Mr. Bhushan Singh
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Going beyond the Recession Mindset
We are now in the midst of a recession and panic and uncertainty in the energy sector is order of the day. What is more worrying is that our economy is energy based. We have been talking about diversification for more than thirty years now and I suspect, if my crystal ball is correct, that we will continue talking about diversification for some time to come.
According to Heifetz 2009, “Uncertainty will continue as the norm even after the recession ends. Economies cannot erect a firewall against intensifying global competition, energy constraints, climate change and political instability. The immediate crisis which we will get through with policy makers and expert technical adjustments merely sets the stage for a sustained or even permanent crisis or serious and unfamiliar challenges.”
We would have seen most recently the case of ArcelorMittal. The effect is that hundreds of workers have been thrown on the breadline and the economic and social landscape in Pt. Lisas and surroundings will be changed. It should also be no surprise that further significant job loss is likely to occur in many other areas as the spillover effect takes hold. I have seen some estimates that over five thousand persons have lost their jobs; I suspect the number is higher.
While it is easy to say that job loss and even industry loss are a natural part of a recession, it does not address the solution. Do we just allow market forces to reshape the environment in its own time and disregard the impact on human lives or do we actively participate in an attempt to minimize both the economic and social effects?
I am not talking about the state adopting a welfare role here; but I am suggesting that retrenched workers be given their just separation packages (the law needs updating). But beyond this, we must encourage these very people to adopt a new mindset. Forget the recession mindset, adopt an entrepreneurial mindset. I know this would be difficult, after all there will be significant mental trauma to deal with after being retrenched in such a manner. But fortune favors the brave. Not meaning to sound like Pollyanna, but the Sun will rise again.
I am of the opinion that being mentally prepared is of importance as even those with secured incomes are bitten by the low consumer confidence bug.
There are cyclical and structural recessions. Trinidad and Tobago is experiencing a structural recession as our economy is overly dependent on a commodity for which we are a price taker.
So is it all gloom and doom if you are a business owner? No, definitely not. The fact is that people do not stop living in a recession. Life goes on, albeit differently depending on the circumstances. A characteristic of a recession is the erosion of consumer confidence. This reduced confidence and uncertainty results in a recalibration of the perception of value. In economic terms then, there is a recalibration of the law of maximum utility.
Firms must also adopt this recalibration of value both in their operations and their product and service offerings. Sometimes this may require a change in the business model. It is shortsighted to think that one business model can take a firm into perpetuity. If this were the case then today we would all still be using the pony express.
The knee jerk reaction in a recession is to cut R&D, cut training, reduce staff, cut benefits, etc. and when the economy improves, you return to the old ways. It may have worked last time around but will it work again? Is this a reactive or proactive measure? Are your competitors doing the same as you; just trying to wait it out? How does this improve the competitive position of the firm? We all know about the survival of the fittest; but in our new normal world, it is also about the survival of the “smartest”.
Disruptive innovation can be a very short distance away especially in a recession, where necessity is the mother of invention. History is filled with examples of firms that believed that due to their size or strategic location, or intellectual property, they were impenetrable and untouchable. One such firm is Kodak. We now use such firms as case studies in our teachings of what not to do.
Firms are now encouraged to have an innovation model not a business model to take them into perpetuity. This requires a fundamental shift in thinking and sometimes a level of discomfort in operations. So are you waiting for things to return to normal? The only thing that will be normal now is change. How you view change as good or bad depends on how prepared you are. In other words, organizational adaptability is what is required. This is of course very simple to say, but implementation is another ball game. After all, while some of us remember the 1980s, many will have to learn the lessons all over again. Many people survive heart attacks but soon return to their old ways.
It is about building new competencies, adapting faster to change, as legacy practices may no longer be relevant in a rapidly changing world. There are always unique opportunities and niches to explore in a downturn? What is your value proposition?
Companies can survive the recession, it’s a matter of using the right strategy. While there is always uncertainty you cannot roll over and wait, it is better to have a planned approach and work towards a shared objective.