Hard times need a plan, based on what-survival?

I was looking through some ‘sage’ advice from McKinsey on managing in a crisis, in really hard times, and one really got me thinking, so I thought I’d share this.

“Use the hard times to concentrate on and strengthen your competitive advantage. If you are confused about this concept, hard times will clarify it.

Competitive advantage has two branches, both growing from the same root. You have a competitive advantage when you take business away from another company at a profit and when your cash costs of doing business are low enough that you survive in hard times.”

This challenged my thinking of competitive advantage but then again hard times certainly do questions all our thinking. I always felt it was the uniqueness within, in what you offered, that separates you from your competition. This alters that perspecitve.

It seems this piece of advice boils down to the hard dollar gained by showing advantage within the market place- where it really counts, in fighting for every sale by being able to make a profit or simply cover your costs to simply keep going.

Isn’t innovation simply stripped away here-lost, forgotten, ignored, abandoned? Just thrown overboard along with any branding and this seems so stark or am I missing something here? What happens when markets come back? Maybe you have survived and you pick up the pieces. Do you agree this is where competitive advantage lies?

Perhaps this is ‘creative destruction’ and ‘innovation productivity’ in its rawest form? See my recent article on ‘seeking innovation productivity through creative destruction’ on this.

Any thoughts?

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4 thoughts on “Hard times need a plan, based on what-survival?

  1. Paul
    I agree with your line of thought here. The proposition that competitive advantage only comes via the ability to capture other organisations customers or cut costs is far to simplistic. It also flys in the face of much previous research demonstrating that in hard time those that innovate are more likley to survive and flourish than those who do not. See the OECD reports of 2010 and the annual IBM Survey’s of CEO’s for evidence. It also denies history and the fact that new business and markets open up in times of adverstiy through innovation. Critically, it is also not what I see happening on the ground as a practioner of innovation rather than simply acting as an observor. The clients we service from the InnovationXchange are thriving in hard times because they combine strategies and build innovation into their processes. The challenge as ever though is how to measure return on investment.

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  2. Paul,

    Thank you for this post, and in the two ideas of competitive advantage put forward by McKinsey we see the problems with our current western paradigm: kill competition and cut costs by squeezing (as much as you possibly can) suppliers, customers, governments, employees.

    In one of the best ever (and unusually titled) books about business, Will and ken Hopper’s ‘The Puritan Gift’, offers a thesis about the root cause of our current difficulties.

    They take a detailed look at the success of America and it’s downfall and lay the blame firmly at the feet of the efficiency movement, the Business Schools, and the cult of the so called experts. Their argument is that in the golden age of American progress five principles ran through government and most organisations and these were: An absolute clear belief that something good was being built for the future; an understanding that the group was far more important than the individual; those chosen to lead had deep ‘domain knowledge’ of the organisations that they were running; an ability to organise and garner resources; and finally the acceptance of technology,

    The B school movement including F.W.Taylor and the efficiency movement moved away from these principles to the ideas of short termism and competition. As Dr Deming taught us all there is no such thing as instant pudding.

    Today, more than ever, we need to understand and undertake real innovation and not just the smoke and mirror practice of financial engineering.

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  3. Thanks for sharing your thoughts.
    Troubling times will drive us to reevaluate our priorities & do what it takes to get back on track.
    I am left wondering how much worse it has to get before we are willing to trade in our culture of self interest in short term (SIST) to a culture of shared self sacrifice.

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    • Paulo,

      I feel a whole lot worse, I believe we as societies are not willing to trade, we have seen to much going on around us- greed, wealth, materialism, a promotion of a certain life style – the age of entitlement. Sharing, working within a community, giving freely to others will come much further down the ‘pain and realisation road.

      Depressing but we ‘attack’ our leaders, deride there every move, offer opinions that are built on narrow prejudiced- no a hard road to travel before we get some semblance of balance back

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