Better Ideas to Beat a Bitter Economy

Cutting costs and jobs won't give you an edge in tough times. Try mixing up teams and tearing down your company, for starters

As evidence of a U.S. recession piles up around us, executives everywhere are tightening their belts. A few of the wiser ones are also investigating whether this is an opportune time to invest in improving their company's position (, 1/29/08).

But somewhere in the back of executives' minds, a little warning bell from business-school days is ringing—one that most of them will ignore, to their later regret. That bell is trying to remind them of an ironclad rule of economics: In a highly competitive market, the value created by any innovation that is common to multiple suppliers gets passed on to the consumer. So you only get to keep the savings and profits from those ideas unique to you, i.e., the ones your competitors don't also think of.

So, how are you going to come up with ideas that competitors won't also discover? Please don't pretend that cutting travel, holding off on filling vacancies, and reducing consulting budgets meet the test. And one (or worse yet, several) more routine brainstorming meetings will simply rehash the same old tired ideas—and your competitors' employees are probably suffering through a similar session at this very moment.

In our experience, fresh ideas come from questions that force you to take fresh perspectives. So, ask yourself, what are some perspectives on your business that you haven't taken? Here are four thought starters:

Create unusual pairings in business reviews. Which department heads do you never invite to each others' monthly or quarterly reviews? Maybe the manufacturing head does not attend the sales review. Or maybe the IT guy doesn't go to the finance review. If you mix things up and invite them and charge them with finding overlooked possibilities for change, they'll probably spot some. We once saw a finance guy break a 12-month logjam between marketing and IT in a single meeting by seeing a workaround that no one had spotted. The pivotal moment came when the IT guy exclaimed, "You could live with that compromise? Hell, we could have that done in two weeks!"

Walk a product through from conception to the junk pile. In large companies, there is an inevitable separation of tasks. For example, the guy who orders the raw materials rarely sees the actual final assembly and delivery. He simply imagines how those steps are performed—and what he imagines is often wrong. Better to appoint a small team to "live the life" of a few key products from beginning to end, all the way from needs assessment through manufacture and delivery, and even through the customers' use and disposal. You will be amazed at how decisions at each step unknowingly create waste, complexity, and miscues at other points.

Ask a team to destroy your company. One of our friends used to have what he described as the best job in the military. He commanded the so-called OPFOR, or Opposing Force, at the Army's tank commander training school. He won almost every battle—and in so doing, he showed the commander-trainees where they needed to change. Ask a team of very bright executives to come up with the plan for a new entrant into your industry whose mission is to destroy your company's position and financials. We did this for a $100 billion company and showed them that the company's entire future hinged on the minds of fewer than 500 people—all of whom a private equity firm could easily afford to lure away by doubling their current salaries!

Separate your costs into two columns. You have two kinds of costs: those necessary for a standard item, and those caused by tailoring, customer idiosyncrasies, incorrect orders, security checks, payment problems, and all other forms of "administrivia." You will be amazed at how small a portion of your cost structure is driven by your core value proposition. The ancillary costs tend to grow in proportion with the total. The more you ask "What causes all the exceptions, and are we getting paid for making them?" the closer you will get to finding ways to reduce costs that your competitors will never recognize.

In a recession, when everyone is cutting expenses, you will have to take some obvious actions simply because you cannot afford to be the only one who doesn't. But it is only the new perspective, the unusual insight, that provides the chance to gain actual ground. We know that these, and other, unique perspectives work because we have seen them in action across all kinds of industries. The only question is whether it is you or your competitor who—after you have both slogged through the obvious—will still have the energy and drive to search for an original idea, something whose value you can actually keep.

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