Counter-intuitive thought of the day comes from Michael Porter, the Harvard strategy maestro, courtesy of the Insead Knowledge site. Prof Porter believes that downturns can give managers more room to make bold strategic moves.
During good times, companies are often trapped by the need to hit quarterly profit forecasts, he says. In a downturn, however, the share price and financial performance of almost every business looks dreadful, lessening that pressure.
Trying to look a little bit better when everybody is bad doesn’t really get you very much. Ironically, during these periods, companies often have more flexibility to make moves and to make investments than they do during more normal periods when they are getting more short term scrutiny.
Convinced that “great fortunes” will be made during this bleak period, he is scathing about companies that carry out across-the-board cuts to their cost base instead of preserving strategically vital spending.
Don’t just take 10 per cent off of every department. That’s a disaster. Cut to a strategy.
Alas, I doubt that Prof Porter’s comments, delivered at the World Knowledge Forum in Korea, will save many companies from excessive cost cutting zeal.
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