By Frank J. Bernhard
News broke this week concerning the abrupt resignation of embattled Nortel CEO Mike Zafirovski as the company continues down the liquidation path. Days earlier, Cisco Systems announced its fiscal Q4 earnings to a mixed reaction among analysts sniping at waning revenue and income, yet somewhat buoyed by new orders beginning to materialize. With skies parted and a glimpse of sunshine in sight, many say that the worst of the 10-month economic destabilization is behind us, but what lies ahead is anyone's guess.
Ebbs and flows within the telecom economy have proven over time to lead us down three distinct paths-boom, bust, and a flatland crawl. What we are starting to witness is an era marked by slower revenue results, lumpiness in manufacturer supply chains as inventory adjusts, and a general coasting to the finish line each quarter. Some earnings reports show signs of promise while others simply bob along in the humdrum. Either way, stagnation can be expected, but exactly how industry leadership handles these periods will determine how successful their companies accelerate during the next boom cycle.
Reactions to lackluster news trigger a broader range of emotions about economic sentiment, but none is greater than the malaise that settles like a fog, resulting in general apathy. Excuses run rampant; short-run blame is assigned to its nearest victim. A single step forward sometimes is followed by two steps backward. Innovation grinds to a halt, and consumers walk with tepid caution in their buying decisions. This, too, is nothing new, but merely a signal that the economy is working in angst toward securing its footing in the next direction.
As previously stated, leadership in times of transition is the secret ingredient to future success or failure. Effective strategies prove their worth when challenged by uncertainty and setbacks that are sure to come. But the day-to-day management and discipline to manage the course of actions, inaction or opportunities are the necessary traits to seek. Companies that choose to navigate with forethought, practice relative concern for current events, and learn from their history of mistakes will ride out the doldrums just fine.
To make the most of a global slowdown, leaders and those empowered to foster change across their teams could best be served to act within the framework of this advice:
- Analyze your customer-profitable firms anticipate the demands and requirements of their customer long before the wave of any new trend reaches its crest. Take advantage of less-hurried buying cycles to gain deeper intimacy with your audience and map products or services against their preferences.
- Strengthen the supply chain with partnerships-the understated and oft overlooked direction of growth in down times is accomplished through revamping your supply chain with partnerships that expand your footprint and open doors to broader capabilities. Some of the best possibilities for acquiring new and profitable customers come from a keener understanding of how and where to leverage existing channels.
- Accept change for what it really means-the only constant in global business is change itself. Leaner periods force us to reexamine our assumptions, behaviors, and strategy to bridge the next era of our existence. Change should not only be embraced but expected in order to further adapt the right mix of products and services that fit the next mold.
- Choose a feasible direction-not all choices are optimal or even within the bounds of reason. Sit back and determine whether the risk of choosing one strategy over another will deliver affordable results. In other words, you may need to shelve the next greatest invention in lieu of capitalizing on your existing asset base.
- Avoid myopic cutting-the easiest and most immediate action for leadership to take is the route of subtraction. Setting aside the pressure of Wall Street is not recommended, but perhaps refocusing your investment by adding new capacity at lower cost might be the prudent option. Cutbacks eventually lead to more cutbacks as the endless chase for profit seems clearer. But most CEOs understand that real and sustainable growth happens because of critical additions-not just a momentary subtraction.
Sailing out of an apathetic economy is not without its unique challenges. And winning the race itself is sometimes less important than the path chosen to reach the finish line. Getting beyond the daily struggle against apathy is a hurdle that all must eventually cross.
Frank J. Bernhard is a technology economist and managing principal of OMNI Consulting Group's telecommunications practice based in Davis, Calif.