Your Blueprint for Managing Through a Downturn

Posted by Orit Gadiesh & Hugh MacArthur on March 12, 2008 8:40 AM
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While economists are still divided on whether to officially invokethe “R” word, smart CEOs are already beginning to think about how they will power their companies out of the impendingdownturn. No better model exists for this kind of strategic exercise than the practices ofprivate equity, which frequently operates in turnaround mode. PE firms not only accurately determine the full potential of an acquired business, they create a detailed blueprint of how to get there quickly.
What is a blueprint? It is nothing more and nothing less than a strategic operating plan that takes the few key initiatives that promises the highest payback and turns them into results. The emphasis is on measurable actions. It starts with high-level moves and works its way down to things you can actually do differently on “Monday morning, at 8am”—in other words, to the detailed operational level—choreographing the moves from standing start to the finish line. Along the way, it helps create excitement and build alignment.
Buyout firm Newbridge Capital used this approach to help transform Korea First Bank from a bankrupt industrial creditor into a world-class financial institution. A key initiative was converting Korea First’s costly institutional branch structure into a network to serve retail customers.
Newbridge and Korea First’smanagement team carefully choreographed the blueprint. Rather than building branches from scratch, Newbridge worked with managers and redesigned the existing infrastructure, consolidating it into a handful of large-scale branches. It closed some locations, and removed back-office functions from the rest, refocusing them on reaching out to consumers. The result: a bottom-line improvement of $50 million within a year.
Soon afterward, Standard Chartered Bank bought Korea First for $3.25 billion, earning Newbridge a nearly four-fold return on its equity investment.
Developing a blueprint can help CEOs draw a bright starting line. This is especially true for new CEOs, who in fact face many of the same challenges as PE investors. Launching a strategic due diligence to define full potential within 100 days can help new CEOs light a controlled fire under the organization and mobilize the company around a common vision and roadmap.
Here are some key steps to creating an actionable blueprint:
• Develop a road map for your three to five key initiatives, and focus.
• Start macro, and work down to what you will do differently on “Monday morning, 8 am”—that is, the actionable to-do list.
• Be specific and pragmatic.
• Let the facts win the day.
• Create excitement and alignment.
• Budget two to six months (at least the first time).
Once you discover your improved path, start down it immediately. Every day you delay in a downturn diminishes your opportunities and enhances your competitors’.
So, as the economists scan for evidence of a recession, have you started planning for a downturn?