Shoe Sole Strategy: Flexible Absorption for SURVIVAL

It is very choppy. Some days looks like it was the end of the world. The volatile world is testing people and businesses. Doing business feels like competing against a never ending enemy. To survive, should company rely on flexibility and exploit market changes? For instance, shifting resources from struggling divisions to more promising ones can spur revenues. Or should you rely on absorption to withstand punches? For example, keeping a lot of cash on hand might enable your firm to weather unexpected threats.

In fact if we study the surviving companies we realized that, they have deployed both capabilities in various combinations. Through flexible absorption, the company consistently identifies and seizes opportunities while also retaining the structure the company needs to thrive.

Achieving Flexibility

A company needs to introduce new offerings and enhancing quality better than rivals. Relocating resources (cash, talent, focus) from a less promising business unit to more attractive ones will depend purely on the willingness to make diversified portfolio of independent business units. As the company is focusing on game changing opportunities, they need to be patient for a right opportunity. Once they identify the opportunity they need to quickly scale up new business or enter new markets.

Achieving Absorption

The capability is critical to survive the price war in this industry. The easiest way is to down size your employee strength and insulate your company from short term and mid-term market shifts.

Achieving Flexible Absorption

A firm can built absorption without affecting the flexibility by reducing fixed costs. This enables the firm to whether diverse threats without impeding its ability to seize a game changing opportunity. Break your large company into smaller business units (profit/loss units). Each unit can quickly probe different markets and fill the gap. But to preserve overall absorptive capacity the company should promote cooperation between the units.

Example
Toyota, maintains absorption by employing a large workforce, but unlike U.S. automakers, enhances flexibility with a combination of work rules, variable job assignments, and employee involvement.

Nuclear Power Investment to turn on GREEN LIGHTS

As governments across the world are imposing strict laws to cut down on carbon emissions and force through green policy measures, energy firms such as Centrica are looking to boost their investment in nuclear power, which is carbon-free. British Gas owner Centrica has clinched a deal valued at about £2.25bn to buy a 20% stake in nuclear company ¬British Energy. The industry has received support from the British government. This move by British and other west European governments is mainly to reduce the country's dependence on foreign gas from Russia.

Centrica has been under pressure from shareholders to invest more in power generation, as it can only meet a third of demand from its own resources. By investing in British Energy, Centrica can lessen its dependence on the wholesale gas and electricity markets where prices are volatile, making it difficult to predict future profits, something that unsettles investors.

Green Inspired Buyout

The Italian Auto major Fiat is planning to elevate itself from industries No.9 position to No.2 position through the takeover of Chrysler and GM Europe. With the auto world falling apart and Toyota’s awful results proving a point of the genuine crisis, the takeover move looks like a overly optimistic approach.

Interestingly there is another reason for this move. Governments everywhere want the industry to make cleaner, more fuel-efficient cars. It means auto makers will have to find enough money to survive the crisis and fund a radical overhaul of their production systems.

The easiest way to meet carbon dioxide targets is to make sure your fleet is stuffed with small, lean cars. Guess what? Fiat knows a thing or two about small cars. The Fiat small cars are the best-sellers in Europe. The European Federation of Transport and Environment says average emissions of new Fiats are the second-lowest among the 14 top European auto manufacturers.

Fiat has something to offer, and it is not cash but it is access to small-car technology, including the platforms, the four-cylinder engines and a promising new two-cylinder engine. Chrysler would save billions in development costs by taking Fiat's small-car technology and slapping a Chrysler badge on it.

GM Europe, dominated by Germany's Opel brand, has a decent fleet of small cars. In that sense, it doesn't need Fiat. But developing Fiat and Opel models from the same platform, and getting rid of redundancies, would cut down the vast amounts of money required to invent low-emission cars. The idea is to use a merger to ensure platforms are shared on every model.

With governments everywhere want more fuel-efficient cars. The carbon dioxide emission regulations are going to play a critical role. None of these car companies can afford to finance the new technology on their own. And one way to keep going is to go with Fiat.

10 Steps to Kill Recession (Part 2)

6. Identify Influencers to Solve Problems (For Mid Level Managers & Senior Managers)

Find the key employees who hold sway in their departments and get them to embrace and spread the change effort. These are the people who know how things really work (not just the way they’re supposed to work) and have a way of bringing together the right people to get things done.

Create groups around the influencers and motivate (rather than mandate) employees to identify what is slowing down business. Set a basic time-frame to achieve the targets, but let each group work at its own pace. Create opportunities for the influencers to schedule informal talks with the employees. Get insights from the influencers about roadblocks.

7. Unleash your TOP PERFORMERS (For Senior Managers & Management)

The upside of a downturn is that recruiting qualified employees becomes easier. With more candidates in the job market, it is the best time to find new talent. But managers shouldn’t forget about the top performers already on staff.

It is easy to think that employees are grateful to have jobs at all. But layoffs and budget cuts may cause good workers to look for better opportunities. Give them a reason to stay by making room for them to keep advancing their careers. Try to keep critical talent moving. If not necessarily up, but growing in experience, responsibility, money, or other tangible and intangible ways.

8. Recognize achievement, even if resources are scarce (For Mid Level Managers, Senior Managers & Management)

Employee bonuses and raises are among some of the first expenses that management cuts during a downturn. But even if extra compensation isn’t in the budget, that doesn’t excuse managements from rewarding employees. Lack of recognition, both financially and verbally, is one of the things that does the most damage.

