Smart Economy

Examining illegal corporate behavior; When good companies do bad things

 

The more prominent and financially successful a corporation becomes, the more likely it is to break the law, according to a new study led by a Michigan State University scholar that challenges previous research. MSU’s Yuri Mishina and colleagues argue that unrealistically high pressure on thriving companies increases the likelihood of illegal behavior, as the firms are faced with continuously maintaining or improving their performance. Previous research suggested high-performing firms are less likely to feel the strains that can trigger illegal activities such as fraud, false claims and environmental and anticompetitive violations.

 

The MSU-led study, which will appear in a forthcoming issue of the Academy of Management Journal, analyzed 194 large public manufacturing firms in the United States between 1990 and 1999.

 

“We found that high-performing companies tended not to be able to sustain that high level of performance over time,” said Mishina, assistant professor of management and lead researcher on the project. “At the same time, high performing and highly prominent companies tend to be the ones that are punished most severely for not meeting performance expectations. And so it becomes a choice: Do I cut corners to try to meet these high performance goals and maybe get caught, or do I accept the results of not meeting my performance goals and be punished for sure.”

 

The pressure comes from both internal and external sources, Mishina said. Internal pressure includes company officials’ perception of how they’re faring against the competition, while external pressure is driven by heightened investor expectations brought about by strong market performance.

 

The researchers say three factors potentially fuel illegal behavior: loss aversion, or the tendency to prefer avoiding losses above all else; hubris, in which managers come to believe they cannot fail; and the house-money effect, or the concept that people perceive themselves to be gambling with the “house’s money” rather than their own capital.

 

Mishina said companies are most apt to engage in illegal activity once they become prominent and feel significant public pressure to maintain or improve performance. The research findings also suggest it’s the prospect of poor performance in the future – not the past – that compels firms to break the law.

 

 

Thus, regulators should try to monitor the activities of both high- and low-performing firms to detect illegal corporate behavior and consider a firm’s prominence and performance relative to industry peers to determine which firms should receive closer attention, the researchers say.

 

Mishina also said analysts, investors and company directors need to be careful about how they evaluate firm performance and the pressure they place on management to constantly improve performance.

“Obviously people want their companies to perform well, both from a revenue and profitability standpoint as well as increasing stock prices,” Mishina said. “But this implies we are in some ways missing the idea of what performance should be. Would it be better to think about maybe five-year growth or 10-year growth? Should performance be based on profitability and stock prices or should it be some sort of long-term viability measure that includes creating jobs, stimulating the economy and other factors?

“By focusing completely on fairly short-term financials we’re ignoring a lot of other things,” he added. “And the emphasis on this performance seems to be what’s driving this type of illegal behavior.”

 

The study is called “Why Good Firms Do Bad Things: The Effects of High Aspirations, High Expectations and Prominence on the Incidence of Corporate Illegality.” It was co-authored by Bernadine Dykes at the University of Delaware, Emily Block at Notre Dame and Timothy Pollock at Penn State.

 

 

Walter Derzko

 

The Opportunity Clinic-28 Tactics for managing your Business in a Recession; Part 15 of 28 Drop problem-solving and adopt opportunity surfing

Why problem-solving, Total Quality Management (TQM), Continuous Improvement (CI), Value Network Analysis (VNA) etc is not good enough in a recession…..you  need to be totally focused on designing and /or finding novel  opportunities. These tools have their place, but it's usually in the upswing part of the business cycle to improve efficiencies of existing operations, but not now.

Many companies are still applying the pre-recession, boom-time mentality to today’s totally changed and novel business environment. Driven by existing business models, mindsets and existing ongoing relationships with  consultants, experts, suppliers and vendors, who are desperately trying to maintain their sales numbers and quotas, companies are continuing to do more of the same…what seemed to worked for them in good  times..lets' work in the same box. What we need is not "out of the box thinking" [I hate that expressionm becuase it shows that you don't understand cognition and how the brain patterns information], but to design brand new "boxes".  

 

The recession is not a problem to be solved, it’s a crisis to be avoided. And you  can only do that in one way. NOW, you need to be totally opportunity-focused and opportunity-receptive and less problem-focused and preoccupied with incremental change. Radical ideas and concepts, (and not accruemental solutions to old problems, unless they lead to novel opportunity spaces) are in order, along with resulting new business models (which we often forget to explore and redesign ), that will help companies thrive and not just survive in a recession.

