How to Thrive in 2010's 'New Normal' Business Operations Environment

Dec. 13, 2009
Find out what your customers value.

The business environment has changed and will not "return to normal"; instead, a "new normal" is emerging. The U.S. and the world economy have been in a recession for at least a year, and the media is starting to discuss a slow recovery. Whether the recovery is weak or robust and whether it is short-lived or long-term, there is no doubt that the business environment has changed.

For example, although credit will likely improve vs. the recent history, it will not return to pre-recession availability. Although businesses have significantly reduced workforces and are unlikely to make significant further cuts (after all, there are only so many people in the business, and someone has to produce, ship, and bill product), they are also unlikely to go on a hiring spree to build up to support pre-recession sales volume levels. Lastly, in our consumer-based economy, we have increased our savings rates from negative numbers to 5% while the baby boomer generation is beginning to retire (both of which result in reduced spending levels), and so it is unlikely overall sales volumes will return to the "old normal."

So, what is this "new normal"? It is a return to fundaments, which includes three core principles: 1) Cash is king; 2) Service is paramount; 3) Execution is everything.

1. Cash is King

During the recession, cash has been king, and I don't see this trend changing. If sales do not return to pre-recession levels due to a reduction in consumption demand and credit remaining tight, there will continue to be pressure on cash flow. Additionally, there is a potential for increased costs (for example, rising commodity prices, increased taxes etc), thus squeezing cash from both directions.

2. Service is Paramount

As businesses struggle to stay afloat and are distracted with day-to-day operational needs, it can lead to order fulfillment problems and a reduction in service levels. Also, as consumers and businesses are cash constrained, they are likely to become more focused on receiving a total quality experience when they choose to purchase. Thus, it is likely there will be a significant opportunity to gain market share when you are the one who is able to provide significant value with superior service.

3. Execution is Everything

Solid execution/implementation skills will gain popularity once again. Function will rise in importance over form. During booming times, form is valued - after all, the exact level of profit or cash flow is less critical when plentiful. Thus, it is enticing to have the latest, greatest gadgets, software features, processes/ programs, etc. Now, what matters is bottom line results -- and timing.

So, how do we thrive in the new normal? In my research in working with clients across multiple industries and countries and in talking with a diverse group of service providers ranging from business attorneys to CPA's and executive recruiters, the conclusions are as follows: 1) Manage cash with vigor, 2) Stand out in the crowd with service, 3) Execute, execute, execute.

1. Manage Cash with Vigor

Cash can no longer be an afterthought. Instead of focusing sole attention on the P&L, elevate the importance of the cash flow statement. However, in 80%+ of the cases, even this is not enough. Depending on your business, it is vital to monitor cash on a daily or weekly basis. Don't just ignore it if you are ok; analyze the trends, search for opportunities. Those companies and individuals who are patiently increasing their cash availability will be the ones to propel forward as assets (businesses, equipment, real estate, etc) go on sale.

There are several ways to free up cash. First, reducing inventory levels while maintaining and improving service levels will typically yield the quickest and largest impact. Second, find ways to reduce your breakeven point for cash and reevaluate priorities and projects with an eye to cash. Surprisingly, in my experience, although reducing costs is one option, it is often not the best one! Think creatively about markets, margins, customers, suppliers, alternative financing methods etc.

2. Stand out in the Crowd with Service

Find ways to provide excellent service. Find out what your customers value. Provide it consistently and reliably. Do your customers know that you value their relationship? How can you demonstrate it? You'll be surprised how quickly customers become accustomed to your superior service. What better way to gain market share while everyone else continues in survival mode!

3. Execute, Execute and Execute

Similar to location, location, location in real estate transactions, the secret weapon to thriving in the "new normal" is unrelenting focus on operational execution. Throw out the focus on fancy programs, software and fads (even fads based on solid principles such as lean, Six Sigma etc); instead, focus exclusively on execution -- returning to the basics of blocking & tackling.

A few tips for execution success include the following: Keep focus on a clearly communicated strategy (do not aimlessly focus on 20 priorities without considering where you are headed). Develop a simple plan that delivers. Value your people and relationships. In the "new normal," those businesses and individuals who continually nurture solid relationships will be the ones to excel. Remember process -- as boring as it might sound, it is the key to delivering bottom line results and outstanding service. It's your playbook. Rigorously prioritize. Lastly, ensure your feedback loop is in place and functioning effectively.

In the Great Depression, more people became millionaires and more businesses prepared for success than in any other timeframe. The same type of opportunity will be available in the "new normal." Will your operation be the one to take advantage of this opportunity?

Lisa Anderson, President of LMA Consulting Group, Inc. is a senior supply chain and operations executive and management consultant.

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