Tom Stewart: How Do You Succeed In Business During a Recession?
Thomas A. Stewart is the Chief Marketing and Knowledge Officer (CMKO) of the global management consulting firm Booz & Company. Stewart most recently served as editor and managing director of Harvard Business Review, and is a best-selling author, an authority on intellectual capital and knowledge management, and an influential thought leader on global management issues and ideas.
During Stewart’s six years with Harvard Business Review, the magazine was a two-time finalist for general excellence in the National Magazine Awards, and received an “Eddie” in 2007 from Folio Magazine.
Previously, Stewart served as the editorial director for Business 2.0 and as a member of Fortune’s Board of Editors. He is the author of two books, Intellectual Capital: The New Wealth of Organizations, and The Wealth of Knowledge: Intellectual Capital and the 21st Century Organization, published by Doubleday Business in 1998 and 2003, respectively.
Stewart is a fellow of the World Economic Forum. He is a summa cum laude graduate of Harvard College, and holds an honorary Doctor of Science degree from Cass School of Business at City University, London.
Tom Stewart: I’m Tomas A. Stewart. I’m the Chief Marketing and Knowledge officer of Booz and Company.
Question: How should companies respond to the recession?
Stewart: If I were a CEO right now, I would be concerned about three big issues.
Number 1 would be liquidity. Can I make it through the night, can I just get through the crisis? And I think the crisis itself is starting to ameliorate but there’s still, can I make it through the liquidity problem?
The second is fitness. Am I fit, am I lean, am I operationally fit for the long term?
And the third is taking advantage of the strategic opportunities that structural change are going to create.
If I were a CEO right now, I would find it very hard to look simultaneously through the microscope at every cost and through a telescope at the future and that’s where I think we’re seeing a lot of confusion in executive suites; of a lot of paralysis, this feeling like I don’t quite know what to do. I’ve got to look at every nickel of cost. But I realize at the same time my industry is going to be changing dramatically, I better have a point of view about the future, because if I don’t have a point of view about the future, somebody else will.
Tom Question: How can business leaders maintain a veneer of optimism?
Stewart: I think that the most important thing to recognize here is, first of all, that there’s not a lot who [became by line]. Your team and the people around you know how business is. You can’t fool them. And you are only fooling yourself if you think you can fool them.
At the same time, I think that you have to recognize that within the truth you still have plenty of opportunity to motivate people. And the more you share with them, the more you rely on them. The more you open up, the more they can help you.
Now, under stress people have this almost instinctive desire to be like turtles. You pull in; you go into your shell and you get defensive. And it’s when you’re in good times, we tend to get expansive and open up; but oh, put the feet on the desk and come on in and have a scotch you know, that’s the sort of a natural reaction and it’s almost the wrong reaction to this kind of stress. You need to try to find ways to open up.
You’re not lying. Business is tough. Here is the situation. This is what we’ve got. This is what we’re facing. And get people to participate and get people open up. This, by the way, also has the benefit then of giving you the support of the team and giving you the support you need. It’s really easy to get into a downward spiral. But there is something about business that gets people starting to think about well, all right. It is what it is, what am I going to do about it?
Business people tend not to be deeply introspective; they tend to be to have bias for action, let’s get on with it. Well, it is what it is, now what? And if you can get to that now what, I think that allows you to enlist the people in the challenges that you face in it. They face and boy it gives you a lot of aid and comforted.
Question: What is the worst mistake companies make in a downturn?
Tom Stewart: The stupidest thing you can do is to say, we don’t have time to do strategy. Let’s do the cutting first and then do strategy second, because if you do that, you already made a strategic decision. You are going to be cutting unstrategically; that it’s going to be by good luck if your cuts actually turned out to be strategically smart.
So I think that’s the big mistake is to turn right to that microscope and scalpel and start taking out cost without stopping to spend at least a little while--and it really doesn’t take more than a day--because you more or less know what your strategy is. At least sit down with the senior executives and say, let’s get strategic about this.
Where do we think we’re going to be in 5 years?
Where do we think we’re going to be in 2 years?
What do we want to make sure we invest in?
And what do we think we can divest from?
And have that conversation first and then pull out the scalpel or the corporate liposuction tools.
Question: Where are the biggest opportunities?
Tom Stewart: In a globalizing world, we’re going to see the continued rise of not only of wealth, in places like India and China and Brazil and Russia, but also the continuing rise of great global competitors.
So we’ll see great companies that emerge from those markets. We will see great opportunities for western multinationals in those markets, great opportunities for emerging market, multinationals in those markets and in western market. We’re going to see a shifting of the competitive landscape with new players. We’re going to have to learn a lot of new names and we will continue to have to learn a lot of new names and that will simply go out.
I don’t think the fundamental dynamics of change; what has happened is that there are opportunities now that are created by cyclical disruption that might not have been there, and that will vary by from industry to industry, in country to country, but there may be opportunities for a Chinese company to make a deal that they could not have made. Or for an American company to make a deal that it couldn’t have made, because of the cyclical disruption. So my thinking here is you should know what your long term strategy is, and then see how the recession may create opportunities or create moments when you can behave opportunistically in furtherance of the strategy that you think is right.
Tom Stewart advises business leaders on managing and thriving in an economic downturn.
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