Managing in a downturn: EPM to the rescue

It’s official – we’re in an ‘economic downturn,’ a ‘consumer recession,’ a ‘weak market,’ a ‘strong suggestion of a recession.’

And Starbucks is thinking about charging a dollar for a cup of coffee.

The automatic response of most boards, executives, and managers is
1. Cost reduction
2. Cost removal
3. Cost avoidance
4. Cost containment
5. Cost management, and
6. Price reductions!

And while it’s never a bad idea to manage your costs, it’s not a great idea to do it at the expense of the rest of your business. And why do we automatically drop our prices and lay-off staff? Do we know for a fact that these are the most effective decisions to take? All the resources spent on cost focus, means that these things will suffer:

1. Revenue Growth
2. Product and Service Innovation
3. Enhancing employee skills
4. New market expansion
5. Partner relationships and Channel expansion
6. Customer Satisfaction
7. Technology investment

One of the secrets of Enterprise Performance Management (Business/Corporate Performance Management) is in the rigorous, multidimensional connecting of the half of the business that asks “what should we do, and how should we do it,” with the other half that asks “how are we doing, and why?”

Well, why not put that to work in a down economy? Why not:
1. Model the supply-chain and look for process inefficiencies and ways to leverage your current infrastructure. (My brother-in-law works for a large package delivery company, and I was surprised to learn at the duplication of effort in truck routes and driver overtime);

2. Ramp up (model, plan for, measure & analyze) innovation in all of it’s forms:
a. Product Innovation
b. Process Innovation
c. Business Model Innovation
d. Packaging/Bundling Innovation
e. Pricing Innovation

3. Quantify and model your enterprise risk. Indentify and “operationalize” key risk indicators, so you know just what risk/reward ratio you can tolerate to achieve corporate goals.

4. Build and score-card team skills and capabilities, both soft-skills and hard-skills.

5. Ask your customers how you can serve them better.

Each of these “antidotes” lives in the management system of the business, enabled by EPM technologies and processes.

And a mature EPM company will have already planned for a “weak market” scenario, ready to put into action the necessary steps to execute on strategy.

Tamara Erikson is also blogging about this at Harvard Business: http://discussionleader.hbsp.com/erickson/2008/01/recession_2008_strengthen_your.html

Comments

[Ron Dimon]

And Tom Davenport blogged about this back in October at http://discussionleader.hbsp.com/davenport/2007/10/recession_the_next_big_thing_1.html

[Ron Dimon]

Rob Preston says it well at Information Week:
http://www.informationweek.com/story/showArticle.jhtml?articleID=206106206&cid=nl_IWK_BTL

[Valerie Bridges]

Markus Sprenger added some good insight to this topic in his article "Surviving Economic Downturns with Performance Management and Business Intelligence Solutions" here: http://www.b-eye-network.com/view/7957