Recession 2008: Take the Offensive
Being neither an ardent football fan nor an economist, I nonetheless find much of my news absorption these days dominated either by the Super Bowl (yes, I am from New England) or the possibility of a looming recession. So, if you’ll allow me this week, I’ll offer my reflections on those two pending events.
There are two moments that I love in football games. One occurs whenever it becomes obvious that the team has reacted to the unfolding events on the field, doing something that is quite different from what they’d originally planned to do -- the pass options are blocked and the quarterback decides to run with the ball, the ball is intercepted and suddenly a defensive lineman is lumbering down the field. Great teams know each other well enough to re-group in motion.
The second moment I love is the “fourth and two.” For all of you who live in any other part of the world than the US, places where football is played with a round ball, “fourth and two” is a nail-biting moment of decision. It’s the time when the team who has the ball can either decide to “punt” -- to kick the ball as far away as possible -- or “go for it” and try one last time to make the yards necessary, with the risk that failure will give the other team a sizable field advantage. Most of the time, the smart move is to punt. But, once in a while, it makes sense to take the risk. My home team, the Patriots, go for it at times. I love seeing teams make these calls.
Now we may be headed into a recession. If so, it will be the second in more than fifteen years. Defined as two or more consecutive quarters of negative growth in the GDP, the last official recession in the United States happened in 2001. And plenty has changed since then. If indeed we’re headed into that game, what’s the best way to prepare your team?
A lot of senior managers are now readying their team for Recession 2008. Most are thinking in ways that are completely understandable -- and in my view -- very likely to be dangerously wrong. Most standard wisdom advises caution and control -- review your costs, tighten your approval criteria, pull key decisions and sign offs up to higher levels, make sure everyone in the organization is as fully busy as possible, narrow the business scope.
That approach might work, if the nature of the recessionary environment were known or easy to predict. But it’s not. Rather than trying to tighten control and hunker down, I’d suggest that you think about ways to make your team better able to improvise given whatever comes along. Four things will help your organization become more spontaneous, innovative and reflexive:
(1) Increase your firm’s “collaborative capacity” through relationships, trust, and knowledge exchange. Don’t cut out meetings, intensify the competition among internal teams, or reduce investments in learning. (For more, see our November 2007 HBR article “Eight Ways to Build Collaborative Teams”).
(2) Articulate a compelling “innovation intent” -- something that, in the language of complexity theory, will serve as a “strange attractor” to rally your team around goals that are intriguing, complex and important. Don’t narrow the focus to the mundane or over-specify the way teams should approach their challenges. Keep them engaged.
(3) Ensure that your team has regular on-going exposure to disruptive insights through diversity and external forays. Don’t cut travel or fall back on the old “tried and true” team. Bring in new people and new ideas and take them seriously. Get outside your business sphere.
(4) Provide everyone in your organization with some specific tools to help with innovative thought processes -- teach people how to brainstorm, use scenario analysis, or create ideas through attribute reduction. Don’t cut training -- invest in your people. Teach your employees how to be a business innovator so they can improvise in motion.
And, occasionally, take some risk. Go for it on a fourth and two.
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Tamara J. Erickson is both a McKinsey Award-winning author and popular and engaging storyteller. Her compelling views of the future are based on extensive research on changing demographics and employee values and, most recently, on how successful organizations work. 
Comments
Nature of recesion at this point of time feel is emnating from the financial institutions overburdened with their Non performing assets and this is contagious.
As the world is now ever more integrated the reduced consumer spends and in turn reduced demand and increased inflation will be something to reckon with until all the guys Fed, banks, regulators get into their act to temper the fall.
Can recession be associated with game -theory ,feel this game is huge and you do not know who the players are and what they are aiming at.Consequences are real and discomforting for the majority of the players.... governments et all.
Your approach is good , but will entities have the resolve to adopt?
They would really need to adapt to come through.