Instead of quietly giving bonuses to overachievers, company needs to regularly single out the top 15 to 20 individuals and teams and reward them. The recognition not only motivates the performers, but it also helps the rest of the company understand what made these employees outstanding.

9. Feedback (For Mid Level Managers, Senior Managers & Management)

Usually management doesn’t know what employees complained about. Employees have no clue if their seniors thought that they were actually doing a good job, because seniors never spoke to them about it. Have constant feedback sessions. Exchange ideas and give feedback to employees about how to do a job in an effective manner.

10. No Fire and Forget Attitude (For Management)

Keep in mind that most of the downturn programs fail because management implements the initiative only halfway or let inefficiencies creep back after meeting short-term goals, which won’t sit well with employees. Adopt the changes wholesale or not at all.

10 Steps to Kill Recession (Part 1)

TCS has shown the door to 500 employees (2-3 years of work experience), citing performance issues. IBM lay off 700 employees. And the most recent one that Microsoft plans to layoff 9000 to 15000 employees.

With companies looking at trimming themselves and using cost-cutting measures, which are threatening projects, you end up with employees with ZERO morale/motivation. For managers (who still have their job), getting the most out of employees in this kind of environment can seem like an impossible task.

In fact rather than pressing the panic button, I feel it’s a perfect opportunity to re-engineer processes and fix what’s broken. Here hard decisions can not only keep your team motivated but pull your company out of its slump.

1.Get the right Message (For Mid Level Managers)

Calling the economy and customers as a reason for companies suffering implies that the situation is totally out of company’s hands and let in large part to fate. This attitude can hit the morale at office and disrupt the employees from focusing on problem at hand.

In a situation when everyone in the company from management to employee is confused about how to proceed ahead, mid level managers need to be positive interpreters. They need to speak to employees in small groups and be as candid as possible about where the company stands. This is a perfect way to keep out of negative rumors.

2.Open the Books (For Management)

Giving employees the numbers behind company performance clarifies where the business needs to change and how their jobs connect to the bigger picture. If you’re going to be transparent, take the necessary time to teach employees about how the business works. Managers should start with what employees probably already understand, like operational numbers, and then connect the dots with how those numbers increase gross margin and generate cash flow.

3.Focus on the future (For Management)

Pulling the company through the downturn isn’t going to be easy, but emphasizing the challenge can have its benefits. Convey to your employees that it is a great time for them to realize that they can play a role in discovering opportunities for the company.

4.The You in Team (For Senior Managers)

The employees’ collective commitment and collaboration is critical in this environment. Senior managers should make an effort to be more visible and available to employees. This can spark productivity and bring the team together. Start attending smaller meetings that you usually skip. Go to them first, and ask how their work is going. This is about knowing firsthand what employees need.

5.Emotions to fix what’s broken (For Management & Senior Managers)

Usually in companies, the management decides the strategy and let it trickle down. The problem with this style is that it rarely makes the employees emotionally attached to the strategy. The fact is that, it is all about problem-solving and discipline, and this is where employees come in. Management should be using employees in the effort to identify where the problem is and how to fix the problem. For example, if the management ask employees to identify how to cut costs and how to implement it. By doing this the management not only will be utilizing worker’s expertise to make them more invested in the company’s success, but it also gives management a more honest look at what’s not working.

Is BPO market recession proof ?... Answer is Yes

The present economic downturn has prioritized outsourcing as a means of achieving short-term cost reductions, and that business process outsourcing in some cases is being used to carry out overdue overhauls to back-office and business service delivery models.

According to EquaTerra report 65% of service providers cite that the economic climate is driving more outsourcing, with pipeline levels up 27% quarter on quarter. This shows that there is an increase in both demand and supply for outsourcing services, beyond general and administrative back-office functions.

Knowledge Process Outsourcing (KPO) for functions such as engineering, research and development, analytics and legal process work, and financial modelling and analytics are gaining in popularity alongside the more traditional BPO services of outsourced payroll and benefits, accounts receivables, and application infrastructure support.

Interestingly the Western Europe the market for BPO will increase by around 10% during the year. Present BPO deals tend to focus on a single function like HR or F&A and on business processes that are pretty much standard across industry like payroll and benefits, or accounts payable and receivables. By focusing on one or two standard business processes service vendors, companies can start to industrialize a process and offshore it, and begin to see some economy of scale.

Looking at surge of BPO business, Wipro Technologies plans to recruit 8,000 employees to its business process outsourcing (BPO) arm financial year.

Irony of Japanese Auto-Part Supplier

We all know that Asian car import has been the one of the big reasons for the fall of General Motors and Chrysler. By introducing competitive products and streamlined production methods, Japanese automakers like Toyota and Honda exposed the weaknesses of the old-fashioned production-line system used by U.S. automakers. Ironically two Japanese auto-part suppliers have been asking the US Treasury for some bailout funds set aside for auto suppliers.

Japan based Yazaki and Yorozu, with North American facilities in Michigan have been supplying to GM and Chrysler. The heavy reliance on the failing auto majors threatens to take down the suppliers.

Interestingly if these Japanese companies are successful in getting some funds, then they would be feeding at the same trough as the beleaguered automakers.

Funny note
GM & Chrysler says: Earlier few Japs hit us so bad that we are on some life line drug and now few Japs are feeding on our life line drug….. errrrrrrrrr………..