Archive for May 2009

Futurescape Newsletter Archive

May 11, 2009

May 2009

Research Insights – Winning in a Downturn –
Strategies and Tactics to Survive and Thrive in Turbulent Times

Our current research on Winning in a Downturn focuses on understanding what organisations of every size are doing to survive the current turbulence and secure the future. Below we have summarised twenty of the critical ideas which we find most compelling and most readily actionable by any organisation. We will expand on these with practical case examples at the seminar in London on June 22nd.

1. Use scenarios to plan for an uncertain future.
In this uncertain and turbulent economic climate, businesses no can longer rely on a single business plan or set of assumptions. Instead the most successful are tackling the uncertainty by using scenario planning to prepare for a wide range of possible outcomes and to identify the opportunities that could arise even in the worst case scenarios. At the same time, they are asking themselves tough questions under each scenario:
– Which market segments and aspects of our business would be most at risk?
– What would the implications be in terms of products, pricing and who our key customers would be?
– What resources should we keep or let go?
– Which actions should we be taking under any financial climate?

2. You can still grow in a downturn.
Remember, even in a downturn, there is opportunity. A 5% shrinkage in an economy means that 95% of activity is still taking place. In a worst case scenario of 25% unemployment, 75% of workers are still employed, and their firms are still buying, trading and needing products and services. Some of the world’s biggest companies launched in economic downturns (such as Microsoft, HP and Tesco). Recessions create huge upside opportunities. Rents are lower, raw materials are cheaper, firms are keener to trade, capital goods are cheaper and labour is more abundant. Under these circumstances, those with the right mindset can really accelerate business growth.If your rivals are focussed on cost cutting, they are probably not paying enough attention to their customers. This creates a tremendous opportunity to step in, examine and enhance every aspect of your customer offering, add more value, differentiate service, make it better and easier for customers to do business with you and increase their loyalty as a result.

3. Revisit the business plan regularly.
Tight financial management is essential to ensure you have the resources to continue in business. In a volatile economy, we have to rework our business model on a regular basis to ensure we can survive on smaller orders and lower revenues per transaction. Cutting inventories and educing your ‘environmental footprint’ can play a massive part by eliminating waste and improving energy efficiency.

4. Deepen the customer dialogue.
Investing time creating a long-term dialogue with your customers will reap long term rewards. The better you understand (i) how your products and services are used by your customers, (ii) the technical and logistical challenges they face and (iii) what their future plans are, the greater the opportunity to provide genuine added value solutions and deepen the long-term relationship. This kind of insight helps you move from simply promoting what your products can do to co-developing solutions and technological innovations for ‘what they want’.

5. Engage and support the supply chain.
Maintain a constant dialogue across your entire industry supply chain. Talk to your staff, suppliers, partners, competitors, regulators and investors to understand how they are all being affected and how they are responding. Use what you learn to identify ways of adding value to your end customers and to your products and services through collaborations across the supply chain. Thinking out of the box about how to build long term supply chain relationships can pay big dividends. At a time when your competitors might be more internally focused, simple investments of time and resources to help address issues for the supply chain will help differentiate you. This might include lending staff time to solve technical problems, helping with product innovation, co-marketing arrangements, contributing to training costs and even mentoring new managers in smaller suppliers.

6. Invest in your people.
Investing in your people will pay dividends in terms of morale and the positive impact on customers. Demotivated staff don’t generally perform well or deliver good service. Low cost training options include e-learning, accelerated learning solutions, secondments, job swaps, inviting in guest speakers from the industry and promoting involvement in physical and virtual social networks. Encouraging staff participation in volunteering programmes for good causes can bring massive motivational benefits.

7. Embrace open innovation approaches.
Many firms such as P&G and Kraft are adopting a more open approach to innovation – encouraging and rewarding those outside the business to contribute ideas. This approach dramatically expands your research and development capability, accelerates new product and process development, cuts costs and provides an effective way to increase exposure to your brand. For smaller firms, it provides an opportunity to be part of the larger innovation ecosystems for big companies.

8. Implement changes quickly and decisively.
Once decisions to implement changes have been made, act fast and decisively, whether reworking your business model, closing down inefficient operations, making redundancies or changing pricing structures. It is critical that once a decision is made, it is communicated and acted on rapidly so everyone can come to terms with it and move on. Emotionally, your people have to be in a place where they are listening to, inspiring and energising customers. If a company does not innovate and if employees are worried more about internal politics than serving the customer, business will inevitably suffer.

9. Focus on the vital few.
Free up time and resource by focussing on the ‘vital few’ initiatives that are critical to your business. Most companies run any number of initiatives, both big and small. Cancel or postpone those which are not considered core and those where you know you are unlikely to receive the investment or support to proceed to full implementation in the current climate.

