Keep Running Faster – You Might Win the Race to the Bottom!

July 30, 2012 / by admin / Strategy / 0 Comments

“We can’t solve problems by using the same kind of thinking we used when we created them.”  Albert Einstein

Operational efficiency is necessary but not sufficient. Simply being better at doing things the way that they have always been done may provide some respite, a way to carve profit from a market in which downwards pressure on price is unrelenting, but it is not a long-term solution to the structural changes which are affecting the industry. By running faster, you might win the price-cutting race to the bottom but the real issue is whether you will have a sustainable business when you get there.

Doing things fundamentally differently will ultimately trump doing the same things more efficiently. To succeed firms will need both an outside-in and an inside-out perspective. From the client’s perspective, what are the areas of meaningful differentiation which will ease price competition? And how can the firm deliver these in a consistent way across its entire footprint? Looking from the inside out, what are the changes to working practice, disruptive technologies and innovative approaches that will break the downwards cycle? And how do we reshape our business, our people, our culture and our rewards systems to “walk the new talk”?

Industry consolidation through merger or acquisition is gathering pace. Key questions for the strategist must centre on how the merger can provide a Trojan Horse and catalyst for change, ensuring that the firm is reshaped and fit for the future? Simply combining two underperforming businesses (without an agenda for fundamental change and the development of an approach fit for a new-reality) will, in the final reckoning, create only a larger, under-performing business. Yes, such a firm may climb the greasy pole, and buy itself some time, but subsequent downwards descent is inevitable.

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