Building out of a Downturn: Companies Are Now Using More Management Techniques to Rise above Tough Times, and Many Are Focusing on Growth Tools
Rigby, Darrell, Bilodeau, Barbara, European Business Forum
Like homeowners struggling to fix leaky roofs, shore up foundations, refinance loans and order new construction to improve their properties, companies are both economising and innovating to build their way out of today's slow-growth business environment. For Corporate Express, the office-products firm that accounts for two-thirds of the [euro]9.9 revenues of Buhrmann, NV, that's meant an ongoing drive to cut costs without losing sight of the primary strategy--increasing organic growth. As customers in Europe, North America and Australia cut back their purchases of office supplies during the downturn, Corporate Express reduced headcounts (by 11 per cent in 2002) and rationalised IT assets and distribution facilities. The company continued, however, to improve customer satisfaction and grow revenue by building up its online procurement platforms and catalogues.
Corporate Express is just one example of a significant shift in management strategies to beat a downturn. Coming out of the 1990-91 recession, companies were more focused on cost-cutting; today a majority of executives worldwide plan to pump up growth even as they keep a lid on costs, according to Bain & Company's 2003 survey of Management Tools & Trends.
The survey found that companies overall are using more management tools. But while they have responded to recession in the usual manner by boosting their use of cost-reduction tools like outsourcing, they have begun to focus increasingly on growth tools, such as customer relationship management (CRM), an approach that harnesses technology to build customer loyalty. Respondents to the survey, which rates 25 popular management tools for use and satisfaction, say that growth tools work. And they are seeing the payoff in their firms' stock performance.
Choosing tools that work
For nine years, Bain & Co. has tracked the use of management tools (see Figure 2). The 2003 survey, which gathered data from 708 companies on five continents, found that tool use overall had increased. The average company employed 16 tools to navigate out of the 2001 recession and the sluggish recovery, up 36 per cent from the average of 12 tools used in 1993 when the G-7 economies were recovering from the 1990-91 recession.
Tools that help cut costs--such as benchmarking, outsourcing, supply chain integration, activity based management, reengineering and downsizing--were certainly popular. Some 63 per cent of companies surveyed used them in 2002, up one-fifth from 52 per cent in 1993. "In these tough times," said one research director in the health care industry, "people have to tighten up their business practices and become more efficient. To that end, they are looking for tools to help them accomplish that goal."
But tools used by companies to find new revenues increased much more markedly. An average of 79 per cent of the firms in 2002 used growth tools, versus 43 per cent in 1993--an increase of 84 per cent. Growth tools include strategic planning, growth strategies, core competencies, customer segmentation, customer surveys and customer relationship management. At least three quarters of the respondents used each of these tools (see Figure 1). "You can't afford not to grow," said a vice president of corporate strategy. "You can't just wait for the economy to pick up before you begin introducing new products for customers."
At Sodexho Alliance, the global food service provider headquartered in Paris, organic growth is the top priority in overall corporate strategy, and customer segmentation provides a key tool for locating growth opportunities. The firm's Sodexho Marriott subsidiary, which operates facilities on university campuses, combines data from student surveys with demographic data to determine the unique mix of student segments and food-service preferences at each facility. The information is used to redesign menus and food-court formats, resulting in double-digit increases in patronage and spending. …