MBA 101: Four Ways To Power Through A Downturn

Donald Sull, a professor at the London Business School and an all around smart guy (see his website here), recently wrote an article in the Financial Times that urges managers to focus on the following four priorities during a downturn: instill ongoing cost discipline, force hard choices, accelerate fundamental changes and seize golden opportunities.

The whole thing is worth the read (here's a pdf link) but for the short (blog) version, here's a few examples to which manufacturers can relate.

Toyota: The Japanese automaker powered out of a downturn in 1950 by using an especially receptive workforce to negotiate fundamental changes in work practices and pioneered the Toyota Production System. They also recognized that "no company is an island," and extended this flexibility and engagement to its suppliers (who were also especially receptive at the time). Most crucially, says Sull, the company continued to use and refine these practices once the market picked back up, instead of returning to fat/happydom.

Nokia: You might not remember that Nokia used to be a diversifiedconglomerate. Facing a steep downturn, Nokia's executives "bet the farm" on the burgeoning telecom business (which then only accounted for 10% of revenues). However, they offset that specialization by diversifying within telecom, for example manufacturing everything from handsets to telecom infrastructure equipment.

Cisco: The high-tech company was nearly flattened by the dot.com implosion, but the management team "forced the hard choices at many levels including reducing suppliers from 1,300 to 420, halving the number of channel partners, discontinuing the bottom third of products, streamlining R&D, and tightening the process for acquisitions."

Samsung: Leadership made some tough decisions through two separate downturns in order to grow from a Korean to a global company -- even though it meant divestment of long-standing, profitable businesses such as sugar and paper processes, because they couldn't give the firm global leadership. He also set his team's sights higher and began benchmarking his divisions against global market leaders, which is probably a much harder change to push through when things are going downhill than when sales are climbing.