Sri Lanka, like many emerging and frontier markets, are in the midst of an economic crisis, not forgetting the self-inflected damage caused by poor internal economic management.
The deprecating rupee and recent fuel price hikes and its ‘snowballing’ effect on cost of living is bound to impact consumer sentiment and spending, business investments and the demand for credit. The natural tendency of many businesses would be to start cutting costs and freeze development initiatives.
Research and MTI’s international experience, clearly shows that, the way in which companies respond to tough times, is what separates the ‘living’ from the ‘departed’. Most organisations tend to indiscriminately cut costs, freeze all forms of developmental work and adopt a ‘wait and see’ approach. We call them the ‘Chop and Cripple’ companies.
By contrast, the smarter companies (we call them ‘Trim and Fit’ companies), while being prudently cautious, uses the crisis period as an opportunity to critically evaluate every aspect of its strategy, structure, staff and systems, challenging every dollar and every stroke of work as to the value added. They also see the upside of acquiring low valued assets, strengthening their market position (given lower level of competitive/marketing activity) and gearing their organisations for the upturn.
A common feature in all economic/financial crisis’ that the world has faced over the last 371 years (from the Tulip in 1637 to current Global Financial Crisis) is the failure of some of the strongest companies that enjoyed meteoric rise in the good times.
The Trim and Fit Approach
- MTI’s Trim and Fit Approach is a Performance-Driven Consulting Solution to help companies to prevail (not just survive) the tough times and seize upside opportunities
- It takes a “direct-2-bottomline” route, thus ensuring sustainable results with the optimum level of resources. The entire process of change is lean and effective, which is further reinforced in the recommendations and outcomes
- Trim and Fit has been developed based on extensive international research of successful and unsuccessful tough times strategies and MTI’s own experience in the last 15 years (over 450 projects in 40 countries across a multitude of industries)
Deliverables to be pursued
- Resilience: Based on a Risk Management and Sensitivity Analysis, enables the organisations to withstand the fundamental and short term threats
- Sensitises the entire organisation through a highly inclusive, interactive and educative process that will get the buy-in of key stakeholders, also ensuring ownership in implementation
- De-Slack: Organisations inefficiencies are accumulated over long periods of good times and tend to get hidden in the overall profitability. De-Slacking through a process of rationalisation helps to achieve a cost optimised operation, by weeding out unproductive value chain components, plants, products, brands, channels, customers, structure, systems and initiatives
- Re-model the business on a Ground-Zero basis (given the environmental dynamics), thus arriving at a business model and scale that will ensure business sustainability and in a position to capture the upturn opportunities
- Upsides: Seizing the opportunities arising from the tough times and making prudent investments
- Toughen: Gearing the organisation to make tough choices that are lean and minimalistic as a part of their DNA, through a Performance Driven Culture (supported by Systems)
The Trim and Fit model
Risk Assessment:
Business risks (external a nd internal) in relation to:
- Value chain based PandL
- Strategy alignment, process optimisation, configuration and motivation
Sensitivity analysis: Degree of sensitivity, as measured by the components of:
- Value chain based PandL
- Strategy alignment, process optimisation, configuration and motivation
Crisis opportunity assessment: Business opportunities arising in terms of:
- Value chain
- Competition
- Strategy alignment, process optimisation, configuration and motivation
- Cash Flow/Cost of capital
Strategy alignment
- Understand and respond to customers’ needs in tough times
- Challenges and opportunities arising from key competitors
- Rationalise products, brands, customers, channels, price points, suppliers and initiatives
- Remove slack with direct-to-bottom-line savings
- Institute ROI measures (marketing, branding, channel, sales, service initiatives)
- Prudent investments to grab competitor market share
- Tighten disciplines of supply chain and working capital management – integrated approach
- Opportunities for acquisition of businesses, brands, products, patents and more
- Sustainability opportunities in the wider business domain
Process optimisation
- Develop lean and robust processes > exposing the excess ‘fat’ and reducing process time
- Optimise cost-effective technology > leaner processes, cycle time and efficiency
- Regimentation of lean formats > cut down meetings and reporting time > reduce cost of management time
- Regimentation of performance indicators > informed management decision making
Configuration
- Develop clean-slate based lean and effective structure featuring;
- zero slack
- minimised layers and supervision only jobs
- Manage excess capacity on the principle - ‘Cold at Structure – Warm at Staff’
Motivation
- Institute performance based pay structure/culture
- Identify how to ‘acquire’ and lock-in high/critical performers
- Sharpen critical competencies
- Drive towards a lean, simple and minimalist culture
- Drive change management initiatives towards new strategic and structural initiatives
Execution is key
- Given the tough conditions we are in, the delivery of this Trim and Fit approach will be based on the following principles:
- An inclusive and interactive process that see key internal stakeholders being part of the analysis and solution development process, via Consulting Workshop and Consulting Clinic
- Based on strong analytics as the foundation of the solution
- Extremely lean and effective documentation, with the focus being on Straction (converting Strategy to Action) and swiftly to implementation
- Given the above, ensuring rapid and condensed project timing
- Internal marketing and sensitivity appreciation to ensure smooth executions
- Implementation audits by to ensure it is being effectively implemented