10. Rethink your marketing tactics.
Never neglect marketing as an effective tool even in an economic downturn. The internet and social media tools such as Twitter are proving to be powerful low cost ways of maintaining and enhancing brand presence. Events can be very effective – particularly when you can provide the kind of training and education that customers may be cutting back on.

11. Be magnetic.
Does your business generate opportunity while you sleep? It is important to ensure that you are working in a smart way to attract new business opportunities and ideas. The more your people are visible in the market and out there communicating, participating and adding value in physical and virtual social networks, speaking at events, writing articles in key publications and keeping the brand visible – the more ‘magnetic’ you become and the more opportunities will come to you.

12. Build confidence for the future.
Firstly generate trust by sharing your results and plans for the immediate future. Secondly, demonstrate all the things you are doing to create added value for your customers. Finally, make it clear that you are not panicking but using the downturn to innovate, plan for the longer-term future and review every aspect of your customer offerings to ensure they are adding value.

13. Focus on the future.
Sales and marketing approaches need to shift away from simply promoting what you have to genuinely adding value for customers. A really powerful tool is to develop and share scenarios for how you see your market developing. Every customer that you serve needs to ask themselves, “What’s next? What’s going to change in the future?” It could be technology, new markets, environmental pressure or the way businesses are operated. Everyone is desperate for such insights but many don’t know how to gather and analyse the information or free up the time to do it. If you can come in and share your views and insights about the future, this can help clients determine how they would respond to different possible scenarios. This sets up a platform to work together to develop the strategic solutions to the different opportunities they see emerging under each scenario. This helps lock you in as a strategic partner, and provides critical insights on what your key customers plan to do for the future. For smaller customers, you could create half day sessions where they could come to you to hear about your future insights and think about how they should respond. It also creates barriers for your competitors as customers won’t want to repeat the exercise with every supplier.

14. Listen.
You need the insight of your suppliers, distributors, affiliates and end customers and ultimate end-users to fully understand their challenges, which will enable you to create the best product and service portfolio.

15. Adopt a winning mindset.
Give yourself permission to believe you can do things a different way. You don’t have to follow the path of the rest of the industry. You can be the first try new approaches, innovation doesn’t have to be expensive. Try to develop this kind of mindset throughout the business.

16. Drive environmental improvements.
Our environmental performance will be under increasing scrutiny. An honest and pragmatic approach is required. Acknowledge that it is a real issue, sign up for all of the key industry wide initiatives and act fast to implement the solutions that emerge. Measure your environmental footprint, benchmark against competitors and leaders in other sectors and determine the improvement actions you will take. Share your plans and progress with the supply chain and seek their input. Work with customers to create the next generation of more environmentally products that help address their challenges.

There is a lot of good practice case material to draw on. Do not take a defensive posture. Establish solid measuring systems and report progress in reducing emissions, waste and resource consumption. Use your workforce and supply chain to come up with ideas and innovations. Offer tools and training to help customers and partners measure their footprint and how to drive it down. Think of smarter ways to use energy, demonstrate more environment friendly products, show people how they will save them money. Eventually new legislation will hit everyone and you do not want your products to be affected, so it really is in everyone’s best interests to act now and avoid having to try and play a costly game of ‘catch-up’ in the future.

17. Scan the horizon
Many organisations have been caught out by a failure to scan the horizon for the key trends and indicators of ‘what’s coming next’. In reality these megatrends create both opportunities and threats which could either damage or enhance our business depending on how we respond. Examples would include the continued growth of the internet and mobile phone usage, the shift of economic power to the developing world, the rising scale of western government capitalism and the resulting levels of public sector debt, an ageing society, rising population, and an accelerating rate of development in many fields of science and technology.

18. Understand the megasectors
Almost irrespective of what happens to the economy, we know that certain sectors will be multi-trillion dollar global markets simply because of how critical they are to every economy. These would include infrastructure, energy, education, healthcare and green technologies. These are ‘opportunity rich’ sectors for large and small firms alike. The challenge is to select key areas to focus on, research them well, find the right partners and have your radar tuned and your network alerted to advise you as opportunities arise.

19. Raise the positioning of your brand
One of the most interesting trends we are seeing is that of firms shifting marketing budgets from advertising to research sponsorship. The latest Edelman Trust Barometer shows that trust in traditional corporate advertising is declining. The lifespan of an advertisement is also relatively short lived. In contrast, firms are finding that sponsoring research which is of value to their customers and partners creates an output that has a longer lifespan than an advertisement. Furthermore research tends to be shared amongst many readers and positions the sponsors as being serious about the issues of importance to their stakeholders. Finally, research offers a powerful platform from which to create new conversations. Many are finding that while their requests for sales meetings are rejected, customers and prospects are only too willing to attend or host short research briefings that can provide them with useful insights.