 

See the cartoon in this week's New Yorker....We're still the same great company we've always been, only we've ceased to exist.  I bet they were great problem-solvers at the tactical, operational level, but poor opportunity surfers at the strategic level.

 

Walter Derzko

Smart Economy,

Toronto;

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

 

When will the recession/ depression end? Part 18 Hormones and Boom and Bust Cycles

It turns out that morning testosterone levels in male stock traders have a direct relation to risk aversion and profitability. Susan Pinker, the author of Sexual Paradox, describes the study done by John Coates, that shows a direct relationship between elevated testosterone levels in male traders in the morning and increased profits and risk aversion. That begs the obvious question. If you extend that testosterone effect across a firm, say Leahman Brothers, and  then across the industry, which is primarily male dominated, does it lead to increased industry-wide "irrational exuberance" over time and unwarranted risk-taking, which culminates in a boom and an eventual bust? Women traders are more risk averse and cautious.

The TV commentatoror asked Pinker, if it would have been better if Leahman Brothers were Leahman Sisters. No, said Pinker. Women in senior positions in regulatory agencies would have been a better safeguard, concludes Pinker.

Walter Derzko, Smart Economy, Toronto,

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

 

Related Recession / Depression Posts

When will the recession / depression end ? Part 17 Recap from the World Economic Forum in Davos

When will the recession end? Part 16 It's all over, well sort of.

When will the recession end? Part 15 Year-end predictions for 2009 starting to come true

When will the recession end? Part 14 Four options for America's race to the bottom

When will the recession end? Part 13 Thirteen economic questions that economists can't answer

When will the recession end? Part 12 Bad times are good times for startups

When will the recession end? Part 11 Bank of Canada optimism

When will the recession end? Part 10, The Conformity Trap or Don't count on your economist for advise

When will the recession end? Part 9 Humor will signal recession /depression bottom

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

When will the recession end? Part 7 False signals of recovery

When will this recession end? Part 6 The USA Paradox; Cheer vs Fear vs Transformation

When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric

When will the recession end? Part 4 The double dip housing crash in the USA

When will the recession end? Part 3 The coming collapse of the American Middle Class into an Underclass

When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?

When will this recession end?

82 Signposts to the current Recession Depression Summary from 2008

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

 

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 8 of 28 Industry Architecture Opportunities

Most entrepreneurs regardless of whether they are struggling novel start-ups, seasoned serial entrepreneurs or veteran industry incumbents don’t pay enough attention to their own business models or evolutionary shifts in their sector or industry structure, (or what some are calling industry architecture), as an opportunity space to exploit.. When I mention the two terms and ask: Is your business model aligned to the downturn or is your industry architecture changing and are you taking advantage of the shift or driving the shift? I often get a blank stare.  Their eyes usually glaze over, until I provide them with one or two examples. Then the usual response is…(pause) ….(wheels turning in their head, followed by tacit acknowledgment )…good point…..(another pause) …well frankly, I never even thought of that.”

Michael G. Jacobides, who is associate professor of strategic and international management at London Business School, illustrates my point succinctly in a recent Financial Times story.

"Over the past few decades, economic theories have become increasingly sophisticated, borrowing analytical tools from theoretical physics and mathematics. Financial tools have become vastly more complex. Regulators have created sophisticated rules to govern the economy, particularly banks.

So why did we not see this coming?  [some did, but most economists were in denial or played their role as cheer leaders and not objective analysts—Walter Derzko]

And how did last year’s “strong incentives” and “profit-driven behavior” become today’s “reckless profiteering” and “abuse of the system”? [Natural evolution according to one of the effects of Marsal McLuhan's Tetrad model -- "flip or reversal"--Walter Derzko]

The reason is that we neglected basic economic facts and failed to appreciate the evolving structure of arand sectors. In the past decade, what I term the “industry architecture” – the rules and roles that govern how participants do business – in financial services changed the financial world dramatically, but almost nobody noticed. Most economists did not bother – for them, industry structure (in particular, the business models operating in the sector) is of secondary interest – and they stuck to the mantra that “markets regulate themselves”. Regulators ignored the monumental changes in how money was made, concentrating instead on fine-tuning rules that focused on an ever-decreasing part of the business world. Academics busied themselves with models that had less and less to do with reality, helping to create structures so complicated that they were bound to implode. And management gurus did not want to spoil the party by suggesting that there were no solid foundations for this brave new world.”

