Navigating a New Landscape

Summer 2009 Issue

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	by Jon Wheeler and Eddie Pasatiempo, Partners

The roads we travel toward business success are paved with assumptions and experience. This has been particularly true in recent years, when senior business leaders focused on creating growth by extending and optimizing their existing business models to yield greater returns, rather than making dramatic changes in their business strategies. This focus on execution management was recently confirmed in our Spring 2009 Clarion Group Business Climate survey, which reports that executives are spending, at most, 20% of their time on business strategies, with the remaining time spent on execution management. In the face of economic contraction, it is understandable that business leaders are spending much of their time ensuring short-term viability and focusing on the tactics required to navigate their businesses through the recession. However, we can also be sure that the future is not going to mirror the past. To prepare for the post-recession economy, leaders need to rebalance their efforts toward business strategy and design to ensure long-term viability. This shift will require leadership to be as agile in their visionary and strategic thinking as they are in executing existing business models, a perspective confirmed in a recent CEO forum we conducted. In this issue of The Clarion Call we offer our insights through a roadmap we call Business Transformation Architecture. This transformational framework helps companies to prepare to meet the needs and expectations of customers in a changing economy and to redefine their own road to success.

Challenging Old Assumptions

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Uncertainty is the defining characteristic of our current economic environment. The recent Business Climate Survey we conducted indicates that one third of executives are uncertain or very uncertain about the future success of their company, due, in part, to rapidly changing market conditions and the unknown length of this recession. For those inside the leadership suite, the need to contract their businesses along with the economy has been emotionally hard, especially when the process meant retrenching companies they had built themselves. However, the economic tide will turn and the need for transformation-class change is approaching for many businesses. To make such a change, senior leaders will need to have the courage to shift organizational focus, challenge collective assumptions and redefine the business based on emerging market opportunities.

Recent events have necessarily swung many leaders’ attention to dealing with immediate economic realities. Yet, there are many indications that when growth returns, it will not return in a way that is symmetric with the recent economic contraction. In this time of asymmetric expansion, unlike in previous recessions, companies cannot expect to return to their pre-recession mix of products and services and continue to achieve the same results. Rather, growth in the emerging marketplace will be achieved through innovation driven by new consumer expectations and new marketplace dynamics.

Harnessing these opportunities will require forethought and mental agility. The businesses that will struggle to remain competitive are those less prepared with strategic possibilities related to how the recession will play out and where the new market growth opportunities will arise. Dealing with the impact of economic contraction, the decline in demand and the pervasive economic uncertainty of the recession required a focus on survival tactics. With what now appears to be the slowing and perhaps the bottoming of the recession, it is time to rebalance leadership’s time and focus on a more strategic business model and long-term growth plan.

How will leaders approach the reassessment of their business models and growth strategies? We offer a holistic framework for performing this critical thinking; the job of assessing the strategic possibilities, design choices and execution management can be effectively accomplished using what we call the Business Transformation Architecture. This begins with an examination of the overall environment (Theory of the Business). It then deals with how the business will compete successfully and sustainably (Business Strategy), how it will operationalize the strategy (Business Design) and how it will create alignment throughout the organization (Execution Management). A connecting thread for all these steps is leadership: leading through the uncertainty to the desired future state.

When the economy recovers, companies may not return to their pre-recession product and service portfolios...

This approach has stood the test of time. Under today’s unique and uncertain circumstances, it continues to help guide our clients as they turn the corner from survival to longer-term growth planning. Your observations about the economy and your markets, along with your intuition, will tell you when the timing is right to explore this path.

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