How to manage new challenges for businesses in a challenging economy

By | August 2, 2012

What are the key challenges for business in this economy? And what does that mean for managers and the skills they need to acquire and focus on?

This was the topic at an event that Bradford University School of Management held recently to launch our re-engineered Bradford executive MBA with guest speaker Keith Williams, chief executive of British Airways.

Here were the themes I looked at – and it would be interesting to know if you think we have these right and anything that is missing here?

1. Managing complexity and uncertainty

Whatever the economic climate, complexity is here and to stay. The new Boeing Dreamliner has more than 250 contractors, each making their own contribution. Boeing is unlikely to be the expert in every aspect of the supply chain – but it knows who is. Today’s managers must recognise that complexity means that there is no weakness in not knowing every answer (or even question). The weakness is not knowing who to ask. Take a look at www.innocentive.com – remote pick and mix solutions.

What is certain about the current economic climate is that we are all uncertain! Most of us grew up in times when you could plan ahead for five years and feel confident, with a bit of tweaking, that you could and would deliver most of your plans.  Now, the managers I meet say that they struggle to produce meaningful plans for six months or a year ahead because markets are changing so quickly.

This is not always a bad thing – managers are more flexible than ever (or need to be) and this means they can spot and maximise opportunities very quickly. But the key is, can they do so more quickly than the competition?

One of the toughest parts is working with staff in times of uncertainty. Redundancies can create guilt, rather than empowerment, among those still employed and mean they just keep their heads down and do not innovate – just keep their job.  Often the energy has gone from those left behind, they don’t believe platitudes from managers.

Managers need to communicate better than ever.  Rebuild confidence and energy in their teams, be very open and genuine about problems and involve employees in problem solving together.

2. Leaving the silos

It is an essential skill to be able to work across a whole business and understand the impact that will happen from a decision made in one part of the business on another very different area. But silos are the norm, not the exception. And many managers run silos within silos!

Here’s a good example. Supermarkets have introduced self-serve stations, which to one part of the business must have seemed entirely logical. They will reduce the need for staff, queues will move quicker, customers will be happy.

The reality has been very different – and you wonder the extent that front-line staff were involved in the decision and implementation of these. What actually happens is that customers can’t get the till to register the bar-code, when finally they do they put it in the bag and then the machine says something like ‘unexpected item in the bagging area’ making the customer feel like a criminal or stupid. How many times have you tried one of these machines and left feeling deflated or a failure? It’s not a great customer experience! It is a silo created one!

3. Risk-taking

Picture4Risk-taking is perhaps the most difficult at the moment. When do you need to be rational and when should you trust your instinct? There is interesting research in the School on this subject and it’s created heated discussions among our Bradford executive MBAs!

The big issue is the balance between making a ‘perfect’ decision, say over 12 months – by which time your competitors have leapt in and taken the market – or following your hunch, even if you launch something that will need refining over time, or might even fail.

Managers need to create an environment where there is freedom to follow your hunch – and empty your mind of everything that is stopping you from doing this because the biggest restriction to innovation is when someone says ‘prove it’.

How many times have you wished you’d followed that hunch?

If you can achieve a track record of two out of three hunches being right, that’s a pretty good achievement?

4. International empathy

Picture2Someone recently said to me that the UK is flat for the next five years. That being the case, every organisation needs to be comfortable with internationalisation – even if not selling overseas, almost certainly they will be buying and outsourcing abroad. And if they aren’t – they probably need to look seriously at their business activities.

The obvious international opportunities are still in BRIC countries but Africa is rapidly opening up. But Africa, or at least parts, is out of the comfort zone of many UK managers. But it’s not with those from many other “developed” countries. Managers need to ensure they get out of their comfort zone when prospecting for business and bring out the best from multi-cultural workforces.

5. Information age

Picture5Our digital age is bringing new ways of doing business and using information. It is also bringing new challenges in terms of protecting that information. The BBC and other media organisations are struggling to protect the information that they put out.

So managers need to work more creatively. Rock musicians accept they make little money from producing DVDs – but touring is bigger business than ever. Nothing can replace the buzz and atmosphere of live music.

6. Influencing and generation Y

Picture6Generation Y were born in the 1990s, are connected 24/7, are literate, technical, tend to have a strong moral stance and are pretty sceptical about those who got the world into such a financial mess. They are loyal to themselves rather than their employer and work-life balance may be more important than salary alone.