Industry architecture will change dramatically in many sectors during this re / depression, and business that can anticipate this or drive the change in the direction that favors their products, platforms or services will be the big winners, leaving others behind in their dust.

 

Walter Derzko

Smart Economy

Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression features 45 opportunity scenarios.

Related posts in this series:

The Opportunity Clinic - 28 Tactics for managing your business in a recession Part 7 of 28  Geopolitical Opportunities;

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

Related Posts over that past year:

·         Opportunity Recognition in Difficult Times

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn

·         Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON

·         Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas

·         Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto

·         Turning Misery into Opportunity

·         Vacuum leaves pullout opportunities;

·         How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs

·         Recession, Depression and Shortages as Opportunities

·         Restructuring of American Business-A New Business Model?

·         Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition

·         Text Mining for S&T Scouting, Foresight and Opportunity Recognition

·         The Opportunity Clinic-swapping opportunity scenarios 08-002

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

Opportunity Spotting Lecture at Ryerson University, Toronto tonight--FREE

My colleague, Neil Wolf, Associate  Dean and the former Chair of the Entrepreneurship program at Ryerson University is speaking tonight on the timely topic of Opportunity Spotting; at Ryerson University; Business School;  55 Dundas St West ( between Yonge and Bay St); Toronto; 6pm tonight  

Room 1-003 7^th floor

 

See you there

 

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for  Managing Your Business (& surviving and thriving) in a Recession Part 2 of 28 Innovation or  Efficiency?

Entreperneurs must make many strategi choices. "Are we going to be innovative or efficient or possibly both vs our competition." is one of them. Firms that simultaneously engage in a high degree of both innovation and efficiency follow an approach that is often referred to in the academic business literature as an ambidextrous strategy.  Surprisingly, relatively few firms are able to balance these two approaches. Internal battles for resources often tip the scales in favor of efficiency over innovation, or vice versa. Management gurus frequently warn that simultaneously pursuing both can set the firm up for mediocre performance, yet the turbulent nature of today’s markets, cut-throat competition and despiration and anxiety from the recession create a renewed need for firms to reconsider this dual approach for longer-term success. Unfortunately, practical insights from empirical studies regarding performance benefits and implementation issues are still scant.  Perhaps this is one reason why few firms are successful in both efficiency and innovation.

 A paper called Innovation and efficiency: It is possible to have it all; this month in Business Horizons (2009) 52, 45—55 discusses the issue of an ambidextrous strategy.

From the Abstract

"In this article, the authors provide evidence—using a cross-industry survey of senior marketing managers in publicly-traded U.S. firms—that firms which successfully employ an ambidextrous strategy outperform those which overemphasize either efficiency or innovation. Furthermore, they highlight marketing’s role as an example of the often overlooked need for successful functional implementation. Finally, they provide useful methods for managers to answer three key questions: (1) Is my firm ambidextrous?; (2) Should my firm be ambidextrous?; and, if so (3) How can my firm become ambidextrous?"

 From the body of the article we find:

"Some management experts are now renewing the call for firms to break with tradition and become ambidextrous—leaders in both efficiency and innovation—to achieve competitive advantage. Two top academic management journals, Academy of Management Journal and Organization Science, recently dedicated special issues to the examination of ambidextrous organizations and how firms manage the balance between efficiency and innovation. Both special issues cite the importance for managers of understanding issues surrounding ambidextrous strategies.

Organizational inertia pushes firms down a particular path, making it harder to adapt to market changes, while short  term thinking crowds out longer-term goals. Home Depot, Dell, Airbus, Kodak, and Ford are just a few examples of companies that have recently found themselves falling behind competitors as a result of overemphasizing one goal over the other."

I wrote to the authors of the article to find out who these ambidextrous firms are and how they are fairing in the recession, compared to their non-ambidextrous competition. When I get a reply, I’ll let Smart Economy blog readers know

Source: Innovation and efficiency: It is possible to have it all; Business Horizons (2009) 52, 45—55 by Matthew Sarkees  and John Hulland

Walter Derzko, Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.

