Has the Fat Lady Sung Yet?

So now we’re a few months into the “worldwide economic crisis”, and it seems as if we are settling down again. Isn’t it interesting how we as human beings adapt to changing situations so rapidly and easily? We even adapt to the fear of the situation getting worse! And we learn to live with fear as a daily part of life.

One can see the fear. The Mini car factory in Cowley (England), started working a five day week instead of a 7 day week, and laid off 850 workers. Why? Because they never sold as many cars in January as what they wanted to! I wonder if this was the right thing to do, or was it a reaction brought about by fear?

I see companies not affected by the “economic crisis” (and there are a whole lot!) retrenching staff as a “preventative measure”. All well and good, but is this the best strategy?

Companies are cutting back on Capital Expenditure, marketing, training and recruiting, all because of fear!

Fear, fear, fear! Yes fear! I hear some of you laughing and saying to me “but Mark, this is the reality! And we are afraid of this reality!” I understand and accept that point of view completely. We watch the news, we read the papers, we listen to commentators, and all they are telling us is how much worse things are getting and going to get, before they get better. We read of the trouble that the motor industry is in; the banks are in and so on. Fear is a completely normal and justifiable emotion, but the question is, is creating survival strategies based on fear, the appropriate response to the situation? I ask this because I’m told that fear is a paralyser. It stifles creative and strategic thought and action, slams on the brakes and puts us firmly in survival mode!

Please understand that I am not advocating ignoring the realities. Where would the allies have been if Churchill had ignored the realities? In his speech to the House of Commons on June 4, 1940, Churchill spent a long time acknowledging and detailing the realities of the war that the allies were fighting (http://www.winstonchurchill.org/i4a/pages/index.cfm?pageid=393), but at the end of his speech he said, “We shall go on to the end, we shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our Island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender, and even if, which I do not for a moment believe, this Island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on the struggle, until, in God's good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old”. Churchill acknowledged the realities of the war, but where would we have been today if the fear of the realities had dominated his strategic thinking? Where would we have been if his thoughts were of defense only and not of attack? Where would we have been if Churchill’s thoughts had been so crammed with fear that his total focus was on survival and not on winning and the needs of a post-war Britain?

So it stands to reason then that we should look at the realities, but not to let our thoughts be dominated by the fear that the realities evoke. Let’s look at the realities of the “economic crisis” then, and see if we can find any solutions and lessons in them.

It’s true that there is an “economic crisis” - the reason? The world ran its economy to a specific set of rules that worked well for some, made no difference to others, and disadvantaged the rest. However, greed overcame common sense, and those rules could not keep propping up the world economy any longer and it collapsed. So now, the “game” has changed, and the world is trying to adapt to this new game - but by still using the rules of the old game! This is not going to work. You cannot win at rugby using the rules of soccer. And it doesn’t matter how much you complain to the ref, you’re still not going to win! The problem that we have though is that we don’t even know the name of this new game, never mind the rules! But if we are going to win, we had better find out the rules really quickly. Churchill spent a lot of time and effort on learning to understand his adversaries, and their “game plan”.

So the reality is this - we may as well get used to the fact that, as far as the economy is concerned, things will never be the same again. If a motor manufacturer is going to to survive, it’s going to have to find a way of providing real value to its customers. If the banks want to survive they are going to have to find a way of providing real value for the money that we pay them. And the same goes for any other business out there. For years, absolute and unadulterated greed, and contempt for the value that is added to the lives of consumers, has dominated the world economy and just look where that attitude has gotten us! What amazes me is that the world has been here before a number of times, but we don’t learn the lessons!

So what are the rules that will ensure our survival in business in the new economy? Well, whichever way one looks at it, in order for an economy to exist, someone has to buy something and someone has to sell something. Adding value to customers’ purchasing and ownership experience is going to bring about a sustainable recovery very quickly. Those companies that are customer focused instead of greed focused will survive and make a lot of money.

This morning I read on News24 about Mustek experiencing heavy losses because of the weakening Rand. Their answer to the journalist? I quote from the news article (http://www.fin24.com/articles/default/display_article.aspx?Channel=News_Home&ArticleId=1518-24_2477401&IsColumnistStory=False), “Although this has had a negative impact on Mustek's finances, the firm is confident of recouping some of its losses through increased prices."

"The majority of these losses have been recovered through the higher selling price," said the company in a statement released on Thursday. Mustek expects to recover about R21m in the next financial period.

I’m sorry, but that attitude is not going to cut it any longer. Why am I going to buy your product Mustek? What value are you Mustek, going to add to my experience of doing business with you and owning your product? You cannot just keep increasing prices to cover losses and expect me to swallow it! That’s one of the rules of the “old economy”!

Today, customers purchasing decisions are “value driven”. In a report published by McKinsey and Company, called “Competing in a Value Driven World” (http://www.mckinsey.com/practices/retail/knowledge/articles/competinginavaluedrivenworld.pdf ), the following statement is made. “A hand-to-hand battle for survival lies ahead for many U.S. retailers. It arises from a basic structural change now taking place in the industry, a change largely camouflaged by the recent economic downswing. McKinsey’s Global Institute has recently concluded that U.S. retailers are among the world’s most productive, yet these retailers have been plagued by low consumer confidence and their senior management has looked to a rebounding economy for a bailout. However, a recharged economy is unlikely to help. Simply put, the retailing landscape itself has changed; with the fundamental and ongoing shift of consumer spend to value retailers. Now, and in the future, success for U.S. retailers will mean learning how to compete in a value-driven world"
(emphasis added by Mark Deavall).

The rules to the “new economy”? Add value. I’m no economist, but having read that report by McKinsey and Company, my common sense tells me that if we apply well structured, value adding strategies, not only will the economy become healthy really quickly, but your company’s bottom line will look better than ever, because people will want to spend their money with you!

So has the fat lady sung yet? Only if you let her!

Mark Deavall is the managing director of Merit Business Institute, a company committed to increasing the profitability of business. To contact Mark, please call him 011 609-1264

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Article by: Mark Deavall - www.meritbusiness.com