Posts Tagged ‘recession’

R&D “Intensity” on the Rise

November 11th, 2010 Comments off

Here’s another piece that highlights increases in research and devlopement spending as we exit the recession. Similar to what I wrote about the other day in regards to Panera, smart companies realize that spending on R&D now translates to better earnings in the future. 

“A typical company view was, ‘I cut capital spending because I don’t need incremental capacity with demand down,’ and SG&A is a bit of a necessary evil,” says Booz partner and report co-author Barry Jaruzelski. “But they cut R&D last; that’s the future revenue stream that these companies are protecting.”

As recently as earlier this decade the Apple iPod was born during a downturn.  Companies are wise to remember the past as they focus on spending with the future in mind.

There’s no question that 2009 corporate spending overall represented “a brutal hit,” says Jaruzelski. “But remember that even in the Great Depression, innovation didn’t stop. In fact, some of our biggest innovations came then, from the jet engine to the chocolate-chip cookie. Television was just being rolled out, and, by the way, Hewlett-Packard was founded in the 1930s.”

Read more at this link:

Panera Bread Strategy – Keep Spending in Recession

November 10th, 2010 Comments off

When tough times hit, lots of companies curl up inside a shell and slash spending on things like research & development and expansion thinking that doing so will be the way to survive. Often, though, companies would be better served to pursue strategic plans that focus on growth rather than merely survival during economic downturns. Companies with access to cash and with strong strategic plans have more options with regard to location and competitors that are weak will not be in a position to respond during periods of recession.

Panera Bread Company is a great example of a company that didn’t just survive — it thrived — during the recession. 

Panera has, for a very long time, played for the long term and stayed consistent. Going into the recession, we said, “This is a time to continue with our strategy.”Almost every single one of our competitors said, “We need to pull costs out.” As a consumer, if you walk into their restaurants, the lines are longer, the waits are longer. You have a table next to you with dirty dishes. That is the effect of increasing labor productivity. It has to come out of somewhere.

We’ve continued to invest in labor in our cafés and the quality of our people. We’ve invested in the quality of the food. When everybody pulled back and we did more, the difference between us and our competitors went up.

And we’ve been taking market share. We had near double-digit [same-store sales] for over a year now. The stock has tripled in the recession.

BusinessWeek has the rest of the interview with Panera Executive Chairman and founder Ronald Shaich on its website:

Strategic Plans Lose Favor

January 26th, 2010 Comments off

This article focuses on some changes being made to strategic planning efforts given the recent economic downturn.  I think the headline is a bit misleading because I feel that strategic planning is as important as ever, but the rigid, long-term plans of the past are becoming obsolete.  Instead, companies are striving to set more short-term plans while allowing flexibility in the long-term to nimbly change things as information become available (whether that information is about competitors, the economy, new products, etc.).  The lessons learned from the economic challenges of the past couple years will shape strategy for years to come.

Walt Shill, head of the North American management consulting practice for Accenture Ltd., is even more blunt: “Strategy, as we knew it, is dead,” he contends. “Corporate clients decided that increased flexibility and accelerated decision making are much more important than simply predicting the future.”

Companies have long planned for changing circumstances. What’s new—and a switch from the distant calendars and rigid forecasts of the past—is the heavy dose of opportunism. Office Depot stuck with its three-year planning process after the recession hit, largely to make sure employees had a common plan to rally around, Mr. Odland says. But the CEO decided to review the budget every month rather than quarterly so the office-supply chain could react faster to customers’ needs.

Theory & Practice: Strategic Plans Lose Favor — Slump Showed Bosses Value of Flexibility, Quick Decisions. Joann S. Lublin, Dana Mattioli. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 25, 2010. pg. B.7

Corporate Social Responsibility in a Downturn

August 3rd, 2009 Comments off

A short Harvard Business School piece about Corporate Social Responsibility in rough economic times contends that it is more important than ever for companies to push CSR programs when times are tough.  This echoes the sentiments in some pieces I’ve posted recently such as the one that discussed the importance of spending on quality initiatives even when the economy is hurting.

Corporate Social Responsibility in a Downturn.  Q&A with V. Kasturi Rangan. August 3, 2009. By Martha Lagace.  HBS Working Knowledge.

Cost Cutting & Customer Satisfaction in a Recession

July 27th, 2009 Comments off

A great piece hidden in The Wall Street Journal today details the importance of being responsive to customers’ needs during hard economic times.  In fact, it is even more important when times are tough for companies to keep and please the customers that they already have.  Companies are using a variety of tools/techniques to keep customer satisfaction high even as they slash costs.

The American Customer Satisfaction Index, a widely followed survey conducted by the University of Michigan, is at a record high. Other surveys also report gains in customer satisfaction.

The results are unexpected, because customer satisfaction typically declines in a recession as companies cut costs, says Bruce Temkin, a vice president for Forrester Research Inc. In this downturn, though, he and other analysts say companies are protecting spending that affects customers.

One of my personal frustrations is waiting indefinitely on hold listening to recorded music and the occassional announcement that “someone will be with you shortly.”  Therefore, I am very interested in a technique now being used by Southwest Airlines where they will phone you back when it is your turn to speak to someone.

Rival Southwest Airlines Co. recently introduced a system that allows customers waiting for a call-center operator to hang up and receive a call back, without losing their place in the queue. Passenger complaints about Southwest at the Transportation Department fell 56% in the first quarter, and its ACSI scores increased by 2%; the airline still leads the industry in customer satisfaction.

Theory & Practice: Companies Strive Harder to Please Customers — Software Tools, More Employee Training Help Firms Improve Their Satisfaction Rates While Cutting Costs. Michael Sanserino, Cari Tuna. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 27, 2009. pg. B.4

Sensitivity Analysis in Hard Times

July 7th, 2009 Comments off

One more WSJ piece from yesterday relates to our in-class discussions about Sensitivity (”what if”) Analysis.  The article refers to it as “Scenario Planning” and shows how useful it can be in allowing a company to quickly react to different market conditions if they concentrate on different possibilities when budgeting.  At the very least it prevents them from being blindsided by things that they didn’t consider.

Theory & Practice: Pendulum Is Swinging Back on ‘Scenario Planning’ — JDS Uniphase Prepares Responses for a Range of Business Situations, Helping Company React Quickly to Change. Cari Tuna. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 6, 2009. pg. B.6

Pricing in a Recession — Flexibility Makes a Difference

July 6th, 2009 Comments off

This article is about a guitar manufacturing company that uses very manual processes to manufacture guitars and the strategy they are taking to survive during the recession.  They have been able to break the $1,000 price barrier while still maintaining their brand image and maintaining a “no layoffs” policy.  The article noted that they wanted to avoid layoffs because their workers have such specialized skill-sets that replacing them when times become good again could be impossible.

I found this article interesting and, like the midsize law firm article I posted earlier, smaller sized companies have flexibility and are able to make quicker decisions in many cases and that can be particularly advantageous when times are tough.

Workers use modern equipment, including robots that polish guitars to a high sheen, but much of the work is still done by hand. Pieces are fitted and glued by workers hunched over workbenches. Workers tune each guitar carefully to make sure its sound is true.

The upshot is extreme flexibility, which is critical in the recession, when fortunes turned swiftly and unexpectedly. The ability to come up with a new design quickly and without tearing apart a production process allowed Martin to get a lower priced product into stores without a huge investment.

Guitar Maker Revives No-Frills Act From ’30s. Timothy Aeppel. Wall Street Journal. (Eastern edition). New York, N.Y.: Jul 6, 2009. pg. B.1