Speed vs Strategy

by Steve McKee

Cristobal Conde is CEO of SunGard, a leading global software and IT company. In an interview with the Wall Street Journal, Conde was asked what has been the best move he's made during the downturn. He answered, "We could have generated more earnings by having more layoffs. We wanted to protect R&D. We wanted products ready to go at the end of the cycle. I saw a huge competitive opportunity to protect programmers when others weren't."

Conde's perspective is smart, but rare. Our research shows that most companies overreact to a downturn and cut not just fat, but muscle. If they go beyond what's absolutely necessary, that can easily compromise their future. Conde turns the fear on its ear by asking his employees "What is it you need to do now so you will remember the crisis as a gift?"

Chilean by birth, Conde has developed a taste for a uniquely American institution: NASCAR. Perhaps it's because he sees in racing similar patterns to those of business. "Going into the crisis is not that different from going into a turn," he says. "You slam on the brakes. In the turn, the most important thing is your position relative to other cars. I've been telling people, 'Focus on our relative market shares rather than overall volumes you can't control. What are we doing to improve our position?' After the turn, you take that better position."

Conde can't guarantee that SunGard will come out of the recession a winner, just as even the best NASCAR drivers don't know when they'll cross the finish line first and when they'll come up short. But races are decided by the strategy of the driver as much as the speed of the car.

Drive smart.


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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Making Innovation Work in a Downturn

by Dan Keldsen

In this latest podcast, IAM Talking with Carlos Dominguez, Senior Vice President in Cisco's Office of the Chairman of the Board and CEO.

Carlos has worked at Cisco for 17 years in a variety of roles, and advocates for the broad and creative use of technologies that are transforming how companies do business, creating distinct competitive advantages and new business models for those who adopt them.

Dominguez says that video, Web 2.0 applications and the increasing use of social networks, at home and at work, are at the heart of the collaboration revolution that is helping companies use the power of collective intelligence to produce revolutionary ideas for new products, better customer service and greater cost reductions.

It was a sincere pleasure of speaking at length with Carlos, and for my part, I believe we had a stunning array of innovation and collaboration-related tangents that emerged, which I believe are well worth paying attention to. Not your average interview, by any stretch.

A sampling of the highlights until we have a transcription ready:

Social networking and open innovation:
How did Journey find the next replacement singer after languishing for years with the missing voice of Steve Perry (lead singer) in the late 80s? YouTube and social networking located a replacement singer from... well, you'll have to listen to find out.

Virtual meetings and worlds:

Cisco is not immune from the worldwide dip in the economy, has taken steps to ban all large scale travel for their sales meetings, executive meetings - at a 10x cost reduction (minimally), and with no perceived decrease in the richness or validity of the outcomes. What is the role of telepresence? Gaming as a competitive driver for salespeople? Take a listen.

Culture:
To paraphrase Carlos:

"Most great innovations are killed within organizations... as they are threats to the existing business... and the Cisco culture is specifically built and tested to prevent potential ideas from being killed"

Cisco has a requirement for executives and managers each quarter, or at the least, yearly, to indicate exactly what they are doing within their business unit to Innovate (BIG I in my vernacular or "disruptive innovation" to some) versus innovate (small i or improvememt) within their areas. How does this compare with YOUR organization?

Healthcare:
What is Cisco doing themselves, internally, to innovate in the health and wellness of it's own employees as well as their families? And what has the impact of that investment been?

And much, much more in this slightly more than 30 minute interview...

We had some issues with Skype introducing noise into the system, but keep your ears open for some fantastic points on the state of Innovation within Cisco, Cisco's customers, and what Carlos' experiences in seeing and working with some of the most cutting-edge technologies available, make possible.

Listen now!

Download the MP3 of this podcast

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Dan Keldsen is Co-founder and Principal at Information Architected in Boston, MA, providing analysis, consulting and training services to organizations worldwide on the application of technology to knowledge workers and managers.

Innovating Through Downturns

While most individuals and organizations natural reaction to an economic downturn is fear and retrenchment, they also present a time of great opportunity.

Where would Microsoft be if they hadn't continued investing through the downturn of the early 90's?

• Microsoft may never have finished the hugely successful Windows 95.

Where would Apple be if they hadn't continued investing through the technology crash of 2001-2003?

• Apple may never have fully realized the promise of the iPod and subsequent iPhone.

When a recession arrives, great opportunity presents itself:

• The unemployment rate increases (more available workers)


• Interest rates drop (lower cost of capital)


• People become fearful of losing their jobs making it easier to recruit from companies reducing or eliminating their innovation investments (increased labor mobility)


• People are more open to moving if a spouse's job is eliminated or at risk (increased labor mobility)


• When a recession arrives, it is easier to acquire tax breaks or other incentives for expansion, new sites, etc. (lower investment costs)

So, if companies have positive cash flows or significant amounts of cash on their balance sheet, or promising ideas to invest in, then there is no better time to invest. Companies with the courage and financial capability to invest in innovation through a downturn, absolutely should.

In addition to all of the other benefits, there is no better opportunity to achieve competitive separation through continued investment in innovation.

It does, however, take a strong CEO and steady board to have the courage and conviction to make such an investment. Innovation is not a perfect science and requires a tolerance for failure and a long-term commitment.

In today's short-term Wall Street quarterly profit-driven corporate reality, investors' short-term outlook may be the biggest impediment of all. But, smart organizations will find strategic solutions to overcome this impediment.

Organizations should take the following strategic actions to maintain or expand their innovation initiatives, despite the current global economic downturn:

1. Secure the leadership flexibility capable of continuing to invest in innovation despite financial pressures


2. Identify resources that you would like to have had access to during good times, that you might now have access to such as:


• Labor in scarce specialties


• Affordable capital


• Scarce real estate


3. Increase competitive monitoring to identify opportunities that may be created in areas where the competition reduces previous innovation investment


4. Increase customer research to identify opportunities to refine your ability to deliver products and services that deliver increased customer value, ideally at lower cost


5. Improve your innovation processes to improve your ability to innovate more quickly and effectively than your competition


6. Improve your organizational agility to increase its flexibility to adapt to changes in market conditions caused by the downturn and to shift resources efficiently and with increased speed

Organizations that take these necessary strategic actions, will come out the other side stronger than the competition, stronger than ever before, and create opportunities to preserve or attain market leadership.

Happy innovating!