Related posts in this series:

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

  There’s an old saying…”the best time to start a new business is the day after the recession ends.” The $64K  question is not when will the recession end but what will the recovery look like? Will it be V-shaped, U-shaped, W-shaped, v-W-shaped,  J-shaped, L-shaped or extended L-shaped? Which of these seven scenarios will play out?  UPDATE: see cartoon on the right from March 2009

To anticipate this, we have to look at what tools do managers and entrepreneurs have to help them predict, track and measure where they and the economy are heading?

 

I dusted off some old notes, slides  and workshop handout materials from just after post 9/11 as the economy topped out and in hindsight, was headed into a recession, triggered by the terrorist attacks on New York city and Washington. The materials were from a set of  experimental workshops that I designed for Andrew Maxwell, who at the time was at the incubator / accelerator at  the Innovations Foundation at the University of Toronto, when they were still located on 243 College Street, before moving into the new MaRS facility.

One workshop was on Designing Winning Business Models and the second was called 12 Tools and Techniques for Surviving Thriving and Managing in a Volatile and Turbulent Business Climate.

Could some of these same  principles and lessons learned from these workshops apply to today’s recessionary / depressionary climate? Most certainly!!

 

Designing a robust and adaptive business model could determine if you dive, merely survive or thrive in a recession.

Some of the key points and questions from the Designing Winning Business Models workshop include the following points:

• What were/are  the traditional business models/ revenue models in my industry and what can I learn from them?

• What are the prevailing business models/ revenue models in my industry today?

• What can I learn from mapping my current business landscape?

• What’s my current business model look like and what are all the components?

• What are the assumptions (tacit and explicit) behind my current business model and are they still valid? robust under changing conditions? various recovery scenarios ?  (V-shaped, U-shaped, W-shaped, v-W-shaped,  J-shaped, L-shaped or extended L-shaped? )

• What are the changing consumer or business values, attitudes and behaviors and are they reflected or aligned with my current business model

• What changes, trends, driving factors and issues are forcing me to rethink my current business model?

• How do I surface assumptions about the current and near-future business climate?

• What’s broken in my existing business model and how do I mitigate the faults and defects?

• How do I design a new viable system using scenario planning, systems dynamics and viable systems modeling?

• How do I model potential major discontinuities, wild cards, disruptions into my revenue model and business model?

• What were the lessons learned from the dot.com bubble, e-commerce failures and the collapse of the “green tech” and alternative energy markets? How do I mitigate that in the future from new emerging technologies.

• What cognitive thinking skills do I need to deploy to come up with novel and difficult to copy concepts for a brilliant new business model?

Tomorrow we’ll look at the 12 predictive  tools that should be in your managerial or entrepreneurial toolkit to help you predict and design opportunity windows for both the downward leg of the recession and the upward leg of the recovery.

 

Walter Derzko

Smart Economy

Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.

 

Related posts:

 

82 Signposts to the current Recession Depression Summary from 2008

When will this recession end?

When will this recession end ? Part 2 Do you listen to the Optimists or the Pessimists in 2009?

When will the recession end? Part 3 The coming collapse of the American Middle Class into an Underclass

When will the recession end? Part 4 The double dip housing crash in the USA

When will the recession end? Part 5 Stop Auto Industry Bailouts, start buying Electric

 

When will this recession end? Part 6 The USA Paradox; Cheer vs Fear vs Transformation

 

When will the recession end? Part 7 False signals of recovery

 

When will the recession end? Part 8 Lessons Learned from the last Post 9/11 recession; designing brilliant winning business models

 

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

 I started to review and update the process of designing a business model for a new startup from the material I teach in my Innovation and Entrepreneurship classes-specifically the Opportunity Clinic.

 

Coincidently, Fortune magazine features an article this week on How to Manage your Business in a Recession, ( by Geoff Colvin. Fortune. New York: Jan 19, 2009. Vol. 159, Iss. 1; pg. 88 ) where they conclude:

“It’s hard to be upbeat about a recession, but it truly is an opportunity. Marathoners and Tour de France racers will tell you that a race's hardest parts, the uphill stages, are where the lead changes hands. That's where we are. When this recession ends, when the road levels off and the world seems full of promise once more, your position in the competitive pack will depend on how skillfully you manage right now.”