20. Looking from the outside in
Who has the responsibility to provide an external challenge to the way you do things? Who around you do you trust enough to ask you difficult questions about the decisions you are making? Who in your business understands what challenges you will face as you go through the next phase of growth? Who is spotting the next set of trends and developments that could impact you in a positive or negative way?
For many small to medium sized enterprises, the temptation is to assume that we can do everything and not seek out external help. However, our research highlights that many of those who have done best at anticipating and responding to the downturn also have trusted sources of external challenge and advice. This can be in the form of non-executive directors, a more informal pool of advisors, membership of a CEO network or a personal coach. An unexpected benefit for many has been that these trusted advisors have also become very powerful brand ambassadors – promoting the business externally and generating additional opportunities.

Conclusions
We have covered a lot of ground here, and hopefully provided some practical ideas. To succeed now and in the future, I would leave you with three key messages:
1. Invest in your people, customer relationships and innovation.
2. Open up to ideas from outside the organisation and think in ‘out of the box’ ways about working with the supply chain
3. Give yourselves permission to believe that you can outperform the sector and win in a downturn.

Forthcoming Events of Interest

June 25th, The Future of Connectivity, The Club of Amsterdam at the RSA, 8 John Adam Street, London, WC2N 6EZ, registration begins at 6:30pm. Admission Free http://clubofamsterdamatrsa.eventbrite.com

A date for your diary – October 14th-16th, 5th European Futurists Conference, Lucerne http://www.european-futurists.org

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The Bulletin, issue no.1

May 10, 2009

By Ian Pearson and Rohit Talwar. May 2009.

The Bulletin – Issue 1

Spending dam-burst ahead
The economic crisis is in large part caused by people uncertain of the future holding back their spending. In the UK, low interest rates mean we get a tiny return on savings. Mortgage costs have not fallen as far, so the gap between borrowing and savings rates has increased sharply. While this should incentivise spending, many are paying off some of their mortgages instead, as the effective return is higher. The trouble is, even those in work are nervous about spending – fearing tough times ahead. The business response is to cut spending and headcounts. With low confidence in government, economic decline is inevitable. So although most are still in work, on the same salary as before, sales are down and companies are going under.
However, this spend reduction means people are building backlogs of things they need. Many will have saved cash, or reduced debts, so will soon be in a better position to go out and spend again. Emotionally, we have also got used to having money and spending and Generation Y (born 198-1999) has limited experience of living in a recession. At some point, the dam of pent up desire will burst and this postponed spending will flood onto the market. Sadly, many companies who so desperately need help now will not survive long enough to benefit.

It is hard to say when confidence will return. Maybe later this year, maybe not till next year. In the short term, savings rate reductions greatly favour debt repayment over buying stuff. The real power lies with those who have no mortgage and accessible savings. Further economic decline means things will probably cost less in the next few months, as companies are forced to offer large discounts. Large purchases are more likely to be postponed if people think they can get them for less later. So for everyone, there is less incentive to spend right now and little prospect of change in the next few months – except for those businesses forced to close before the recovery starts. But this dam-burst is inevitable.

When some of the debt has been paid off, when money is burning a hole in the pocket, and as new technology brings exciting products to market, people will spend heavily again. When they do, the pick up will be rapid. Companies that survive should be more efficient, less wasteful, more innovative, leaner and meaner. The banking system will hopefully have been reformed and better regulated. The economy should be far healthier when it recovers than when we entered the recession and better prepared for the world we are moving into. Well, almost…

Coming Next – Video Visors
This could be the year when video visors make it into the mainstream, probably as one of this year’s must have Christmas presents. Video visors contain displays that allow the wearer to watch video, play games, or browse the web. The first generation will be opaque, so will only be
suitable for when the wearer is seated, but soon, semi-transparent ones will be available, that allow imagery from computers to be superimposed onto the everyday field of view. This will enable merging of the web and the real world, so that characters from games, or friends’ avatars from social networking sites could populate the high street along with ‘real’ people, or even replace real people. This ‘dual architecture’ could give a different appearance to every pedestrian.

Ian’s Rant 1 – Backlash Against the Civil Service
One big fly in the economic ointment is the rapid growth of the civil service over recent years. In many areas, the civil service employs most of
the working population – voters who could in turn favour a government that looks after civil servants. So there is a strong political momentum
associated with improving civil service working conditions. These have gradually become much more favourable than in the private sector, especially as the private sector has been forced to close many final salary pension schemes, and taken the full impact of the recession. Recent
attempts to level the playing field between public and private employment conditions have been very feeble and fizzled out quickly.

