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Ill-prepared, Flat-footed and Slow: Business Responses to the Economic Crisis and the Impacts

Ill-prepared, Flat-footed and Slow: Business Responses to the Economic Crisis and the Impacts

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Published by Dave Livingston
Businesses did not anticipate the depth and severity of the economic crisis, in spite of numerous warning signs, and were got badly prepared, flat-footed and reacted slowly and poorly. Now we a semblance of normality returning a renewed sense of complacency is settling in that does not prepare them for the challenges of the new normal. Here we look at how they reacted, or didn't, lay out some general principles, examine Wal-Mart in depth as an example of the kind of foresighted re-thinkings required to deal with the New Normal and consider some of the challenges and failures. In particular we lay out the disruptive changes they should be anticipating as well as examine the failures of leadership that contributed to the poor responses. Since business performance will dictate how well we deal with our new challenges the future of growth, profits and employment are very dependent on the adaptability, resilience and innovation of business and the outlook is not promising.
Businesses did not anticipate the depth and severity of the economic crisis, in spite of numerous warning signs, and were got badly prepared, flat-footed and reacted slowly and poorly. Now we a semblance of normality returning a renewed sense of complacency is settling in that does not prepare them for the challenges of the new normal. Here we look at how they reacted, or didn't, lay out some general principles, examine Wal-Mart in depth as an example of the kind of foresighted re-thinkings required to deal with the New Normal and consider some of the challenges and failures. In particular we lay out the disruptive changes they should be anticipating as well as examine the failures of leadership that contributed to the poor responses. Since business performance will dictate how well we deal with our new challenges the future of growth, profits and employment are very dependent on the adaptability, resilience and innovation of business and the outlook is not promising.

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Published by: Dave Livingston on Jan 19, 2010
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Business Performance in Crisis:Flat-footed, Ill-prepared and Slow-Reacting
By Dave Livingston, Managing Principal, Llinlithgow Associates
(
www.llinlithgow.com
)
Dave is a management consultant primarily focused on improving enterprise performance by coupling strategy with execution thru the design and implementation of workable, integrated management systems.He blogs on this and related issues in Economics, Markets 
 
& Investments and specific industries and companies at 
www.llinlithwo.com/bizzx 
, his BizzXceleration blog.
Where you can keep current on the state of the Economy, the implications for Markets and read explorations into business performance for Industries and specific companies.
Introduction
How we cope with the economy of the New Normal will depend on how well businesses adjustto the slow growth, over-capacity and strong worldwide competition. In other words all our well-being depends on how well businesses do in re-thinking and re-engineering themselves.Sadly, the prospects in general aren’t very good, when you survey the landscape. Here weexamine how businesses adapted during the crisis from December, 2008 thru the end of 2009.Because most businesses ignored the warning signs that had been visible since 2006, clearsince 2007 and undeniable in early 2008 they were largely caught flat-footed by the crisis inthe Fall of 2008. Having been blindsided they reacted slowly like deer startled by theheadlights on a dark country road. And, like the deer, with the excuse that nobody could haveseen this coming.Here we survey those reactions across the broad spectrum of general business responses, layout and examine the principles that should have governed their responses and should be theprinciples that guide them going forward and consider the implications for performance, profitand earnings. We also investigate particular companies that did well heading into the crisis byalready having major re-construction projects underway. In particular we take a deep dive inexamining the complete overhaul of Wal-Mart which began major restructuring in 2004,established new strategies and controls and completely re-thought all aspects of its operations.Those include product development, market branding and merchandising, store operationsand logistics and technology as well as its international operations. In other words we takeWMT as an exemplar of the kind of deep-seated re-thinking that every business will need to dobut few are.We also offer up major explorations of how disruptive this decade is going to be and the crisisin leadership that contributed to so many of these problems.
 
 
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
 
Page 2 of 34 Strategy without execution is fantasy. Execution without strategy is thrashing.Either without a management system is unlikely.
 
Table of Contents
1. Let the Triage Begin: Business Performance vs. "Stupid Is
"
32. Survivor: Search for the Next "Blue Chips" 53.
Economy vs. Earnings Cage Match: Outlook, Business Performance & Realities???
74. Time, and Past to Play Bizzball: Economy to Business Performance 95. Good Boats, Good Captains: Applying the Investment Mantra for Profit 116. WMT as Performance Exemplar: Re-Think, Re-Factor, Re-Energize 137. Predator Prey Symbiosis: Crisis, Leadership and Values 178. Disruption vs. Innovation: Change, Response, Resilience 209. WMT as Exemplar II: Diving Into the Details of the Retail Enterprise 2310. About Llinlithgow Associates 28
 
READINGS
 
1. Business Management in Crisis 292. Leaders and Examples 30
 


 
Page 3 of 34 Strategy without execution is fantasy. Execution without strategy is thrashing.Either without a management system is unlikely.
 
Let the Triage Begin: Business Performance vs "Stupid Is"
December 11, 2008
http://llinlithgow.com/bizzX/2008/12/let_the_triage_begin_business.html
 
In many ways this is one of my sadder posts with no grain of schadenfreude in it, not matter the justifications. Yousee we've been warning first about the very visible slowmotion slowdown for well over a year. And well over sixmonths ago we warned that the economy had crossed the Rubicon of tipping over into a severe downturn thatwas likely to last longer and be deeper than anybody was yet anticipating. In fact deeper than most are stillanticipating. The general reaction to those warnings, both to the blog posts and private warnings to my networks,was to poopoo the arguments, tell me that things weren't that bad and all we were really facing was a lack ofconfidence and things would begin turning around "real soon now". Just wait. Well we've waited and the newscontinues to worsen at an accelerating rate on a worldwide basis. Here's the real danger though. Like my networkand readers most executives were and are being caught flat-footed and ill-prepared. As they scramble to catch upwith readily perceptible realities they are again making decisions, likely to be hurried and therefore bad ones, onthe fly. As Forrest put it, "stupid is as stupid does" and there are a lot of very ostensibly bright people about toprove him righter than right. In this post we want to review the general business situation and outlook but start byputting a stake in the ground regarding the state of the economy.
State of the Economy
Let's start with one large and overlycomplicated chart that collapses a lot ofthe economic arguments we've maderecently and been making for all thistime into one lump so we can put thattopic to bed. As usual these charts arein YoY terms and the first sub-chartshows GDP, GDP ex-trade andEmployment. Notice that for the firsttime in nearly 30 years GDP and GDPxtdiverged because of the accountingproblems with inflated imports,particularly oil. The more revealing puredomestic indicator (GDPxt) shows avery steady slowdown that peaked in '04! Talk about your weak recovery andnon-organic growth. It also shows atipping (recession) beginning in Q407that accelerated in Q208, and comparedhistorically, looks headed for thebasement.The consequences in part two are jobgrowth that was anemic and, measuredby jobs net of 150K/month or450K/quarter, never dug out of the hole.We're now almost six million jobs in the hole. Which in part three is a terrible harbinger of future demand declines,as measured by the sum of the changes in real wages and employment. The best leading indicator we've found.

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