When faced with a life-threatening situation, the body adapts superbly for fight or flight. “Blood flow is diverted to the lungs and other critical areas. The pupils dilate to improve vision, and hearing is sharper. Breathing, heart rates, and response times accelerate. The odds of survival improve,” describes Darrell Rigby in ‘Winning in Turbulence’ (www.harvardbusiness.org). If only a company could respond so brilliantly to the dangers of a downturn, he wishes.
What happens, instead, is that executives struggle to distinguish between core activities and less vital functions, Rigby finds. “They look inward rather than outward. Their decisions are hampered by loss of concentration, diminished creativity, and an inability to perceive and learn from new information. When that happens, the odds of survival deteriorate.”
Continuing the human analogy, he writes about how our body constantly scans the environment for changes in temperature, food supply, competitive threats, and other vital factors, so that outside changes trigger immediate adaptations in our metabolic rates, adrenaline levels, and even perspiration.
Companies can learn to do the same, urges Rigby. “For example, they can do a quick ‘Net Promoter Score (NPS)’ survey of customers after every transaction, asking how likely it is that the customers would recommend the company or the product to a friend or colleague.” He says that answers to this question – scored on a zero-to-10 scale – correlate highly with customer loyalty and can serve as an early warning of incipient dissatisfaction or defection.
Again, just like the human body which, when threatened, relies on the fundamental systems at its core that afford the best chance of survival, a company, too, has to concentrate on its core business, to improve the odds of success in a downturn. Define the core by beginning with an outside-in view, advises Rigby.
“This is not an exercise in listening for what you want to hear, with conclusions that flatter your accomplishments; it’s based on a robust definition of the boundaries between markets and a realistic assessment of competitive position.”
Turbulence – a sudden change in wind speed and direction – has killed and injured more travellers than most other aviation hazards, the author informs. “It tests the judgment and reflexes of even the most experienced pilots. Flight crews that survive episodes of heavy turbulence talk about their disorientation and fear as the aircraft they know so well fails to respond to the controls as the ground rushes toward them.”
Navigating through turbulence at thirty thousand feet is different than at three thousand feet, he observes. “Up high, pilots have more options. They can manoeuvre around approaching storms or reduce their speed for a smoother ride. If fuel is running low, they can scout for the best runway to touch down safely and plan their next moves.”
Closer to the ground, everything changes, Rigby notes. “Storms are unavoidable, reaction times shrink, and options evaporate. Staying aloft requires quick and accurate decisions based on an immediate grasp of the resources available.”
Similarly, for business leaders flying through economic turbulence, he says it is crucial to know the altitude in terms of financial strength and flexibility. Earnings statements provide one vital measure of financial health, but in a downturn cash flow and liquidity analyses serve as even more precise altimeters, fuel gauges and radar systems, the author counsels.
Imperative in-flight read.
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