before about the "next billion" consumers: the hundreds of millions of former peasants who a few years ago were subsisting in rural villages and who are now working in factories and assembly plants and joining the consumer class. This offers new opportunities for companies that can provide the next billion with simple, low-cost products. One major global appliance manufacturer successfully tapped into this demand as far back as 2003 in Brazil, when it introduced a no-frills washing machine that cost just $150. Indian automaker Tata Motors has done the same with its four-passenger "Nano" city car, priced at $2,160 at the close of last year. Opportunities at the low end abound. Executives flexible enough to bring new thinking back to headquarters—and nimble enough to create lower-end products (that typically sell for 30% to 50% less than home-market products) for businesses and consumers in developing markets—can gain competitive advantage. boldly expand—or shrink
The fact that many businesses are hurting also creates merger and acquisition opportunities, often at bargain-basement prices. This may be time for the nimble to shop and buy, filling gaps in capabilities, purchasing competitors, hiring top-line talent, and planting brands in new markets. Or time for a once-in-a–lifetime sale. The global slowdown also has pushed down the prices of many commodities. Companies with cash may want to take advantage of the opportunity to buy low. We can reliably predict that when the global economy regains steam, commodity prices will increase accordingly. This is the most challenging environment that most business managers will have to contend with during their careers. They need to be ready to move in any one of a dozen directions on short notice. If things get better faster than most experts anticipate, managers must be able to spring into action. If things slow down and the economy moves into reverse again, they need plans to batten down the hatches, conserve cash, keep their best people—and possibly put everything else up for grabs. Who knows? On that happy note, what should executives do? My first bit of advice has nothing in particular to do with business but everything to do with health and happiness. That is: Stay positive and upbeat. While executives need to stay grounded in reality, defeatism guarantees defeat. As the Japanese philosopher and writer Daisaku Ikeda reminds us, "viewing events and situations in a positive light is important." This "does not mean being foolishly gullible," he writes, "It means having the wisdom and perception to actually move things in a positive direction by seeing things in their best light, while all the time keeping our eyes firmly focused on reality." Keeping a positive attitude will help you see opportunity where others see only problems. "holistic risk assessment"
Now for business: To deal with today's shifting reality, the most important thing is "variabalizing" costs—that is, lowering fixed costs and increasing the percentage of costs that fluctuate with the market. This probably will mean increasing short-term commitments and reducing long-term ones, which will require management's constant attention. It will significantly affect suppliers, who will need to become more flexible, too. The advantage for management is that it provides more control over immediate costs and more maneuvering room—to buy, sell, cancel orders—as needs and costs increase or decrease. The disadvantage is that a company will have to pay market price for commodities and components, even as the economy perks up, which it inevitably will do. In the short term, however, variabilizing gives management significantly greater control over costs. A second approach involves what I call "holistic risk assessment." By this, I mean simply that managers have to look at everything—not just the risks posed by external factors beyond their control, or the comparative risks of Plan A vs. Plan B, but the risk inherent in sitting pat as well. There is always risk in the downside. There is also risk in not taking advantage of the upside. This risk is not visible and is frequently undervalued in the equation. There are no simple "this " or "that" answers anymore. Managers need to know what they'll do under a wide variety of scenarios and they need to be prepared to make decisions on the fly, then change course just as quickly as circumstances prompt. Extreme flexibility is the rule of the day. Finally, businesses need to focus on their core strengths. It is no coincidence that Apple introduced its $499-and-up iPad tablet at a time when virtually every American has become a penny watcher. Apple did what it does best: Innovate—in this case amid the jaws of a tough market. That should be the model for every company. Do what you do best and don't let the bad economy stop you. Just as few business executives probably knew the name Howell Forgy, most probably don't know that jumping over candlesticks—as recounted in the 19th-century nursery rhyme, quot;Jack Be Nimble,"—was something of a sport. According to the Oxford Dictionary of Nursery Rhymes, it was said that a person nimble enough to jump a lit candlestick without extinguishing the flame would be rewarded with good luck. Who doesn't need that these days?