Harvard Business Publishing

Dear Prof. Davenport,

Most organizations do not seem to accept (or even understand)
the dictum that prevention is better than cure. Since recessions
cannot be wished away, one can always look at possible opportunities to be leveraged at the appropriate time. A suggested approach could be:

1. Job rotation and training. Organizations generally do not have the patience, time, money and willingness for either during normal times. A recession spotted round the corner might be the best opportunity to do what might have been neglected for many years.

2. It is highly unlikely that recession would hit all countries on this planet at the same time. Hence, one could also look at opportunities in terms of new markets or new market segments.

3. The possibility of a recession may also be a good time to look at Total Quality. Many organizations would be surprised by the reduction in costs through a conscious adherence to Total Quality as compared to reduction through traditional methods (right-sizing for example)

4. Focusing on service as a differentiator could also prove very useful during a recession. Since the ability to differentiate among products is limited, finite and transient, the relatively intangible but increasingly important aspect of service could be allowed to become a part of the organizational culture.

5. Innovations can be a powerful mechanism to check-mate, perhaps render competition irrelevant when normalcy returns (Blue Ocean). Since most organizations would hesitate to invest on innovation during a recession, those that do might have a competitive advantage over the rest.

There are obviously other methods too. What has been suggested is merely a starting point.

Warm Regards

Modeling of recession scenarios seems like a prime candidate for direct use of shareholder value as opposed to the usual metrics like "quarterly profit".

You can include various strategic options (headcount reductions, golden handshakes, pricing strategies), uncertainties for Market parameters, along with other business-relevant uncertainties and their relationships to the Market. The uncertainties for the Market parameters can include any new information we have about an impending recession, as well as learning that may occur over time.

The result is a strategy that is optimal with respect to shareholder value, as opposed to trying to manage quarter-by-quarter. We've included future options, and accounted for the information that we have, including possible Market behavior. As we move forward and our information changes, the model is updated, and we are informed of changes to the optimal strategy. We always maximize shareholder value given our current state of information, and thus are agile in the face of changing economic conditions.

Prof. Davenport,

I would agree as well. I think the right technology & processes can enable a management system where you can model the 'right' things to do and connect that to analytics to determine how well you are doing them and the best way to do them. See my blog entry at:

http://businessfoundation.typepad.com/bf_blog/2008/01/managing-in-a-d.html

Regards,
-Ron