In this article, Fortune  identifies 10 strategic issues or tactics to manage your business in a recession. I’ve added 18 more strategic questions of my own from the Opportunity Clinic, to get a total of 28 tactics or strategic issues that each business or entrepreneur should be seriously considering and re-evaluating now, if they have yet to do so.

 

Why 28? Well it comes from the core components of your Business Model, which  is made up of 6 key generic areas or components such as:

• How do we create value ? (factors related to our offerings)
• Who do we create value for ? (or Market factors) 
• What is our source of competitive advantage ? (or internal capability factors )  
• How do we differentiate ourselves? (competitive strategy factors)
• How can we make money?(economic factors and Revenue model)
• What are our future ambitions ? (investor factors , business goals )etc

In turn, these general components can be further subdivided into 28 strategic issues or questions, that every entrepreneur should be asking  himself or herself when first designing a business model for their business idea or concept.

In recessionary times however, tactics that made sense in fast growth times can be absolutely disastrous, even survival-threatening for many businesses. If you haven’t done so, business needs to step back and explore each one of the assumptions behind their original business model idea. Criteria for assessing the overall business model in recessionary times could include profit potential, robustness (ability to withstand changes in assumptions about underlying internal or external conditions), adaptability, resilience, and sustainability.

 

Part 1 View Unemployment as an Opportunity Window (competitive strategy factors and internal capability factors)

The December 2008 figures for  unemployment in Canada, USA, Europe and Asia were generally grim sounding and greeted with doom and gloom by the media and most politicians-the worst or steepest drop since the 1930's in some cases. Stating the obvious, Fortune says: "

 

"Managing in any recession is difficult; managing through this one is especially hard because it's different from previous ones in multiple ways. Most immediately significant, employment is plunging more steeply than in a long time--by more than two million jobs [in the US} last year, more than during the previous two recessions, and this one is far from over."

However, entrepreneurs should look at the plus side and see this as an opportunity to capture new talent that is normally difficult to recruit in good times and fill key positions with experienced staff that may now be out on the street looking for jobs. A good friend of mine, who was formerly a Country Sales Manager with a top 5 consulting firm, is now looking for a job. Anyone need to fill a Sales position with an excellent candidate?

Fortune reminds us to: 

 

"Reevaluate people--and steal some good ones.

Just as most investment managers look like geniuses in a bull market, most employees can look like excellent performers in a booming economy. Now is when you identify the impostors. Working hard at that task is important, because if you need to lay people off, as you well may, it's critical that you choose wisely. A subtler danger: If salaries or bonuses need to get whacked, you may be tempted to reduce them equally across the board in an effort to show that we're all in this together. But think of the message that practice sends to your best performers, who will feel they're being punished rather than rewarded for their great work. Mel Stark of the Hay Group consulting firm points out that in his survey of the World's Most Admired Companies as ranked by Fortune, the best ones take extra pains to reassure their "most driven and focused employees," the ones it is most important to keep. Instead of spreading the pain, reward your best workers well, even in a recession. Then scout for competitors that are sharing the misery equally and steal their best performers."

In summary,  protect your own best performers from competitive poaching, and do some aggressive hiring and poaching yourself, while times are bad.

Cognitive Skill?What's negative, positive, different and interesting about unemployment in this recession?

Walter Derzko< Smart Economy, Toronto

Author of the soon-to-be-released book: Hard Times Golden Opportunities.. about opportunity recognition in a recession/ depression featuring 45 opportunity scenarios.

Related posts in this series:

The Opportunity Clinic; 28 Tactics for managing your Business in a recession Part 6 of 28 What's in your Recession Playbook?

The Opportunity Clinic; 28 Tactics for Managing your Business in a Recession Part 5 of 28 Category Killer Innovation-India's $10 laptop

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 4 of 28 “Left Behind “Opportunities- Go Green & Go Slow

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 3 of 28 Design Opportunities- Hope or Nostalgia

The Opportunity Clinic - 28 Tactics for Managing Your Business in a Recession Part 2 of 28 Innovation or Efficiency?

