News for Product Manufacturers from Hanley Wood CEO Frank Anton
Business 101 Revisited
My wife has an MBA. So, not surprisingly, she's the one who reads the business books that promise to reveal the secrets of good management in 300 pages or less. I have a master's in journalism, earned because I wanted to be a sportswriter. So, not surprisingly, I'm the one who reads the sports pages, first thing, every day.
But with the management of my business being made so difficult by the collapse of the housing industry, I recently forced myself to read a rather old magazine article and a recent report from a consulting firm, each of which promised to offer sage business advice on managing during a downturn. Having survived in business through four housing downturns, I really wasn't expecting either the article or the report to tell me something I didn't already know. And, in fact, neither broke entirely new ground. But both made powerful points that, I think, bear repeating here.
First, this from a June 2001 article, "Moving Upward in a Downturn," from The Harvard Business Review: "Contrary to conventional wisdom, downturn winners avoid diversification. ... What does make sense is focus, creating ballast by reinforcing the core business. ... Concentrate as many resources as possible on playing to win on the main field of competition." (If I had 1,000 housing starts for every media executive who told me Hanley Wood should diversify, the housing recession would be over!)
The following points are all from a new report from Booz & Company. Let's begin with: "It makes sense to get ready for a worse outcome rather than to simply hope for a better one." (Our most pessimistic projections about housing activity have in every case been too optimistic.)
The next point seems obvious — "Stay focused on your best businesses, your best products and your best customers" — but it's nonetheless easy to get sidetracked and eventually dead-ended looking for too many new ideas and new customers to buy them.
The next three points seem to me hugely important and very related. First, this: "Strong and weak companies alike may have too much capacity ... too much business overhead, and too much staff." (A year or so ago it didn't seem like we had enough of any of those.) Second: "Complexity and capacity are the handmaidens of excessive overhead." (Overengineering and good times go hand in hand.) And third: "Avoid using pricing to secure the volume you need to cover fixed costs you shouldn't have in the first place." (Amen.)
The 15-year housing boom was fun while it lasted. Almost everybody prospered, but at the same time just about everybody fell into the same traps — and all the traps were triggered when housing starts collapsed. Now, none of us can wait for a revived housing industry (or a federal bailout) to come to the rescue. We'll have to save ourselves.
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