- Posted by Soni Abraham
January 23, 2008 08:27
Respected Tamara,
Agree with you on Recession 2008.
But the activities and consequence of Recession never seen in the developing Economies like China and India where the Economy is still to stabilize itself in the world market.My recent visit to China for 15 days was a stunning one with the scene of skyscraper and good infrastructure.
It may be possible that the Recession will last for few months or it may take other part of story to become long in years.Major companies here are flooding with foreign investment and opportunity to invest in Western Countries where potential to grab new opportunities with low price product is high.
Please suggest us the real meaning for Global Recession if it really exist.
Regards
Thakre Bhupendrasinh
- Posted by Thakre Bhupendrasinh
January 25, 2008 09:35
Tammy:
I enjoyed your words of encouragement to business leaders not give into their first impulse (knee jerk reaction) to cutback. Yes it is practical, and sometimes necessary but all too often it seems that it is the only reaction. Maybe, because there is comfort in repeatable well understood actions.
Sometimes I worry that we are loosing our competitive spirit - and have fallen prey to becoming parrots of the latest caution, catch phrase and over analysis in an effort to understand and perhaps control important political or financial events.
This is a time to think creatively, act opportunitistically and push forward. Only a glance at a chart of the US markets over the last 100 years tells clearly (without all the noise) the story of innovation, and the great opportunities that have emerged at every turn or crisis.
We are now fearing how globalization might be a threat to our economy, and the stability of our financial markets. But creative mind and business innovators are focused on figuring out how to continue to harnass the promise of global growth while creating opportunities around the world. Investing in collaboration can produce new ways that can benefit both the corporate brand and the least in our global society. Take a look at what RED (founded by Bono) accomplished this week in Davos gaining the support of giants like Microsoft and Dell.
The future will not be cancelled as long as we envision learning, developing and collaborating as tools to sustain growth.
Ro Pavlick
- Posted by Ro Pavlick
January 25, 2008 15:13
DR BVK has logically analyzed the impact of a possible US recession on the Indian economy. The cascading effect of the flow of millions of dollar funds can be deployed to create infrastructure is a valid suggestion. As the author has pointed out, IT and ITES should come forward to focus on product innovation and promote products instead of repeatedly offering customer based services only.
Cost reduction through innovation and economies of scale has become an imperative necessity in a globalised economic situation.
Forgetting all their old differences, if India, China and Korea constitute a regional co-operation, it can dramatically challenge some aspects of globalization. As the author has suggested, it is the right time for promoting health tourism with a strong drive towards herbal medicines, ayurvedic treatment, coupled with yoga and meditation.
I congratulate the author for providing a micro and macro analysis of the situation and offering pragmatic solutions. The article has come at the time of the presentation of the budget and I request that this can be brought to the attention of the Ministry of Finance while framing the budget for 2008-09.
- Posted by S.Prabakaran
January 28, 2008 04:16
I hate to sound too optimistic but I think of it more as "1st and ten", not "4th and two".
There's a Chinese character that can mean "crisis" or "opportunity" - to me, this is an opportunity to relook everything my casino does in light of the present circumstances and make changes where necessary to improve performance and protect against similar occurrences.
A little belt-tightening never hurt anyone.
All this from the guy who usually plays the devils advocate....
- Posted by Harold K. Wilkes
January 28, 2008 15:51
I have to agree that this is an opportunity for improvement. Perhaps an imperative for improvement in a variety of areas (innovation, efficiency, risk management, skill-building).
I've posted my thoughts on how technology and process can help at:
http://businessfoundation.typepad.com/bf_blog/2008/02/managing-in-a-d.html
-Ron
- Posted by Ron Dimon
February 1, 2008 01:28
A severe recession is upon the United States.
We as citizens need to wake up and realize our financial stability is on the brink of cracking. Check out www.recession2008.wordpress.com and watch some of the smartest people in the world debate this issue and talk about the facts hidden from us.
- Posted by bonds7
February 3, 2008 21:33