McKinsey on Surviving the Downturn

Posted by Bob Apollo on Tue 3-Feb-2009

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One of my little luxuries is a McKinsey Quarterly subscription. I keep it up even during challenging times because it forces me to reflect on some of the key issues that face us today. 

They recently published an excellent series of articles on surviving the downturn.  They won't thank me (and I haven't got the room) to publish their advice in its entirety - and I recommend you take out your own subscription.

I found the following recommendations particularly profound, though, and I'd like to share them with you:

  • In hard times, save the core at the expense of the periphery. When times improve, recapture the periphery if it is still worthwhile.
  • Any stable source of good profits - any competitive advantage - attracts overhead, clutter, and cross-subsidies in good times.  You can survive this kind of waste in such times. In hard times, you can’t and must cut it.
  • If hard times have a good side, it’s the pressure to cut expenses and find new efficiencies. Cuts and changes that raised interpersonal hackles in good times can be made in hard ones.
  • Use hard times to concentrate on and strengthen your competitive advantage. If you are confused about this concept, hard times will clarify it. Competitive advantage has two branches, both growing from the same root. You have a competitive advantage when you can take business away from another company at a profit and when your cash costs of doing business are low enough that you can survive in hard times.
  • Take advantage of hard times to buy the assets of distressed competitors at bargain basement prices. The best assets are competitive advantages unwisely encumbered with debt and clutter.
  • In hard times, many suppliers are willing to renegotiate terms. Don’t be shy.
  • In hard times, your buyers will want better terms. They might settle for rapid, reliable payments.
Last, but perhaps most significant, was the following:
  • Focus on the employees and communities you will keep through the hard times. Good relations with people you have retained and helped will be repaid many times over when the good times return.

We all need to be prepared to make tough decisions and bear the consequences.  But we should never forget our friends.

Topics: Scalable Systems, Complex Sales