Reflections - Never waste a good crisis

Never waste a good crisis

To catapult to the top

Dreams experienced in ‘deep sleep’ can be educative if we reflect on it. If the same theme repeats itself it is a bullhorn to act.  

There are primarily two kinds of dreams: one, that startles you awake; and the other from which you don’t want to awake too soon. In either case it is our subconscious playing out our aspirations and our fears which when heeded and interpreted correctly can be transformative.

Some years back there was one such dream having frequent reruns in my ‘deep sleep’. It related to not meeting monthly and quarterly business targets. I am sure many are afflicted with this kind of a dream. In my dream I have been falling short, gravely, and growing increasingly fearful of the call from the boss to explain myself.

The dream was a flashback to the recession of 2008-2011 triggered by the sub-prime housing crisis in the US and the global financial meltdown that followed with the collapse of Lehman Brothers on September 15, 2008 – a date imprinted in my memory.

We are in some form of recession with Covid-19 indefinite lockdown – governmental or self-imposed – which will have a bearing on meeting the weekly, monthly and quarterly target in our respective businesses.

How should we arm ourselves to face the potential, imminent and real recessionary effect on the economy and on our business?

1.   Crisis mindset: Winston Churchill has been quoted as saying, “Never waste a good crisis”. We need to internalize the spirit of this statement and act differently from the business-as-usual approach. Our attitude should be, ‘Here is a great opportunity to think deeper, harder, smarter to create opportunities for the business, and for whatever scaled down opportunities that exist, have strategies in place to get a disproportionate share.

2.   Being honest: With ourselves and everyone else who forms some intersect with our business to identify what really are the critical issues that need to be addressed urgently. This means being deliberate about what areas of our business we will let die so that the ones to be kept alive get all the support. Generating a consensus around the decision would be the test of management’s leadership chops.  

3.   Being humble: The recessionary environment would call for humility in the top management to be able to say ‘I don’t know’. To reach out to those who may have the answers. It could be the peer group in the industry or cross-industry to understand how they are responding to the ‘crisis’. It could be inviting suggestions, without creating a panic, from the stakeholders how the business needs to run differently. The customer-facing staff or the team on the ground can provide insights into customer anxiety and customer demands of the business or potential defaults in payments to the company.  

4.   Being wise: Identify the signs and nature of the slow down. Which segments are most affected relative to the others? How are customers reallocating their spends and their budgets? On what budget items are they continuing to spend, on which they have cut back, and which items have been eliminated from their shopping list? If it is a large company, the sample set for this research could well be the staff of the company, though a customer segment would provide superior insights.

5.   Nose to the grindstone: Instead of the team spending time in the office strategizing, better to save on overheads and get them out in the field with a clear mandate to learn what is happening, provide an interpretation, and suggest strategies and tactics to create new opportunities for the business or better value add to existing opportunities; each one must play the role of a business head and an entrepreneur if he or she needs to retain his or her job.  

6.   Feeling challenged by the team: In an economically weak environment the management will be challenged by their employees to show the light and the way forward. If the management response is not convincing the brighter lot would start looking out to their industry peers who seem to be getting it right and hot-footing it there further weakening the company’s response. If the way forward proposed by management is clear than we can expect ‘reverse brain drain’ further strengthening the company to respond to the crisis.

7.   Working smart: Having role models to imitate is a good starting point for strategizing. For instance, role playing what would Aditya Puri, MD, HDFC Bank, do in these circumstances? To deliver EBIT of 25% y-o-y for 25 years there had to be:

                                         i.    A definitive management style (no magic)

                                       ii.    Deeply held business truths

                                      iii.    Tested processes and practices that deliver

                                      iv.    Time in the field with the team

                                       v.    Setting strategy together but responsibility with individual

                                      vi.    Holding the team feet to the fire to deliver on the numbers

                                    vii.    Close monitoring of what’s working what’s not

                                   viii.    Avoiding analysis-paralysis and consensual decision making

                                      ix.    Providing clear direction and decisions

                                       x.    Treating time as an irreplaceable asset of business

                                      xi.    Gumption to say no to what industry was doing and saying yes to what appeared to be a calculated winner for HDFC Bank based on its innate strength and vision for the business.

