Best-selling author Lisa Gable’s book, “Turnaround: How to Change Course When Things Are Going South,” is a North Star for our time.
The stress-test of Covid19 revealed many weaknesses underpinning modern society.
As oracle/investor Warren Buffett once remarked, “When the tide goes out, you see who’s swimming naked.”
By that Buffett meant simply that during boom times, many companies look strong and prosperous above the surface, even untouchable. During lean times, it quickly becomes clear which companies are financially overextended, which ones have made extremely poor marketing or manufacturing decisions, and which have the cash flow, portfolio diversity and marketplace flexibility to survive the business climate, whatever comes.
Of course, Covid19 wasn’t your average year in the marketplace. It wasn’t even your average two years.
Investors have other sayings, some involving the dread “Black Swan” events- unforeseen and unexpected happenings which cause tectonic shifts across multiple industries. Black Swan Events can topple corporate empires and reconfigure entire markets in ways no one could have possibly predicted.
The Information Age itself was one such Black Swan event, though a slow-moving one. Some futurists saw it coming, if not its inexorability. But just as a slow-moving glacier can alter a geographic landscape forever, the evolution of the Internet et al changed the U.S. economy and the whole global marketplace permanently.
Only through such an event could an unknown upstart like Netflix have bet correctly and heavily on the right technological breakthroughs to topple a market colossus like Blockbuster.
Netflix, Target, Walmart, Amazon; the mighty corporate giants of today are facing their own gauntlets in turn, navigating the post/pre/present pandemic era without so much as the aid of a crystal ball.
Our currently elevated level of inflation, while not exactly unexpected, has put quite a snarl in business-as-usual, even for retail titans like Target and Walmart. Both companies just survived their worst quarter in decades.
A strange and troublesome supply line crisis, plagued by odd delays on everything from treadmills to baby formula, has offered already struggling companies even more challenges.
With the price of gas reaching astronomical levels, companies are confronting another perfect storm of Black Swans: The U.S. economy is built on a 10,000 mile supply line fueled by petroleum and American stateside manufacturing capabilities are but a shadow of what they once were.
The American manufacturing machine, greatly diminished, can no longer produce all the goods we need; not by a long shot. The shift back to “Made in the USA”, for practical purposes- if it can be done- certainly won’t be done overnight. Likewise the shift from fossil fuels. Even the majority of the electricity in the U.S. is currently produced by burning coal.
Into a business community badly shaken by the events of the past two years has come problem after problem.
Covid19, and especially the time white-collar workers spent away from their office buildings, cubicles, and 70+ hour workweeks, meant the Rise of the Dysfunctional Workplace.
Or rather, it revealed the delicate underbelly of dysfunctional office culture from Amazon to REI and beyond.
On the surface, Amazon may not have much in common with an urban-hippie themed camping supply co-op, but what they now share is emblematic of the deeper workplace problems revealed during Covid19.
Some Amazon and REI employees spent their pandemic successfully unionizing. For Amazon it was a U.S. company first. REI management seemed to find the whole idea hurtful.
Companies, and their managers, are also facing a new crisis of conscience, an existential question so profound, it more than any other factor may determine which companies win and which lose over the next five years.
Since time immemorial, most American companies have adhered to the “Shareholder Model”, meaning companies have been predominately held themselves responsible to their shareholders to turn a profit and provide a return to investors.
This is being tentatively replaced in some very powerful quarters with the “Stakeholder Model”. Under this new model, the fiduciary duty of corporate managers to provide value for investors is usurped by a duty to provide value to community stakeholders- which means everyone.
In other words, some companies are committing, not to making better products or out-selling their competition, but to making the world a better place. There are a number of problems with this strategy, not least of which is the subjective nature of what makes the world a better place.
Turning a profit is fairly straightforward. On, “making the world a better place,” accounts differ wildly.
Some American companies, like their counterparts around the world, seem to be floundering in the wake of Covid, but not everyone has emerged a loser. Billionaires were made during Covid, fortunes were won and lost. The world’s 10 wealthiest men doubled their wealth during the pandemic, according to Oxfam.
Going forward, there will be opportunities to make the most of what Covid19 has left us and rise to the top. But what are companies to do?
How can anyone- from the wealthiest CEO to the newest addition to the mail room- position themselves, their company or career to best advantage considering all the new unknowns and obstacles?
Lisa Gable, author of “Turnaround: How to Change Course When Things Are Going South”, may have the answer.
Described in her field as a kind-of corporate Ms. Fix-It, a corporate consultant fixer-of-all works, Gable’s basic premise is powerful and perfect for our time: “Apply engineering processes to solve problems,” and, “manage complexity with data.”
Complex issues like regulatory burdens, taxes for different industries-including the gig economy- expanded access to broadband and other technological wonders; all these factors and more can prevent a business from creating the kind of flexibility and responsiveness it will need to survive the comings changes.
Change isn’t a bug of the free market economy; it’s a feature. Now more than even, harnessing the power of change can separate the economic winners from the free market casualties.
“The underlying cause of many problems is the poor integration of change,” says Gable succinctly of her recent book. “Don’t fix what’s there,” she extolls her clients and readers. “Start from scratch.”
“Too many companies go through mergers, restructuring, even small reconfigurations without ever really absorbing the changes,” she says. “Rather, changes are tacked on, annexed, aftermarket.”
Gable is right: Many companies are quick to add a new computer system here, new tax accounting software there; two departments are melded together imperfectly and the end result is unwieldy, not optimal.
True reorganization with new components is key, according to the principles of “Turnaround”. Among other things Gable recommends, companies should strive for three months equilibrium after a restructure or any major changes.
To achieve a turnaround, Gable asks corporate managers to consider two questions: “What do I want?” and, “What am I doing to get there?”
There is no “new normal”, at least not yet, but responsive companies can turn things around now to take full advantage of new trends in the marketplace, even as they emerge.
For instance, until 2019, Americans were moving at the lowest rate on record and that trend looked very stable. In 2022, a record number are now relocating to less expensive areas with lower taxes.
While that eventuality would have been very difficult to predict five years ago, with “Turnaround,” companies, corporate managers, and employees will have all the flexibility they need to capitalize on the changing marketplace, riding each new wave from the best possible vantage point.
Come what may.
(contributing writer, Brooke Bell)