Nevertheless, this is the year it must be addressed. Public anger at what is seen as a two stream society, one part living in protected comfort at the expense of the other, is growing rapidly. When the civil service was associated with low pay, it was assumed a reasonable trade off for better job security, low stress, and a nice pension. Now the average civil servant is paid significantly better then their private industry equivalent, gets more leave, takes more sick days, works less hard for fewer hours, and retires earlier on a far better pension. The now all-round superiority of public service terms and conditions is simply not sustainable, paid for as it must be by those working in the private sector. So if the government fails to address the disparity voluntarily, they will be forced to by a fierce private sector backlash. This so far amounts to no more than a number of irate press articles and letters, but it could erupt soon into demonstrations and unrest if left to fester.

Rohit’s Rant 1 – Banking – Bail Out or Black Hole
As over eight trillion dollars in the US and hundreds of billions in the UK are channelled to the financial services sector through a variety of mechanisms, governments try to convince us the taxpayer could profit handsomely from the bail outs. However history is not on our side.
Recent research from the IMF studied 124 banking and financial services failures since 1970. They found that, on average, it takes 3-7 years for a full recovery, the cost is around 13% of GDP and taxpayers get back just 18% of the bailout investment. With – for example – the total assets of the big three UK banks being roughly three times the size of UK GDP, the question is really whether these banks are just too big to bail out in
their current form.

The money poured in to prop up bank balance sheets isn’t being recycled into new lending at anywhere near the rate government expected. One wonders why these deals went through without clear agreement on such basic issues. We’re told – mainly by the banks – that if they aren’t propped up in their current form, the economy will suffer. That horse has already bolted – just ask those losing jobs and closing businesses on a daily basis.

Maybe we need to look at a much more radical restructuring and simplification of the banking system – splitting out consumer banking and day to day business banking from the riskier investment banking, leveraged debt and proprietary trading operations. Ring fencing the toxic wastelands and putting the other sectors under new management might take some time because of the complex structure
of these patently unmanageable behemoths. However, it would allow new investment funds to flow into the safer banking sectors, start to rebuild trust, and get the real economy going.  It would also allow full valuation of the possible scale of bad debt on banks’ books and enable tough decisions to be made about how to share out the losses between all involved.

Ian’s Rant 2 – End of the Greens
Now that everyone is environmentally aware, even if they don’t always act that way, ‘greens’ are rapidly losing control of environmental
issues. This has to be a good thing, since green politics was often thinly disguised socialism. The subscription to environmental protection by almost all parties now allows the issue to be given over to scientists to deal with it.As greens lose their mandate, so meta-religious environmentalists will also lose their haloes. In fact, it is now apparent that many of the earlier policies forced through by environmental groups have actually significantly damaged the environment. Policies such as favouring bio-fuels and carbon trading have done great harm by incentivising destruction of rain-forests and drainage of peat bogs, both of which have increased the amount of CO2 in the atmosphere. With science at last starting to take control, we should look forward to seeing new ideas that will actually help fix the problem.

Rohit’s Rant 2 – How Modern are we?
The two most frequently aired management themes of the last decade have been (1) the need to transform customer service and (2) the imperative to innovate. The most commonly cited enablers have been unleashing our people and embracing the internet and social networks. However, in the current crisis, it seems that while we are still committed to service and innovation, we’re paying scant attention to people and the potential of the internet – if the results of our current survey on Winning in a Downturn are anything to go by.

The survey is still running, but as we stand, the most popular actions are cost cutting (60%), improving customer service (48%) and innovation (40%). Only 17% prioritise either staff motivation or increased use of the online channel and only 8% are spending more on training.  When asked for the top three priorities for surviving the downturn, clear direction and strategy (59%), customer relationships (57%) and cost control (48%) came out top.

Just 24% see staff motivation as a priority and only 3% opted for greater use of the internet. We don’t need data to tell us that unmotivated employees hold back performance – but it’s strange how easily we’ve ignored the people factor when things get tough. I’m also amazed at how many businesses are ignoring the power of the web as a virtually free sales, service and recruitment tool, as a magnet to source new ideas, as a research tool, as an engagement vehicle and a means of driving word of mouth communication.  Given that both motivation and exploiting the web can be done a virtually no cost – this feels like a massive missed opportunity.

What is the Bulletin?
The Bulletin is a response to requests from our respective clients and contacts to provide a monthly update of our current thinking on what’s
happening in the world around us and what could shape the future we’re moving into. To book Rohit or Ian for a speech, or discuss your research and consulting needs please contact us at rohit@fastfuture.com or idpearson@gmail.com