Any good crisis should bring out the best from those who like challenging themselves, to catapult to senior positions in the business, which in good times they would have had to wait their turn. 

Those Revolting Europeans

The French are revolting. The Greeks, too. And it’s about time.

Fred R. Conrad/The New York Times

Paul Krugman

Go to Columnist Page »

Blog: The Conscience of a Liberal

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Both countries held elections Sunday that were in effect referendums on the current European economic strategy, and in both countries voters turned two thumbs down. It’s far from clear how soon the votes will lead to changes in actual policy, but time is clearly running out for the strategy of recovery through austerity — and that’s a good thing.

Needless to say, that’s not what you heard from the usual suspects in the run-up to the elections. It was actually kind of funny to see the apostles of orthodoxy trying to portray the cautious, mild-mannered François Hollande as a figure of menace. He is “rather dangerous,” declared The Economist, which observed that he “genuinely believes in the need to create a fairer society.” Quelle horreur!

What is true is that Mr. Hollande’s victory means the end of “Merkozy,” the Franco-German axis that has enforced the austerity regime of the past two years. This would be a “dangerous” development if that strategy were working, or even had a reasonable chance of working. But it isn’t and doesn’t; it’s time to move on. Europe’s voters, it turns out, are wiser than the Continent’s best and brightest.

What’s wrong with the prescription of spending cuts as the remedy for Europe’s ills? One answer is that the confidence fairy doesn’t exist — that is, claims that slashing government spending would somehow encourage consumers and businesses to spend more have been overwhelmingly refuted by the experience of the past two years. So spending cuts in a depressed economy just make the depression deeper.

Moreover, there seems to be little if any gain in return for the pain. Consider the case of Ireland, which has been a good soldier in this crisis, imposing ever-harsher austerity in an attempt to win back the favor of the bond markets. According to the prevailing orthodoxy, this should work. In fact, the will to believe is so strong that members of Europe’s policy elite keep proclaiming that Irish austerity has indeed worked, that the Irish economy has begun to recover.

But it hasn’t. And although you’d never know it from much of the press coverage, Irish borrowing costs remain much higher than those of Spain or Italy, let alone Germany. So what are the alternatives?

One answer — an answer that makes more sense than almost anyone in Europe is willing to admit — would be to break up the euro, Europe’s common currency. Europe wouldn’t be in this fix if Greece still had its drachma, Spain its peseta, Ireland its punt, and so on, because Greece and Spain would have what they now lack: a quick way to restore cost-competitiveness and boost exports, namely devaluation.

As a counterpoint to Ireland’s sad story, consider the case of Iceland, which was ground zero for the financial crisis but was able to respond by devaluing its currency, the krona (and also had the courage to let its banks fail and default on their debts). Sure enough, Iceland is experiencing the recovery Ireland was supposed to have, but hasn’t.

Yet breaking up the euro would be highly disruptive, and would also represent a huge defeat for the “European project,” the long-run effort to promote peace and democracy through closer integration. Is there another way? Yes, there is — and the Germans have shown how that way can work. Unfortunately, they don’t understand the lessons of their own experience.

Talk to German opinion leaders about the euro crisis, and they like to point out that their own economy was in the doldrums in the early years of the last decade but managed to recover. What they don’t like to acknowledge is that this recovery was driven by the emergence of a huge German trade surplus vis-à-vis other European countries — in particular, vis-à-vis the nations now in crisis — which were booming, and experiencing above-normal inflation, thanks to low interest rates. Europe’s crisis countries might be able to emulate Germany’s success if they faced a comparably favorable environment — that is, if this time it was the rest of Europe, especially Germany, that was experiencing a bit of an inflationary boom.

So Germany’s experience isn’t, as the Germans imagine, an argument for unilateral austerity in Southern Europe; it’s an argument for much more expansionary policies elsewhere, and in particular for the European Central Bank to drop its obsession with inflation and focus on growth.

The Germans, needless to say, don’t like this conclusion, nor does the leadership of the central bank. They will cling to their fantasies of prosperity through pain, and will insist that continuing with their failed strategy is the only responsible thing to do. But it seems that they will no longer have unquestioning support from the Élysée Palace. And that, believe it or not, means that both the euro and the European project now have a better chance of surviving than they did a few days ago.

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