A friend of mine who runs a management and innovation consulting business recently told me that almost all of his clients were responding to the recession by making drastic cuts in budgets and personnel, including innovation, R&D, product development and marketing efforts. "The problem with that," he said, "is that when the economy recovers, it's going to take them another two years to ramp up again. They won't even have the right personnel or teams in place anymore. They'll be way behind."
So if it's going to set them so far back, why do executives make those decisions? Why do senior managers tend to have such a potentially limiting focus on improving the bottom line numbers in the next quarter, the post-recession world be damned? Clearly, the pressures of unhappy stockholders is a big factor, at least for public companies. But I came across a more intriguing explanation in a recent "Financial Page" piece
by James Surowiecki in The New Yorker
Surowiecki explains the choice as stemming from a difference between risk and uncertainty. Quoting the economist Frank Knight, he says that risk "describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty describes a situation where it's not even clear what might happen, let alone how likely the possible outcomes are." Risk is an everyday part of business. But a deep recession ups the ante of unknowns so high that instead of calculated risks, managers are faced with actual uncertainty. And like sailors facing a dark, unpredictable storm, the typical response is to batten down the hatches, reef the sails, and just try to ride it out.
Not every sailor chooses that option, of course--especially during a race. More than one race has been won by a gambler captain who's actually let sail out during a storm wind, taking advantage not only of the strong wind, but the fact that every other competitor has pulled in their sails, to gain an unassailable edge. Not surprisingly, the same has been true in business, as well. Surowiecki lists numerous companies who have let out their sails in tough times and emerged dominant after the market started to recover, starting with Kellogg cereals in the Great Depression.
So if the evidence is so strong that the industry leaders, post-recession, come from the ranks of those who didn't trim the sails in the storm, why don't more companies follow in their footsteps? Ah. Probably because more than one race has also been lost by a gambler captain who's let out sail in a storm wind ... and ended up capsizing rather ignominiously for their bold, courageous effort. Swing for the fences and you may just end up striking out.
We forget that sometimes, in our canonization of the innovative heroes of America. Or ... maybe we don't forget it. Perhaps the reason we give such great lip service to taking innovative risks but don't, as a market whole, tend to follow suit ... especially in tough economic times ... is precisely because we understand quite clearly the risks involved. As the saying goes, "Nobody ever got fired for buying IBM." Playing it safe may not win the race, but it's less likely to end up with you going down in flames.
On the other hand, as the former CEO of Continental Airlines once said, if you're in the pizza business and you just keep cutting one topping after another, pretty soon, all you have is crust. And it's hard to sell crust.
It's also hard to get people excited about making crust. "Think very conservatively, safely, and predictably" is not nearly as zippy or persuasive a slogan--or as likely to inspire employees to commit hearts and souls to the effort--as Apple's slightly more dramatic "Think Different!" campaign. What if pitcher Tug McGraw of the 1973 Amazin' Mets had tried to rally the team with "You know, we can get through this season without too much embarrassment," instead of his iconic "You gotta believe!" Now, granted, the Mets didn't win the 1973 World Series. But they went from last place to within one game of a World Series Championship in the span of a couple of months. Which isn't exactly going down in flames.
Vision alone doesn't guarantee success, of course. Christopher Buckley's new book (Losing Mum and Pup
) recounts how the vision of his acclaimed father William F. Buckley, Jr. for a more perfect Christmas Eve mooring once led to the running aground of the sailboat, with the loss of Christmas tree, presents and all good cheer. It's a cautionary, if highly entertaining, tale.
But there's a lot of ground in between battening down the hatches and voluntarily taking on a Christmas Eve gale. The captain I'd most want to crew for would be one who kept one eye on conserving the ship, but kept the other one ... crafty, conspiratorial and twinkling ... focused on how we might just outsmart that storm by concentrating on one or two particular strengths we had, or could develop, and taking advantage of the wind. Someone who wasn't content with survival as an end in and of itself, but had a passionate vision of something worth surviving for--and a clever vision of how to get there ahead of the rest of the pack.