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This article was written at the start of 2002 to share perspective and optimism for the coming future. Its motivational qualities still apply and are worth a read.
A new and provocative "Facing the Forces of Change" study is making its way through the industry. Uncertainty continues to be the word of the day.
In spite of all of this, business owners need to make decisions, take actions, and get on with running their businesses. I have been asked to share my perceptions on our near term future and try and provide some perspective as well. The short version is that I am very optimistic regarding the opportunities and growth available in 2002. Since no one can predict the future, I will share the events and experiences that have led me to this sense of optimism.
I recently attended an economic summit meeting that was attended by some "big gun" economists from Fortune 100 companies. I'll admit that I only understood about 50% of what was discussed. Franklin Roosevelt was right when he said that he needed a one handed economist. That way they couldn't say, "On the other hand." Here was the bottom line for me.
Economies cycle and will continue to do so. A great deal of discussion is spent on fiscal policy pretending that the cycle can be controlled. The reality is that when it is time to go in the tank, we go in the tank. The converse is also true. When it is time for a recovery there isn't much that can stop it from happening. Prior to September 11th, leading indicators had already started to indicate signs of an economic recovery. The economists believed that September 11th would slow it by one quarter and we would return to normal growth rate during the second quarter.
It is important to remember that normal growth would be 2 to 4 % GNP, not the hyper growth of 2000. With age and experience I have decided that most distributor share growth occurs on the shoulders of an economic cycle, either going into or out of a recession. Business owners need to decide, in advance, if they are going to play the game to win, or play it not to lose. Either decision is OK but clarity of intention is key. We have a series of white papers and articles on our web site about managing in lousy economies. The address is www.ircg.com.
There is a tool circulating on the Internet that may help you deal with our continuing uncertainty. I have taken one of my business cards and placed a message on it and I keep it in my wallet. This way I see it several times each day. It helps me maintain my personal perspective as I listen to the news. It has the following message:
I have complete confidence in…
1. My God given ability as a leader
2. The leadership of this country
3. The strength of the U.S. economy
Many companies in our industry are in trouble. I think that they should be in trouble because they haven't managed their businesses and they have been carried along by the strong economies in 1999 and 2000. They bled red ink during 2001 as old problems caught up to them. Most of these companies are still sitting on the sidelines hoping that the 2002 economic recovery will save them. They are risk and investment averse and they are probably positioned to lose share as the economy recovers. As you look at your business, remember that their problems are not contagious. No one wants to discuss it publicly, but I've had several conversations with industry leaders and the general view is that this industry will be much stronger as these weak players fall out.
I was very excited last year to be made a DREF Research Fellow and have an opportunity to be part of the Oversight Board on the new "Facing the Forces of Change" study. I have learned much from this involvement and I highly recommend that business executives study how the ideas can be applied in their own organizations. It can be ordered from www.nawpubs.org. The report used an entirely new approach to scenario planning. I have become a major believer and we use it extensively, both internally and with our consulting clients.
The short version of a scenario for a business is "Just suppose X happens, what would we do?" All you need to do is put together a one-page description of a potential situation and then develop a one-page action plan if it occurs. If you are trying to figure out how to capitalize on an economic recovery, consider building scenarios for the following situations.
- Your largest customer goes away or all of a sudden gets a major new contract.
- Your largest supplier goes away or makes a major change in how they go to market.
- One of your competitors either is sold or goes out of business.
- You either lose a few key employees or have the opportunity to recruit some key folks from a competitor.
These are all tactical scenarios and they play very well with the strategic scenarios developed in the "Facing the Forces of Change" study. One key question to ask for any scenario is, "How would we know that it is occurring before the actual event?" Most businesses would be well served to spend a weekend in an executive retreat in consideration of these situations and others.
There are many future courses that can be developed by a business as they face 2002 and beyond. While knowing what to do is tricky, it is pretty clear what not to do. Many years ago Paul Albreicht shared something with me that has stuck with me and may have some value in your planning considerations. He described the Fatal Flaws of Management as the key things to avoid in order to ensure you will be around in the future. As you read the list below make sure that you are not guilty.
- Failure to distinguish between high, medium, and low priorities
This refers to the organization that is consumed by the urgent instead of the important.
- Failure to anticipate sufficiently
Executives must spend some time thinking ahead so market changes don't slam them in the face.
- A poor sense of what will and won't work
This is God given judgment or common sense. It is genetic.
- Failure to initiate a forward program
Everyone wants a future and executives must create the thing that they can become.
- Failure to develop internal comfort
Exercising power creates pain. Executives must have some place to recharge their batteries or they can't go the distance.
- Failure to recognize the right situation
Most folks fail to recognize when it is time to go and, therefore, stay too long. Distributors should periodically evaluate traditional markets, product lines and other business activities.
Entire books have been devoted to each of these flaws. These are the issues that warrant quiet and private consideration.
Many businesses, especially public companies, wrote off 2001 as a lousy year. These companies used low expectations to write off bad inventory, fine tune organizations with layoffs and recruiting, and generally prepare for a strong, competitive 2002. Hopefully, you have done the same thing in your own business and you are ready to go. If you haven't sorted out your future plans you may want to consider the list below. This list is for the top executive.
- If you are over 50, stop whining and create a clear decisive ownership transition plan and exit strategy. If you are trying to recruit and retain top talent you will have to share it with your key people.
- Spend some money to get yourself into technology and the Internet on a very personal basis. By the end of the year you need to have favorite search engines, know what the right mouse button does, and develop your technology strategy with respect to your customers, employees, and suppliers. You need to lead your own organization because your employees know less than you do.
- Take the Jack Welsh approach and trade out the bottom 10% of your employees. At a minimum, get some agreement as to who they are. Distributors should always "carry their wounded" but avoid "carrying their dead." Remember that leaving these folks around keeps you from getting the right people.
- Make sure that every single employee knows the company's top three business objectives. Each employee needs to know how their job specifically impacts those three objectives to play at the "A level." Employees need to understand the firm's objectives before they can support them. Top management, therefore, needs to deliberately agree on them and then communicate them effectively.
- Invest money, even borrowed money, in some enterprise that builds competitive capability. This industry in inherently entrepreneurial. That means assuming risk on a continual basis. When an owner becomes gun shy, it's time to leave.
- Spend quality one-on-one time with your key customers. Although well- intentioned, most decision-makers rarely do it. Those that do gain the information and insight needed for local market leadership.
- Make absolutely sure that you have a good answer to the key strategy question, "What actions are you taking now that will improve your competitive advantage in the future?"
2002 will be an interesting year and we'll all have some victories and some setbacks. You are mentally in the right spot if you understand the line from a song by the late Harry Chapin, "It's the going, not the getting there, that's good!"
Enjoy the ride…
Published in Gases & Welding Distributor, Jan/Feb 2002
Indian River Consulting Group is an experienced based firm specializing in Distribution. Started in 1987 by J. Michael Marks, a current DREF Research Fellow, IRCG's specialists consult with distributors and suppliers to make the changes necessary to maintain competitive advantage. You can contact them by calling 321-956-8617, or visit www.ircg.com for more information.
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