Accepting the recession landscape has been extraordinarily painful. Rewriting the map for the recovery journey will have challenges that must be embraced to create a sustaining business in the new, post recession landscape.

1. Setting the Course for Recovery
Accepting the recession landscape has been extraordinarily painful. Rewriting the map for the recovery
journey will have challenges that must be embraced to create a sustaining business in the new, post
recession landscape.
The new landscape
How do we plan for a new business landscape?
The obstacles to planning are many and include dead inventory, customers who have disappeared,
customers’ customers’ that have changed, credit is difficult, key employees have been released. The list
can go on, but the resounding challenge is that in recovery a new landscape will emerge and to build a
sustainable business on a solid foundation, a back to basics process combined with new tools must be
embraced.
Let’s start with a straw man framework that may be familiar to managers. Your surviving customers have
customers who have adapted to new realities. Diversification is always essential to business survival; the
landscape has changed and the diversity has created new opportunities. However, your inventory may
not reflect this environment. Your business processes, your credit situation, your employees may also be
out of step with this situation. I have seen people work to exhaustion doing the “old” right thing in a new
marketplace and the harder they work the worse the make it for themselves. The new landscape has to
be explored, mapped and then communicated so that new processes can be tested and deployed.
Exploring, Mapping and Communicating The New Landscape
Business intelligence can be defined not only what your people know but what is captured in your IT
support systems (CRM, SCM and ERP for example). A subset of business intelligence is analytics, a $10
term for making a process of using ad hoc reports to uncover or explore new trends. Analytics can be
further defined as the extensive use of data, statistics and modeling to explore, map and present fact-
based findings to management for decision making. All-in-all, the compelling idea is to have a predictive,
ad hoc, data based process that supplements the daily reporting that fuels management decision making.
To introduce how analytics can be used, a sales scenario may be helpful. By taking a notion from a sales
manager about a new customer or market the standard reports may not be as helpful needed to build a
case. Managers retrieving key sales data and comparing with inventories can develop a testable sales
strategy with risks identified. If the trend looks promising, vendors and the customer are approached to
model a deal at a higher value proposition than they had before. This process is creating a competitive
advantage and taking control business terrain. Rather than a one-off task that is the common situation,
this becomes a process to try to discover higher valued business, better quality inventory and
diversification that reduces risk. In some ways the new landscape is being created as well as discovered.
You don’t want to be a commodity to your customers and you don’t want your sales operations to be
order takers. This is an aggressive, interactive approach with some overhead for analysis as the new
processes are created, then refined.
From this position, you firm will aggressively segment markets and business models. A one size fits all
operational structure leaves a lot of money on the table. The largest customers get the most attention,
when they may be the least lucrative while smaller firms may have an urgency or niche that requires
special attention and delivers a higher margin.
Being able to identify trends, map possible scenarios and communicate the expectations and then
measure the results in a formal workflow provides management the opportunities to enter new markets
with less risk. Failures do occur, so the process must be evaluated and the current workflow examined.
It could be that once again the failure is due to people doing the right thing in the old landscape and not
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2. the new landscape. Employees will do what they are incented to do. There must be a match between
the new expectations and how they are measured.
Expectations are the natural follow-up to a management decision. Aggressive expectation management
for customers and employees must be in place. The occasional “strategic” sale may help with client
relationships, but continually missing margin targets is a trend that must be quickly identified and dealt
with. A SPA with 1000 items or more in it is not a reasonable sales solution; it is order taking at an
unfavorable discount.
Exploration is internal as well as external. Trade working capital (the loan the business provides to the
sales organization) must be managed ruthlessly. I have been surprised by managers of large stores who
were unfamiliar with the definition of TWC and how it worked.
The time value of money is in play. Inefficiencies in warehouse, back office or sales order management
are constraints that throttle organizations. Time is lost in rework. Sales are lost to more nimble
competitors. Overhead increases and the material sits, devaluing the investment.
Old habits that reflect the old landscape can create losses. For example, a salesperson may not
understand that having a critical “D” item is a risk. “A” items were not purchased because this D item’s
value sat on the books for months. I have heard salespeople say a “D” item should be sold at not more
than 20% because it was a rip-off to sell it for its true cost which would be closer to a 40% margin.
An ad hoc report would help identify which items are truly continuity and which should be RTV’d. Then
training would follow-up to ensure that the continuity items were priced properly. Further ad hoc reports
would help identify that the price point was correct when the item was sold. Inventory managers would
have reports that re-set prices for these items and managers would approve their re-pricing. The
complexity of the process may be hard to justify until a six figure motor control that is 3 years old is sold at
a loss.
Everyone has a customer who guarantees purchases for non-commodity material if it is stocked and then
the good intentions don’t turn into sales. Branches can have more than 30% of their inventory turned
upside down. The ability to replace that inventory in this landscape is constrained, at best. Analytics
would offer a risk reduction.
Rather than buying a two year supply of an item that sales must have, the trend data may support a sixty
day supply where an additional week (about 10%) would be reasonable. On the other side of the
equation, trending for stock-outs with high margin customers may create a sales opportunity, a reason to
visit a less marquee customer and create a marquee relationship.
This process offers an opportunity to re-tool the back office workflow. How can the Credit Department be
used in a preemptive manner, rather than a sales throttle? Credit becomes a partner with sales rather
than an adversary.
Where are other constraints in the workflow? Once a trend is identified, how does receiving, AP, AR,
warehousing and delivery engage with the new landscape? Changes in workflows can be tested with
little risk. The number of touches reduced, speed of billing, speed of DSO, etc., would be measured for
different client classes and offerings. Again, constraints can be identified and their value determined.
Good ideas that don’t work are identified and the next test queues up. No harm, no foul.
Back office workflows must be evaluated to reflect the new efficiency requirements of this landscape. Are
the right incentives in place? The right metrics? The proper training? Is there an interactive process to
manage up the ladder and deliver tactical insight? What are the operational and true costs of a new
market or marquee customer? What is the contribution? Are the correct metrics (KPI’s) in place? Are the
support systems credible? Are managers held accountable for their processes?
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3. When you are venturing in to a new area the business intelligence systems may not accurately reflect the
value of this venture and analytics will offer a fact-based scenario.
At this point in the quest we are seeing a converging of customer relationship management, supply chain
management and enterprise resource planning. Silos are being re-evaluated, but it is not the “toss the
salad” management shakeup. It is fact driven exploration of opportunities. Processes, customers and
inventories are being harvested; sacred cows are smelling the charcoal.
New Maps
Managers have a unique challenge to face at new effectiveness paradigm or landscape. Decisions must
be based on finding constraints, modeling a decision and talking that strategic position to delivery;
otherwise the decision is a good intention, not a decision.
Peter Drucker offers a 6 step approach in his Harvard Business Review article “The Effective Decision”
(HBR January-February 1967):
1) Clarifying the problem. Is it unique or systemic?
2) Defining the problem. What is important? What requires action?
3) Specifying the answer to the problem. What are the required deliverables or outputs?
4) Deciding what is right rather than what is acceptable.
5) Building action into the decision. How is the decision rolled out? Who needs to know? What
support systemstraining are provided?
6) Testing the validity and effectiveness of the decision. Measure the impacts and refining the
criteria of the decision process.
Positioning for recovery in the post-recession landscape will require an intense and challenging
evaluation of your business model. Analytics is a tool to help re-tool the processes that worked well but
now may be constraints on where the model needs to be. Getting by with order taking will not position
you for the next recession – about every 7 years, if lucky. A dynamic landscape requires information at
the speed of business. Analytics offers a tool to meet that challenge.
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