During my long years’ experience in corporate management sector, of which major part was at senior management level,I have seen my share of “boiled crabs.” What I mean is that I have witnessed many a crisis-laden companies with the metaphorical crab that doesn’t notice the water it’s in is warming up until it’s too late.
I have seen in dismay how leaders walk right into a crisis without recognizing that their situation is worsening. They’re not bad leaders, but they’re often working under a set of paradigms that no longer apply and letting the power of inertia carry them along. And, when they don’t realize they’re facing a crisis, they won’t know that they need to undertake a turnaround, either.
I have also heard the regrets: sometimes leaders underestimated how critical their situation was - or they were looking at the wrong data. Others took advantage of easy access to cheap capital to stay the course in spite of poor performance, believing they could push through it. Still others got so caught up in the pressure for short-term returns that they neglected to ensure their company’s’ long-term health - or even wilfully sacrificed it.
Rare among them is the leader who stepped back to review his or her own plans objectively, asking “Is this what I thought would happen when I first started going down this road?” That’s a good sign, because acknowledging that your plan isn’t working is the necessary first step.
Blue Ocean Strategy
This series of articles will analyse the signs of corporate crisis, its causes and how to come out of it and thereafter, how to continue with the winning streak. The series is addressed towards the corporate executives and managers who aspire to become leaders and also towards leaders who wish to rise up to the top rung senior leaders in their companies.
The series is based on, what is known as, Blue Ocean strategy.
What is Blue Ocean Strategy? It is a new thinking developed by globally pre-eminent management thinkers Chan Kim and Renée Mauborgne. They observed that modern companies tend to engage in head-to-head competition in search of sustained profitable growth. Yet in today’s overcrowded industries, competing head-on results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. Lasting success increasingly comes, not from battling competitors, but from creating blue oceans of untapped new market spaces ripe for growth.
The authors assert that certain strategic moves create a leap in value for the company, its buyers, and its employees while unlocking new demand and making the competition irrelevant. The Blue Ocean strategy presents analytical frameworks and tools to foster an organization's ability to systematically create and capture blue oceans.
We will study them in details in the coming weeks. But before we move on to the Blue Ocean Strategy itself, we need to browse through in capsule format how today’s high-profiled companies take tough decisions in times of crisis. This might take about 7 instalments. Once you have a grasp of these techniques, you will be in a better position to understand the Blue Ocean Strategy techniques.
Signs
There are numerous signs of company distress - and a distressed company is typically dealing with multiple signs.
The company may have problems in working capital/liquidity: Declining or negative cash flow, Large contingent liabilities, Unresolved near-term debt maturities, contracting vendor terms, increase in accounts- receivable aging, Increase in outstanding accounts payable.
The company may be undergoing weak profitability and industry outlook: Shrinking earning’s margin, Reduced capital-investment programs, Going-concern opinion, Deteriorating industry fundamentals, Adverse regulatory issues eg. Tax, workers benefits etc.
The company may experience declining Financial position: Declining stock price, Inability to meet debt covenants, Resignations of key finance staff, diminishing liquidity, Repeated bank amendments, Downgrades in debt ratings, Accounting restatements, Inability to file financial statements
The company is faced with dissatisfied workforce: Large or unplanned reductions in workforce, Management turnover, Disruption in unionized workforce.
Taking decisions
Napoleon Bonaparte once said that, “Nothing is more difficult, (and therefore more precious), than to be able to decide.” He recognized that a few critical decisions put leaders to the test. In turbulent times, some leaders make tough choices with courage and conviction. Others cannot cope with the complexity and uncertainty. They remain indecisive, and their rivals gain the upper hand.
Like Napoleon, today’s business leaders must cope with a great deal of ambiguity as they make important choices about the future. They face uncertainty with regard to politics, macroeconomic growth and stability, technology and changing consumer tastes. Many worry that an unknown event will transform their entire industry in a matter of a few weeks or months.