The Opportunity Clinic - 28 Tactics for Managing Your Business (& surviving and thriving) in a Recession Part 1of 28

 

Related Posts over that past year:

• Opportunity Recognition in Difficult Times

• Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn

• Recession - Proofing your Business - Spotting & Designing Opportunities in a Downturn – June 25, 2008, Ontario College of Art Design, Toronto, ON

• Recession-Proofing your Business-Strategies and Tactics for smoother sailing in turbulent seas

• Master Class in Opportunity Recognition for entrepreneurs and intrapreneurs> May 30th 2008> University of Toronto

• Turning Misery into Opportunity

• Vacuum leaves pullout opportunities;

• How will baby boomers handle the recession? Zoomers, Doomers, Gloomers, Opportuneurs

• Recession, Depression and Shortages as Opportunities

• Restructuring of American Business-A New Business Model?

• Using New Yorker Cartoons for Opportunity Recognition /Sense-making & Pattern Recognition

• Text Mining for S&T Scouting, Foresight and Opportunity Recognition

• The Opportunity Clinic-swapping opportunity scenarios 08-002

© 2005-2009

Walter Derzko -"Changing the world, one idea at a time"©

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

• ".....Strategy without action is a day-dream; action without strategy is a nightmare"-old Japanese proverb
• ".......Ours is the age that is proud of machines that think and suspicious of men who try to." -- H. Mumford Jones
• ".......Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  --A. Einstein
• ".......Change is difficult, but complacency and stagnation are surefire showstoppers..." --Walter Derzko

• ".......Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  -- Margaret Mead

• ".......Small minds discuss people; Average minds discuss events; Great minds discuss ideas; --Anon

P. S. if this is your first visit to my blog, please go to our Welcome page 

 

 

Designing Thinking Time on the Job vs Doing Time 07-048

David Pollard, in his latest blog entry on How to Save the World, echoes a point that I have struggled with too--creating thinking time on the job for my clients.

David states:

My observation, throughout my career, has been that as businesses become more 'efficient' (i.e. they lay more people off and load the work onto fewer and fewer workers), there is less and less time to think.

Most of the CEOs I have known openly lament that they have no time to think at all. I suspect that's why they like mission statements and strategic planning sessions -- they are forced, briefly, to get above the day-to-day crises of operation and think about what they are doing and should be doing and how and why to do it. Unfortunately, these often turn into rushed, uninformed, sterile exercises that are totally disconnected from what's actually happening in the organizations -- because the people who participate in these exercises don't have time to find out what's really going on (and generally, no one on the front lines is foolish enough to tell them).

The result is that these organizations become completely dysfunctional. A few overpaid people make uninformed, thoughtless decisions and impose them on front-line people who must then find workarounds so they can continue to do their jobs reasonably effectively despite what they are told to do by management (usually ignorantly), told to achieve by management (usually unrealistically), and told to provide to management (usually pointlessly)."

The efficiency of photocopier is one of the culprits here too, which has obsolesced/cut out our time to think.

Before the copier machine, people had more time to read, reflect and ponder issues. Now we just have stacks of photocopied papers in our inbox that we never have time to get back to and read, because the next urgent fire gets thrown in our lap.

A half hour a week of directed, on-demand thinking (i.e using de Bono's lateral thinking skills, concept challenge, PO or provocative operation, random word etc) goes a long way to alleviate this dilemma.

This addresses the bigger question:

Why are some people better thinkers then others? Is thinking an art? A gift?  Just  plain luck or chance? Or in fact, is thinking a skill that can be learned, practiced and applied to all facets of life from idea generation, evaluation, writing better essays or term papers, proposals, white papers  to preventing or resolving conflicts and disputes from personal relationships to social crises, addressing leadership issues or even entrepreneurship.

David reminds us:

"Thinking is a skill, and like any skill it takes considerable and continuous practice. My sense is that those of us who are paid to think are mostly pretty rusty at doing it. It's a holistic skill in many senses: it entails both deductive and inductive reasoning. It synthesizes conscious and subconscious knowledge. It requires recalling and drawing on a lot of ideas and information from many different sources. It entails imagining, opening oneself up to and carefully considering novel approaches, perspectives and alternatives. It requires digestion, perception, provocation, attention, and avoiding preconception.

Many of us do puzzles or play games of intellectual skill to try to exercise our brains so we can continue to think effectively. But that's not really thinking practice -- these exercises are generally pretty prescriptive.

Real practice involves using everything you know and everything you can do well, and sometimes things you do not so well. It requires stretching, challenging yourself. It's hard work. And it takes time. There's a reason why some of our best thinking comes after we've 'slept on it' -- consciously or subconsciously we are finally investing time in thinking"

How many readers here know about lateral thinking or have been taught thinking skills in school?