Managers can no longer shrug it all off. The Y Generation is the future – employees as well as consumers. Managers need to get into their zone. Employ strong motivational skills, involve and interest, give regular praise and understand that a great pension offer (if one exists!) at 22 is unlikely to be seen as any incentive.

Which of these challenges do you think are the hardest to manage – and have we missed any that you think are more critical?

Whatever the economic climate, complexity is here and to stay. The new Boeing Dreamliner has more than 250 contractors, each making their own contribution. Boeing is unlikely to be the expert in every aspect of the supply chain – but it knows who is. Today’s managers must recognise that complexity means that there is no weakness in not knowing every answer (or even question). The weakness is not knowing who to ask. Take a look at www.innocentive.com – remote pick and mix solutions.

What is certain about the current economic climate is that we are all uncertain! Most of us grew up in times when you could plan ahead for five years and feel confident, with a bit of tweaking, that you could and would deliver most of your plans.Now, the managers I meet say that they struggle to produce meaningful plans for six months or a year ahead because markets are changing so quickly.

This is not always a bad thing – managers are more flexible than ever (or need to be) and this means they can spot and maximise opportunities very quickly. But the key is, can they do so more quickly than the competition?

One of the toughest parts is working with staff in times of uncertainty.Redundancies can create guilt, rather than empowerment, among those still employed and mean they just keep their heads down and do not innovate – just keep their job.Often the energy has gone from those left behind, they don’t believe platitudes from managers.

Managers need to communicate better than ever.Rebuild confidence and energy in their teams, be very open and genuine about problems and involve employees in problem solving together.

1.Leaving the silos

About Julian Rawel

Julian Rawel is Director of Executive Education at the School of Management. He has previously held positions of Groups Sales and Marketing Director, Eurocamp plc and Marketing Director, Royal Armouries Museum. Julian has been a non executive director of travel industry bodies ABTA and AITO. He has a BA in Geography from Leicester University and an MSc in Tourism Management from Manchester Metropolitan University. Julian is a Fellow of the Chartered Institute of Marketing and a Chartered Marketer.

Specialties:  Consumer and business marketing, Branding, General management, Management development

14 thoughts on “How to manage new challenges for businesses in a challenging economy

  1. Victoria Tomlinson

    Julian, this is spot on. While some of these will apply more to larger corporates, I think for all businesses, whatever their size, managing complexity and planning is the biggest challenge.

    The theory is that our business plan should look at possible political and economic scenarios and have ‘what if’ plans for these. But we’d be here all year trying to second guess what might happen to the Euro, let alone all the other unknowns in the economy.

    Risk-taking and innovation have to be what matter at the moment – and as you say the biggest skill is building in the allowance to fail (a bit!).

  2. Robert Campbell

    This is a really interesting debate. Julian has teased out the ‘big picture’ issues which are likely to impact on the UK economy over the next ten years. It is interesting perhaps to consider the current actions of some of our largest institutions towards innovation and risk taking. The banks have secured the hatches (with much encouragement from the UK Government) and are building up their balance sheets whilst telling us that many of the business propositions they are being asked to lend into are … too risky.

    The entreprenerial housing sector is on the decline with very low numbers of new builds perhaps again driven by the low mortgage lending levels currently.

    And the Government itself regards the lowering of UK debt to have a much higher priority than investment in business and enterprise.

    So from one viewpoint we have the pragmatism that says business must be more inventive and risk taking if it is going to weather this economic storm (as the alternative is shrinkage through consolidation) but the institutions are having cold feet about playing their part.

    We can only hope that large private sector companies can be braver than the example set by those who have such inflence over our macro finances.

  3. Mauricio Gomez

    I think that 4, 5 and 6 are closely interrelated. For innovation to take in this challenging times, managers need to realise that globalisation was not a ‘customs’ or ‘digital’ phenomena, it is a new set of mind that puts speed and transparency on top.

    Great article!

  4. Joy Milton

    Bonjour Julian! My first thought is along the lines of Victoria’s, that these issues are all very relevant, probably more so to larger businesses. The first three in particular could come under a broad heading of “be more entrepreneurial” which applies equally to business of all sizes.

    For ourselves, on the ‘S’ side of SME, the current challenge is related to the last two – how to target a limited marketing budget at increasingly sophisticated customer base. I consider myself fairly technologically literate, but my own Generation Y kids – and more so, their younger cousins – are working at a different speed.

    Modern businesses are far from being Luddites, but they do need to develop an open workforce with the competence to recognise and react to opportunities that the information age is bringing.

