Action Plan for Success
Once you have developed a solid plan for improving the survivability of your organization, you can begin to layer on some plans for taking advantage of the current situation. What you do, however, should take into account each action's likely impact on your survivability.
The approach here is to go after gains that would in normal times be extremely hard to obtain. For example:
- If some of your competitors are cutting staff and service,
they are generating unhappy customers. This can create a major
opportunity for you.
- Low interest rates available to strong borrowers make
carefully targeted acquisitions feasible in a market where
your equity coin may be iffy at best. You may be able to buy low using
unusually-cheap debt.
- Competitors are probably slashing (or have slashed) product and technology development. This may be a great time for you to leap ahead with a renewed strategic focus on development.
Action Plan Ideas
1. Buy Solid Income Streams
If you have a pile of cash available, it might be possible to use some of it to acquire businesses or business units that can demonstrate the ability to generate stable income in difficult times. Purchase prices are likely to be as low as they will ever be, given bank reluctance to lend and weak equity markets.
Such acquisitions should of course be strategically sound but they do not have to be the kind of big winners that you might normally pursue. A solid performer with a clear ability to produce stable returns over many years may be a much better target today.
2. Buy Advanced Products & Technology
Another use for cash is to purchase valuable product or technology advances. This may take the form of an entire business or just a license arrangement.
Competitors and small technology companies may hit the wall during the next year or two and present you with some rare opportunities to acquire valuable products and technology cheaply. You may want to begin targeting these so that you will have early notice of their potential availability.
3. Borrow Short-Term & Buy Fast Payback
Historically low borrowing rates (for those businesses that can still borrow), typically available mostly with shorter maturities, suggest debt-financed acquisitions that can pay off the debt within the loan period. These acquisitions will be ones with strong, steady cash flow.
Making such "self-financing" acquisitions is probably a good idea at any time but it is critical now. You don't want to have to add the burden of refinancing your debt at possibly much higher rates if the acquisition fails to produce the necessary returns.
4. Protect Your Best Customers
This is the time to pay extra attention to making sure that your best customers are completely satisfied. Competitors desperate for sales may try to lure them away with special pricing deals. Try to give your best customers enough value to offset any likely pricing disadvantage you may face.
Protecting your best customers is sound strategy at any time but, again, critical strategy as desperate competitors try anything to lure them away. Building stronger bonds with these customers need not be costly and it is likely to pay off handsomely for years as business conditions stabilize.
5. Go After Your Competitors' Best Customers
A paralyzed, distracted or weakened competitor is likely to be generating customer dissatisfaction at a significant rate. You should think about regularly contacting the top customers of your competitors to get early signs of any service problems that may give your company an entry point.
You may want to prepare a list of these customers and assign each one to a strong salesperson for regular contact and monitoring for dissatisfaction.
6. Invest in Your Future
Strategic investments are always important but never more so than when competitors are slashing theirs. You need to remain informed about where competitors are cutting and how such cuts might suggest your own investment targeting.
The impact of a strategic investment in normal times is often diluted by the similar investments of competitors. Your investment becomes more one of staying in the game than creating a lead of any significance. Only when competitors have slowed such investment will yours have the chance to generate a substantial lead.
7. Innovate Aggressively
A culture of innovation is always vital to gaining ground on competitors, especially when competitors are hesitant. You need to make sure that your innovation process is strongly supported and deeply embedded in your organization.
Market leadership is often a consequence of routine innovation and effective implementation. Much of this can be low cost, incremental advances that are well within the resource constraints of most organizations.
And a Few Don't-Do's
The difference between survivability-constrained planning and normal-times planning is that the available options today are likely to be fewer and more focused. Targeting becomes far more important. The margin for error is less.
This means that some previously considered strategic options may no longer be in play. Examples:
- Major Merger:
Big mergers and acquisitions have a distressingly poor track
record in the near-term. Many problems are not visible until
post-merger, requiring substantially more time and money to
correct. You may not get the necessary time, sinking the whole
ship.
- Major New Product Introduction:
Anything that requires big bucks and substantial risk is
probably not a good move during periods of great uncertainty.
- Major Reorganization:
Even a less-than-major reorganization, unless unavoidable,
always entails substantial risk, takes longer than expected, and
is more costly that planned. They have a high failure rate.
- Short-Term Borrowing Without
Fast Payback:
With interest rates so low, it is tempting to borrow at whatever the best rate may be. Borrowed funds are often added to the pile of cash or used to buy back equity. Not a good idea: short-term borrowing needs to have a fast payback purpose. Buy an income stream that can retire the debt well within its maturity.
- Stock Buybacks:
Good idea if the equity market goes up; bad idea if the market
tanks. Survivability suggests that there are safer uses for
cash.
Of course, special circumstances may offset any of these general cautions but it is important to be sure in such cases that survivability is not likely to be adversely impacted.
Survivability Tracking
Planning for success in very uncertain times is pretty much the same as your normal planning process, except for the survivability constraints on action options.
You will want to make sure that whatever you decide to do has been carefully checked for its survivability scorecard impact.
Actions that might be well-justified in normal times may turn out to carry substantial risk in today's uncertain times. At the very least, you may find that survivability considerations lead to a much different attractiveness ranking among alternatives.
In addition, an attractive option may be worth pursuing even if survivability near-term is slightly decreased so long as recovery can be expected within a reasonable period.
Your survivability scorecard metric is likely to change significantly over time as your survivability strengthening measures show results and as important events occur and business conditions change. This means that action options previously rejected may in time become acceptable and that new options will appear.
Survivability tracking will require running your model routinely and not just as part of annual planning exercises. You may want to add the scorecard metric to your routine management information flow, which would require scorecard updating on at least a quarterly basis.
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Action Plan for Success