Recession Leadership: Why are companies so quick to cut back when trouble hits?

Bill Taylor on Sinking the Boat, Missing the Boat, and Rocking the Boat.

A down economy can be a great opportunity for companies to try something different or start something new. If all you’ve got is a spreadsheet filled with red ink and dire forecasts, it’s easy to be paralyzed by fear. But if you’ve got some leadership nerve, and can muster a few good ideas, then hard times can be great times to separate yourself from the pack and build advantages for years to come.

In The New Yorker, James Surowiecki reminded of the bold strategic moves that repositioned companies and redefined industries during periods of turmoil. He told the story of how Kellogg, during the Great Depression, “doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies.” As a result, Kellogg became (and remains) the industry’s dominant player. It’s also worth remembering, he points out, that Texas Instruments introduced the revolutionary transistor radio during a recession in 1954, and that Apple launched the iPod six weeks after the September 11 terrorist attacks — hardly the best time to start a pop-culture phenomenon.

So why, Surowiecki wonders, given all the evidence of the chance to gain ground during periods of economic upheaval, “are companies so quick to cut back when trouble hits?” One answer involves a distinction made by two business professors nearly 25 years ago. In a paper published by the Journal of Marketing, Peter Dickson and Joseph Giglierano argue that executives and entrepreneurs face two very different sorts of risks. One is that their organization will make a bold move that fails — a risk they call “sinking the boat.” The other is that their organization will fail to make a bold move that would have succeeded — a risk they call “missing the boat.”

Naturally, most executives worry more about sinking the boat than missing the boat, which is why so many organizations, even in flush times, are so cautious and conservative. To me, though, the opportunity for executives and entrepreneurs is to recognize the power of rocking the boat — searching for big ideas and small wrinkles, inside and outside the organization, that help you make waves and change course.

You don’t have to be as bold as Kellogg or as daring as Steve Jobs. But don’t use the long shadow of the economic crisis as an excuse to downsize your dreams or stop taking chances. The challenge for leaders in every field is to emerge from turbulent times with closer connections to their customers, with more energy and creativity from their people, and with greater distance between them and their rivals. The organizations that I admire are determined to offer a compelling alternative to a demoralizing status quo — as the only way to create a compelling future for themselves.

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