Adapting and Planning Your Way Out of the Recession

Mark A. Smith in his Information Management Blog titled "Adapting and Planning Your Way Out of the Recession" quotes Yogi Berra’s famous observation: “It’s tough to make predictions, especially about the future,” and points out that the economic events of the past two years  made forecasts obsolete in a very short period of time.

Furthermore, Adaptive Planning’s recent poll of US financial executives is hardly reassuring and confirms the lack of overall lack of enthusiasm over the economic outlook. The poll found that just under half (46%) expect a “W-shaped” (bumping along the bottom) recovery. A pick up in job creation is not in the cards until next year or later, according to 80% of the participants and 41 percent think employment growth won’t begin until the second half or later. 

There are mixed feelings about the business outlook for individual companies – half expect growing revenues but one fourth think they will fall and almost one-third expect to see staff reductions in the second half of the year. The trends in the survey over the past 18 months reflect the mood of the North American economy: things have stopped getting worse but they’re not getting better in any kind of hurry.

The survey also pointed to a key feature driving the North American and European economies:

Strategic Cost Management

In times of uncertainty, organizations are examining ways to enhance cost efficiencies, by focusing on cost analysis and profitability analysis. The Key is.... The key is to identify a handful of activities of sufficient size and significance to justify separate treatment and for which a single cost driver can be identified. Identifying costs that can be influenced is key to cost streamlining. Refocus resources on really profitable products, customers and channels. NOTE : When using an integrated approach, such as Activity Based Costing  that works on causal relations to allocate costs, changes in the level of activity will not lead to a proportionate change in total costs.This in turn calls for the need to analyze costs according to a cost hierarchy, focusing at four levels: unit, batch, product, company:     * Unit: Unit level costs increase in proportion to the number of units produced (e.g. labour hours)     * Batch: Costs increase in relation to the batch of units being produced (e.g. set-up or purchasing costs)     * Product: Costs at this level are incurred irrespective of the volume of products or batches produced and might include costs like technical support, etc.     * Company: Costs at the company level are incurred and cannot be assigned to products directly (admin and management) Finally, is worth noting that Kaplan differentiates between the cost of resources supplied and the cost of resources used >> (the cost of resources supplied = the cost of resources used + the cost of unused capacity.)   And unused capacity is not entertained in a  Strategic Cost Management framework. O2ibm

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Two Best Practice Approaches to Cost Streamlining

In times of uncertainty, organizations irrespective of size, are faced with the challenge to improve or maintain their margins, by focusing on operational cost efficiencies. They are using different approaches to ride the economic downturn and come out even stronger. Akzo Nobel's margin management programs were implemented throughout the company with a strong focus on cost management, and cash management, by closely monitoring working capital and be prudent in capital deployment. Besides managing costs and working capital, the company also wants to come out of the recession stronger and serve their customers better. Therefore the company focuses on continuous innovation and development of emerging markets. Akzo Nobel uses technology and innovation as key differentiators. The results of the cost management program are being monitored closely, to ensure full benefit realization. Oskomera, a steel fabricator,  worked on redesigning their business processes using lean production principles.  The result: a reduction of work in progress by 85%, a reduction in cycle time by 65%, an improvement of quality levels by 41% and an increase of productivity by 67%. The lean principles that Oskomera applied were: Quality is integrated in business flows People are an integral part of the business process Stocks are streamlined an waste eliminated. O2ibm

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Strategy Execution in times of Uncertainty

	In this unpredictable economic climate, leaders must be capable to lead their companies to quickly adapt to new market forces. Business models are changing to catch up with the emerging drivers of competition. Success hinges first and foremost on "Thinking-Ahead" strategy  and robust execution. Because execution plays such a critical role in success or failure, especially during a crisis, many companies are turning to new technology solutions to ensure they can deliver on strategies and emerge even stronger. Any company that fails to adapt quickly and efficiently to market changes can miss important opportunities ir risk their very survival. Here are some key points to consider: A new strategy is not enough - executing under these extreme market conditions is not enough, meaning you need to make sure you touch every point of the strategy timeline and product offering. Align your workforce with what you want to accomplish - workforce alignment and performance is critical. Be prepared to change course or rethink your strategy monthly - it is difficult to get your strategy right the first time so review religiously.  Leverage performance and talent management solutions for business execution - this will help you attain the top and bottom line results.    Key points from Workforce Magazine (June 2010)
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