The Great Recession has changed market attractiveness — perhaps for the long-term — for many, many organizations. The ability to adapt will determine the survivors and thrivers. Therefore, let’s take a closer look at four key points.
First, the ability to adapt and the ability to react are not the same.
We react to a contract being cancelled; we adapt to changing market conditions. 
Reacting is a response to an event; adapting is a form of evolution. Organizations, like species in the natural world, adapt to improve their fitness to succeed in their environment. (According to Scientific American, the extinction of Neanderthals may well have been caused by their inability to adapt quickly enough to rapid climate swings and not by competition or inter-breeding with modern humans. See terrific 6-minute video.)
Second, the ability to adapt has three parts:
- Finding opportunities to add value within an enterprise’s doable sphere
- Enrolling the necessary resources (employees, partners, capital, technologies)
- Executing well
The ability to continually find and deliver new value to customers trumps all other business competencies. Organizations that do it well see themselves as “can-do” market leaders; others label it “change” and wring their hands.
Third, each act of adaptation is a strategic initiative: an assignment of resources to a potential opportunity. The great entrepreneurs — like Carnegie, Disney, Walton, and Gates — forged their success not from a grand vision or technological genius, but from a cascade of adaptations aimed at creating new value. These strategic initiatives are eventually aggregated and relabeled, erroneously, by history as a Grand Strategy. The truth is far more instructive!
Fourth, creating new value faster is a competitive advantage. In 1997, I first read Wheelwright and Clark’s book Revolutionizing Product Development and have been referring to it as a book of strategy ever since. In this simple but powerful diagram, they capture a truth about business in a rapidly-changing environment: if you are a fast-cycle enterprise that can adapt (create new value) quickly, you can overcome slower competitors despite their lead and improve your fitness despite turbulence.
Topics: Adaptation, Competitive advantage, Innovation, Opportunity, Productivity, Strategy, Superiorities, Survival
“In July, the number of unemployed persons was 14.5 million,” according to the Bureau of Labor Statistics. Another quarter million jobs were lost; however, as Chart 2 indicates below, the month-to-month decline is about half the job loss rate six months ago.
The bad news in the BLS report for July is on page 2:
The number of long-term unemployed (those jobless for 27 weeks or more) rose by 584,000 over the month to 5.0 million. In July, 1 in 3 unemployed persons were jobless for 27 weeks or more.
According to NPR, long-term unemployment is higher than at any time since 1948 when the data began being collected. Long-term unemployment –- the stuff of foreclosures and household devastation — is now increasing much faster than short-term unemployment:
The problem of long-term unemployment is a main reason I predict we will see many years of “green shoots” before we have any significant economic growth. For those interested in the topic, there is an outstanding and still relevant 2005 briefing paper from the Economic Policy Institute entitled The Rising Stakes of Job Loss: Stubborn Long-Term Joblessness Amid Falling Unemployment Rates:
A different pattern emerged after the 2001 recession. With far fewer job gains in the most recent recovery, long-termers found their pathway out of unemployment blocked. The fact that job losses declined meant that the overall jobs picture started improving, but this did little to help those who had already lost their jobs during the heart of the slump. It was these workers who became and remained long-term unemployed as job creation languished many months into the recovery.
The decline in job growth stemmed from many factors: employer reluctance to hire because of continued instability fostered by weak demand, escalating fixed costs of hiring (especially health care costs), and the escalated use of just-in-time employment practices.
Several options enable employers to avoid hiring the more traditional full-time permanent worker and instead resort to just-in-time hiring, which is likened to inventory-adjustment practices used by firms to respond to demand. To meet cycling demand, “just-in-time” hiring practices include more traditional options, such as the use of overtime, but it also includes newer practices such as the use of contingent workers, temporary workers hired (and fired) through temp agencies, and contract workers (many of whom were once employees of the firms they contract for). While such strategies may raise profits, they prolong the lack of job creation, and as such likely help explain the unusually weak job creation in this recovery.
Topics: Economy, Jobs, Middle class
On grainy TVs in the summer of 1968, ABC Sports trumpeted something dramatic: a high jumper competing for the gold by leaping over the bar… backwards! Americans ran to their living rooms to gape each time Dick Fosbury made an attempt.
Serial entrepreneur and professor John Greathouse probes the origins of Fosbury’s innovation:
[Fosbury] began experimenting with alternative, unconventional methods of high jumping as a high school sophomore. Rejecting the straddling approach, which had been the standard for the prior forty years, Dick tweaked the old-fashioned scissor kick, eventually morphing it into a new and unique approach, which was eventually dubbed the “Fosbury Flop.”
The track and field community initially scorned Fosbury’s approach, labeling it “unsafe” and “too unorthodox” for the average jumper to master. However, nothing sells an innovative idea like winning. After Fosbury set an Olympic record at the 1968 Mexico City games, jumping 7 feet 4.25 inches, track coaches all over the world took notice.
The adoption of the Fosbury Flop was rapid. The last high jumper to set a world record using the straddling approach was Vladimir Yashchenko in 1977. As shown in the chart below The Fosbury Flop had become the international standard by the 1980 Olympics.
The Fosbury Flop helps illustrate an essential principle of innovation: ”…Whereas it may be appealing to focus on the future, breakthrough innovation depends on exploiting the past.” (Kathleen Eisenhardt, from the foreward of How Breakthroughs Happen by Andrew Hargadon) It is in the combining and synthesizing of long-established or emerging elements, often from disparate fields, that new solutions spring. If we reverse-engineer the Fosbury Flop, we can tease apart the details of training, equipment, and technique assembled and refined by Fosbury. For example, he abandoned the mainstream straddle technique and began experimenting with the older scissor kick. There was also a game changer that is too frequently left out of the picture (literally and figuratively): “Given that landing surfaces had previously been sandpits or low piles of matting, high jumpers of earlier years had to land on their feet or at least land carefully to prevent injury. With the advent of deep foam matting high jumpers were able to be more adventurous in their landing styles and hence experiment with styles of jumping.”
This same recombinant pattern is evident in the birth of mass production at Ford Motor Company, as chronicled by Andrew Hardagon in his book How Breakthroughs Happen. Interchangeable parts and tools were essential but had been part of industrial production for nearly a century. Continuous flow production was already widely in use by H.J. Heinz, Campbell Soup, and other food canners and processors. The final major innovation in the Ford system was bringing the work to the worker rather than the worker to the work — and Henry Ford credited Chicago meatpackers for that insight.
Topics: Innovation
Insolvency lawyers discuss how this recession is different:
Aubrey Kauffman of Fasken Martineau Dumoulin in Toronto observes that “the key departure from previous downturns is that potential purchasers don’t have access to financing to buy businesses in distress — even if these businesses are fundamentally sound.” [...]
“Other downturns have been more focused,” Mr. Kauffman says. “We’ve had the likes of real estate busts and the dot.com bubble burst, but nothing like this — where the pain is so pervasive and we’ve gone from a position of unlimited liquidity to no liquidity in 10 months.” Restructuring lawyers say they are shifting their efforts. “We’re looking a lot less at identifying an exit strategy and more at shifting everyone to surviving this terrible situation, preserving the business, and hopefully keeping the existing stakeholders in place long enough to find a better solution,” Mr. McElcheran adds.
Topics: Credit, Hunkering down, Survival
Grasshopper.com promotes their with a nifty video titled “Entrepreneurs can change the world.” Kind of clever — I watched it several times!
Topics: Adaptation, Innovation, Opportunity
