Wednesday, August 19, 2009

Winning in Turbulence

Business Week has just posted a review of a new book by Darryl Rigby, the former head of Bain & Co.'s retail practice. Entitled, "Winning in Turbulence," the book looks at what strategies work in surviving a downturn.

While, I am in general a skeptic of the quality of many business books, especially those written (or ghost written) by retired chief executives, I have found that economic history provides valuable insight when today's challenges are beyond the experience of those trying to deal with them. I am a particular fan of the late Robert Sobel, who chronicled business failures in his book, "When Giants Stumble" which was one of dozens of books he wrote chronicling business during changing times. I hope that Mr. Rigby has joined the late Dr. Sobel in providing us with a clearer understanding about how companies have dealt with downturns in the past and identified strategies that worked and those that did not work. If he did this, then Mr. Rigby has provided postal managers and policymakers with some useful ideas on the potential impact of decisions that the Postal Service may have to make to survive if postal policy is not changed.

The following paragraphs summarize what I took away from the Business Week review that will likely cause me to buy the book.

The review states that a key to Mr. Rigby's view on surviving turbulence is the company's position prior to economic challenges. A company's ability to survive economic turbulence depends on their financial position going into the turbulence. If the firm is financially sound going in, it is more likely to come out of the turbulence a survivor.

The article identities three traps, that Mr. Rigby identified, that management has to avoid if possible as it works through turbulence
  1. Going after new customers through price cutting as these customers may abandon you once the recover occurs and pricing becomes more rational.
  2. Cutting costs in ways that core customers notice.
  3. Curtailing customer focused innovation
As it appears logical that a firm's financial position prior to economic turbulence will affect its survival afterward, the question remains as to how a company can avoid Mr. Rigby's traps when they are not financially strong. My hope is that reading his book will answer this question.

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