  5. Salman

    An excellent write up Julian! Enjoyed every bit of it especially the risk taking part being one of my favorites. Will share this with my colleagues at work. Looking forward to more of these kind from you. All the best!

  6. Patrick Spigt

    Thanks for the good article!

    I have something to think about, which could be useful for the article.

    At the moment in the Western world managers (and politicians) at the highest level make terrible decisions for business (and the government). Due to the financial crisis many sr. managers are in shock and do not know how to solve the problems the right way. Therefore they make terrible mistakes, making the problems even bigger.

    1. Problems to make good decisions together (game theory).
    2. Making terrible trade-off decisions that hurt important parts of the organization.
    3. Managers that do not have a clue what business they manage.

    Solution, create more flexibility (especially for older managers who cannot manage the changes), cut costs at the right place but do not stop working on your mission, vision and strategy.

  7. Brett Lorge

    Good article. I especially agree with the silos comment and how these need to be broken down to facilitate innovation and especially flexibility (as others have posted I think this is especially relevant in the corporation sphere in which I work). Another point related to this is that vendors or supplier companies face cost cutting pressures because of the uncertain environment and the impact this has on revenue internally in their businesses. These pressures are then reflected back and magnified by their external customers who want products delivered that save them costs and are flexible so they can pick and choose what they need at the speed they need it rather than taking premium or packaged products that cost more (both from a direct cost perspective and from indirect costs such as increased spend on infrastructure to support these products) that were the norm in the past, at least in the B2B space. Breaking down silos means business decisions can be made based on this type of direct customer feedback about the cost pressures they are facing (from a support, infrastructure and product cost perspective) as well as ensuring business units are able to respond quickly and effectively to these changes in requirements. A final point that is slightly contradictory is that because the external environment is constantly changing, vendors and suppliers are being pressured by customers to ensure a minimum amount of REQUIRED changes to existing products while still offering customers the flexibility to cut costs on these same products by dropping aspects of a product they don’t need. This means backward compatibility with previous implementations, products and product versions must be maintained during transition periods and there is a huge move away from “big bang” product upgrades.

  8. Course Program

    Well done…again. Julian I hope you keep writing more blogs like this one. Nice work Julian.

  9. Peter Harrington

    Hi Julian
    Good to read – many thanks. I took ‘Adapt – Why Success always starts with Failure’ on holiday with me. Author Tim Harford recommends a ‘Trial & Error’ approach to risk and getting things done. It’s a great read and fits in well with your blog piece.

  10. María del Pilar Ramírez Gallo

    Many thanks for sharing it. I find it very useful, very complete and through analysis yet simple and easy to read.

  11. Steve Brown

    Hi Julian
    I think you have clearly mapped out major, key challenges that face – and will continue to face – managers today. Implicit within “managing complexity and uncertainty” is an area that needs to be made explicit: that of managing within complex networks. Again, this touches on another theme “international empathy” but I think it is a challenge in its own right. For some strange reason we still use Porter’s Value Chain model. (I know it is not the same as a Supply Chain but it is often used as such!) The model may well have been true in 1985 but the world bears no resemblance to then and I think we need to equip our students – and managers – with the message that we now have to manage within what are often VERY complex networks (perhaps a better term than ‘chain’) and it calls for the very best of managerial skills to do so. Simply sated, things no longer move in straight line trajectories from raw materials to end customers – .e.g. Suppliers may subsequently become customers, alliance partners or even competitors within these complex networks that operate today, sometimes on a global level. The skills required to manage today include lateral thinking; the ability to deal with complex relationships; understanding international cultures and so on.
    One more thing: I think the world is different, post-2008. This is where Generation Y will hold us to accountability. I think we need to try to help a world in which new powerful economies are rising (notably, of course China and India, although they are examples of many others). Coupled with this, is the reality that China is buying up whole areas of base metals and other key prime sources of materials. Another challenge we have then, is how to engage with China in business where they will hold ownership of these key resources.
    There are many more themes because the world- although wonderful – is so remarkably complex these days including the very essence of how we conduct business.
    I hope my short ramble has helped the discussion in some small way. If it has, great; if not, then I am not: Professor Steve Brown (Exeter University; and Visiting Professor to Baruch College, New York)

  12. Liam Crawford

    Read your blog, found it interesting and on the money. What I would add with recent experience around redundancies, often the result of take overs or downsizing is that those not made redundant often wish they had been, especially if the package was good. So the reality is in the past people may have been lucky to have avoided redundancy but the work place de-motivator now is actually “ wish it had been me”.

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