The Washington Post reported in its Sunday editions that businesses of various stripes -- ranging from retailers to airlines, drug manufacturers to fast food restaurants -- are facing the challenge of changing the basic business strategies around which they have organized their organizations and goals.
"The 1990s are so over they never happened," business consultant Michael Hammer told the Post.
Essentially, what happened is this. During the business boom of the last decade, profits and sales generally were so strong that business executives saw little need or advantage in examining their fundamental strategies, even when signals suggested that economic reversals were on the horizon. Now, with economic doldrums a reality, businesses aren’t investing in hiring and product development because they don’t have the money. But it’s hard to get the economy jump-started when businesses aren’t investing and hiring.
In addition, during the boom most companies didn’t know which of their strategies were profitable and productive…and it is only now that they are facing the unpleasant realities that some of their operations were what one expert called “value destroying.”
So now, businesses have to find new strategies that work, do so in a way that doesn’t overtax their financial reserves, and communicate it to their customers in an effective way without destroying central value propositions and brand equity.
"The 1990s are so over they never happened," business consultant Michael Hammer told the Post.
Essentially, what happened is this. During the business boom of the last decade, profits and sales generally were so strong that business executives saw little need or advantage in examining their fundamental strategies, even when signals suggested that economic reversals were on the horizon. Now, with economic doldrums a reality, businesses aren’t investing in hiring and product development because they don’t have the money. But it’s hard to get the economy jump-started when businesses aren’t investing and hiring.
In addition, during the boom most companies didn’t know which of their strategies were profitable and productive…and it is only now that they are facing the unpleasant realities that some of their operations were what one expert called “value destroying.”
So now, businesses have to find new strategies that work, do so in a way that doesn’t overtax their financial reserves, and communicate it to their customers in an effective way without destroying central value propositions and brand equity.
- KC's View:
-
And the hard part is what, exactly? (Just kidding.)
We found this story to be intriguing, mostly because of the notion that much of what business does is “value destroying.” There are strategies and tactics that may be perceived as central to brand equity, but that may in fact be undermining a company’s central value proposition.
These are the central questions when it comes to doing business in 2003 and beyond -- for companies big and small, national and local, mainstream and niche. These issues are too critical to be ignored today, because without consideration, there may be no tomorrow.
A perfect example can be found in the current stories about Home Depot, which is suffering from weaker than expected sales amid accusations that management has focused so much on cost-cutting that it has ignored the customer, leading to poor service and declining sales. There even is speculation that if things don’t turn around quickly, it could cause problems for CEO Robert Nardelli, who came to the company from General Electric just two years ago.
Or look at the fast food wars between McDonald’s and Burger King, which seem to be fought over who can sell burgers the cheapest. As mentioned elsewhere on MNB, can these battles be doing anything to help the images of these companies, or even the fast food business as a whole?
While many food retailers didn’t necessarily find the 90s to be an era of unrestrained growth, plagued as they were by the growing dominance of Wal-Mart, how many of them can be found guilty of exactly the same crime -- sacrificing differential advantages and core value propositions and brand equity because they ignored their customer, focusing just on price and cost-cutting?
We’re not suggesting that price is unimportant, nor that finding efficiencies and increased profitability is a bad thing.
It’s just that these things are tactics that ought to enable broader, differentiating strategies. Instead, they became ends unto themselves.