If not, you've been shortchanged by the education system and should ask for your money back !!!

See my next post tomorrow: Smart decisions: when just to sleep on it is good enough

© 2005-2007

Walter Derzko

Expert, Consultant and Keynote Speaker on Emerging Smart Technologies, Innovation, Strategic Foresight, Business Development, Lateral Creative Thinking and author of an upcoming book on the Smart Economy "

The Smart Technology Blog: The Smart Economy -- Read, enjoy, explore, speculate, comment !!

To arrange for an in house presentation or briefing on smart technology see here

To explore the opportunities and threats of any new smart technology in your industry - Contact Me or explore how we can work together

.....Strategy without action is a day-dream; action without strategy is a nightmare"- old Japanese proverb

".......Ours is the age that is proud of machines that think and suspicious of men who try to." - H. Mumford Jones

"Without changing our patterns of thought, we will not be able to solve the problems we created with our current pattern of thought."  A. Einstein

"Change is difficult, but complacency and stagnation are showstoppers..." Walter Derzko

"Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has."  - Margaret Mead

P. S. if this is your first visit to my blog, please go to our Welcome page

UK Government publishes Strategic Horizon Scans

The Horizon Scanning Centre has commissioned two complementary scans looking ahead up to 50 years : the Sigma Scan and the Delta Scan.

Initial versions of both scans have been published by the contractors who developed them : Sigma Scan by Outsights - Ipsos MORI and Delta Scan  by the Institute for the Future (IFTF).

The Sigma Scan is a broad synthesis of some of the world's best Horizon Scanning sources. It covers future issues and trends across the full public policy agenda. It is drawn from a range of sources including think tanks, academic publications, mainstream media, corporate foresight, expert/strategic thinkers, government sources, alternative journals, charities/NGOs, blogs, minority communities, and futurists.

The Delta Scan is an overview of future science and technology issues and trends, with contributions by over 200 science and technology experts from the worlds of government, business, academia and communication in the UKand US.

Develeped over 2005 and 2006 by a team of consultants and futurists,  the Scanning Framework has some novel methodologies and catagories. Each main issue is described as an Issue paper.

The main text of the Issue Papers themselves is divided into a number of different sections:


Headline: Headlines provide a brief description of the future eventuality discussed a pithy note on the main themes contained within the paper.


Keywords: Keywords summarise the coverage of the issue and suggest related issues, domains or topics.


Summary: The summary provides first an Abstract of the Issue (delimited by asterisks) for a quick overview of the whole paper, followed by a description of the trend, event or theme and the debates it raises. This is generally a presentation of the data/evidence in this field, linked where necessary to sources (with no fixed view on likely outcomes).


Implications: this contains a range of possible outcomes that could flow from the Issue as described in the Summary. These incorporate a number of factors where appropriate, including social values, habitat/environment, new technologies, knock-on and perverse effects. Early Indicators: This aspect of the Paper suggests possible early warning signs and precursors that should be looked for to indicate that the Issue may indeed be developing as described in the Paper.

Drivers and Inhibitors: Factors, people, institutions or events which will either fuel (Drivers) or act as a barrier (Inhibitors) to the emergence of this Issue.


Parallels and Precedents: Historical, international or cross-cultural examples of
somewhat similar instances which may shed some light either on the evolution of the Issue or the likely success of different strategies in response.


Sources: The list of sources consulted in writing the Paper, with web links, documents and location information where applicable.


Related links: a list of websites that may be of further interest to the reader relating to the topic


Sigma Scan basics: Issue Markers

Each issue has been further labelled with a number of Markers, which provide highly indicative (i.e. not predictive) information about the possible likelihood, impact,
distribution, severity and development time of each Issue:


Impact: This marker is designed to reflect the potential of this issue to create pervasive and/or serious change in the world at large: a development which in cultural, technological, environmental, economic or political terms alters the way we live or perceive the world. Impact is divided into:

• ****Extreme: Intense, deep-seated, pervasive or long-lasting in its effects. An event/development which profoundly affects the planet for example, an asteroid strike.
• ***High: A great event in human history, something that shapes human history and leaves longstanding cultural residues for example, the moon landings, the establishment of the United Nations, a major pandemic.
• **Medium: A defining aspect of a particular generation or nation's experience of the world. An important footnote in world history, such as the implementation of the Euro, the fall of the Berlin Wall.
• *Low: A development whose scope to instigate change is subtle or in some way restrained by conditions, medium, force, locality or likely responses. Something that captures the news agenda for months or years, but eventually fades into the cultural memory for example, the cultural changes of the 1960s.
• ?Unknown: There is no consensus within the literature about how best to interpret this issue.