Efficient leaders find ways to cope with this uncertainty. They adopt strategies for simplifying complex situations so that they can make decisions quickly and effectively. These strategies enable managers to make sense of a confusing situation.
In the next seven weeks, we will study seven strategies that business managers can employ to cope with ambiguity and complexity as they make critical decisions. These strategies often prove very effective because they enable managers to make accurate judgments under stressful conditions.
Highly stressed
If you are an executive, manager or a leader, you don't need to be told that the world of work is tougher than ever--you live it every day. Faced with shrinking budgets, smaller staffs, shorter deadlines, more demanding customers, and an unrelenting call for innovation and growth, is it any wonder that so many executives and managers surveyed say they feel “highly stressed”? Clearly, the old management paradigms just don't cut it anymore. What's needed is a fresh, bottom-line approach designed for what really works in today's business world.
You should to be willing to make hard decisions, and stick to them, even when people you may care about are on the other side of the aisle.You should prioritize results, identify actions needed to achieve them, and build consensus on what it will take to get the job done.You should be flexible and never become so rigidly tied to one path.
Tough managers do not fear innovation and are always receptive to input from others.You should be a good team player who always keeps the interests and vision of the company in mind.You should value collaboration, and encourage it among their colleagues. You should keep morale high within your team by rewarding good work and giving people everything they need to do their best
The choice is yours: continue to do things the old-fashioned way or adopt a bold new approach to managing designed for the realities of today’s workplace.
Tough decisions
If you are manager, well then, as they say, the buck stops at your desk. For managers, there is nowhere to run when it’s time to make the hardest of decisions. And they need look no further for the biggest challenges they will face than with the personnel they have in their teams.
While there is no way to learn to make “the right” decision every time, managers can learn the process of making the “best possible decision at that right time.”
Most often when decisions need to be made, as long as facts are clearly taken into account, the right decision is pretty clear. Being ‘factual’ makes it much easier, because objective assessments are much easier to make than subjective ones. When you let emotions rule your decision-making process, that’s when things start to go awry.
5 Rules
There are 5 accepted “rules” to help you make the right decision. Remember - When you make the best decision, there is always a loser, but it cannot he helped.
(1) Make no decision before it’s the “right “time. This is the key for any manager. If you don’t make those decisions that you don’t have to make, invariably, there’s new information that comes, there’s more information, better information, better data. Determine whether you need to take the decision now, or in the afternoon, or tomorrow or next week. Making a decision at a later date may lead to a more informed one.
(2) Accept that this is not an easy decision and there are no “right” answers. Stop searching. There is only a “current” right decision based on the information that is available.
(3) Deciding with heart or head? You have to admit if you are making decisions based on emotion or the facts. While it is not necessarily bad to make a decision on emotion, this needs to be clear.
(4) Make the decision after careful consideration, but then do not waver. Commit to one path and take action. Wavering will almost guarantee that the desired outcome is not accomplished.
(5) When definitive action is taken, learn from the result and then plan the next move. Remember, business success is a series of patient interim steps, not giant wild leaps.
It can be tough to get it right for the bigger picture – and that’s where great managers earn their crust.
Lionel Wijesiri is a retired company director, having over 40 years of business management experience, the major part of which was in decision-making leadership. He is an academically qualified business administrator with bachelor and master degrees from UK and Singapore universities respectively. Wijesiri has worked in a number of different types of companies in different industries, thus gaining varied experience during his long career. Management and business research were his favourite subjects.
Wijesiriagrees with global business experts that there are no permanently excellent companies, just as there are no permanently excellent industries. Every corporate leader does smart things and less-than-smart things. To improve the quality of his success, he needs to study what he did that made a positive difference and understand how to replicate it systematically. That is what management gurus call making smart strategic moves.
This series of articles which he presents in the coming weeks will guide business executives and managers on how to create uncontested market space and break out from the competition. It is all about what is known as the globally acclaimed “Blue ocean strategy”.
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