Likelihood: The likelihood that this issue will evolve to become a central theme/development - in some way - in future society within its projected life span. The likelihood markers are:

• ***High: 75+% confidence that the events discussed will come to pass.
• **Medium: An equivocal 50/50 call.
• *Low: 25% or less probability.
• ?Unknown: No consensus about the likelihood.
  
  

Controversy: The level of consensus amongst experts, commentators and other observers holds that the Issue will unfold in the way described in the Paper and/or assume a greater significance in acting as an instigator of change. The controversy markers are:

• ***High: Very few experts pay the issue serious attention, and there is very little consensus about the extent to which this issue is likely to emerge. There is very little known evidence for this issue, and what there is highly unconventional, or propounded by alternative sources.
• **Medium: Whilst there is some kind of conventional consensus, futurists and/or alternative sources dispute whether this issue is likely to be a central development in future. Evidence is somewhat equivocal or open to scrutiny, even within expert audiences.
• *Low: The majority of experts, as well as a large volume of authoritative evidence, point to this issue emerging as a central theme over the next 50 years.
• ?Unknown: No known consensus on how to apply this marker.

When: The expected timeframe for this issue to influence C.21st life to the degree ascribed to it under "Impact". Divided into:

• 0-2 years: This impact of this issue is already being felt or will be in the immediate future
• 3-10 years: Likely to be under way but perhaps not well distributed. Wider effects felt over the near horizon
• 11-20 years: Mid horizon effects
• 21-50 years: Mid to far horizon effects
• 50+ years: Far horizon effects ?Unknown: High level of uncertainty as to when this impact could be felt

Where: The geographical spread of the Issues impact. Divided into:

• Domestic/national Largely restricted to particular nation states (e.g. UK)
• Regional Largely restricted to major global regions/continental areas (e.g. EU, Latin America)
• Global Potential to be experienced anywhere/everywhere on a global scale
• ?Unknown

How fast: How quickly the events and potential impacts described in the Paper could be
experienced:

• Instant in a matter of moments
• Days over the course of days
• Months over months
• Years over years
• Unknown

Sigma Scan basics: Issue Genres


As well as the markers, each paper is also classified into a number of different Genres. This is identified at the start of the Summary in capital letters and is supplied as an at-a-glance way for users to decide what sort of critical thinking they should apply to their reading of the paper. (e.g. in the same way that we would apply different critical faculties for reading a work of science fiction than we would for reading todays
newspaper).

Weak signal: A primarily descriptive Paper attempting to shed light on a relatively little known, weakly felt or poorly distributed phenomenon a possible baby trend at the relative margins of current knowledge. The Implications of this style of paper tend to be limited to explaining what is already starting to happen, and the Drivers / Inhibitors are important in deciding whether it will grow into a Key Driver or dwindle into nothing. The aim of Weak Signal papers is to inform readers about trends or
potential events that might slip under the radar.

Forecast: An Issue for which there is a relatively high degree of certainty, at least in terms of its likely presence as a force for change, based as it is on robust quantitative data and relatively stable variables. Forecast papers are based upon well-grounded and
authoritative sources, drawing on models or statistics to draw conclusions.

Key driver: These Papers describe a relatively more mainstream and better-known trend or development. Something that would probably on the radar of most policymakers or strategy thinkers. Key Driver papers provide a top-level review of the trend for the uninitiated, and aim to stretch the more informed reader with some wider Implications Parallels / Precedents beyond the usual inferences and certainties.

Scenario: A Paper which takes as its evidence base published scenario work from other sources. It therefore discusses the range of uncertainties and drivers that have been discussed in developing these scenarios and compares the assumptions in them. Rather than describing a possible driver of future change, it therefore examines the feasibility and possible implications of a particular hypothetical future.

Wildcard: An Issue with the potential to emerge unexpectedly but with potentially major impacts. Often, these papers deal with a radical discontinuity, as compared to other, more continuous and/or gradual trends.