Cartoonists Michael Fry and T. Lewis astutely observed that, “The more things change, the more they remain … insane.” For many business leaders, today’s economic climate is awash in change – volatile, often unpredictable, and always daunting change. How do companies, new or established, prosper in an environment where funding is drying up and bankruptcies are on the rise? How do you keep your existing customers and attract new ones when people are more inclined to save their money than spend it? Equally important, how do executives ensure their employees remain engaged when they are worried about their futures?
These were essentially the questions put to the business leaders who shared their experiences and insights at Ivey’s Idea Forum on April 13, 2009. At this Forum, Larry Rosen, the CEO of Harry Rosen, and Anton Rabie, President, Co-CEO and Co-Founder of Spin Master Ltd., revealed their corporate strategies for “driving growth during turbulent times.”
While many high-end retailers are taking a major hit, Larry Rosen says that the global economic crisis hasn’t been catastrophic for his business. Regardless of a few setbacks, “some pockets are doing very well”. Larry’s advice is “to always stay true to your brand,” especially in bad times.
During the recessionary period in the early 1990s, the company had considered the “$49.95 suit”, but that idea soon fell by the wayside. As Larry explained, a Harry Rosen customer “doesn’t want to trade down in quality. In difficult times, they may buy less. However, they won’t compromise on their standard of quality.”
Harry Rosen is “known for its well-trained associates, the presentation of its merchandise and the store’s environment” – all of which are an essential part of the “customer experience” at Harry Rosen. Larry believes that although companies must carefully manage their expenses in an uncertain economy, they “must not change anything that changes that customer experience.”
Consequently, his company is not cutting staff. In fact, it is concentrating on keeping staff motivated and engaged by introducing new sales incentives. Overall, the message that Larry continually strives to communicate is that “at the end of the day, we’ll be stronger.” As a result, he says that, “morale is great, there’s no turnover and the thinking is positive.” This strategy “has worked (for Harry Rosen) throughout the four recessions” that occurred since the company was first established in 1954. And it’s a strategy that Larry Rosen will not change now.
Anton Rabie, who heads up and owns Spin Master together with Ronnen Harary and Ben Varadi, also embraces the wisdom of remaining true to your company’s mission and values. Spin Master is Canada’s fastest growing children’s toy and entertainment company, with customers in 56 countries. It employs 650 people in Canada; the United States; Mexico; China; the United Kingdom; and France. And it has co-development and technology partnerships with other leading companies competing in markets aimed at children, including Sega Toys and the Cartoon Network.
According to Anton, the children’s consumer products industry has been hit hard by the current recession. Overall, the price to earnings ratio is down for many companies and sales are dropping. Industry-wide, the feeling is that “things will not get better until 2010.”
Anton believes that CEOs in troubled industries today must “lower their company’s operating costs and understand their numbers.” But, they also have to “protect the core of their business,” by leveraging “the three or four differences” that make their products stand out from the competition. He further believes that it is critical for CEOs to “be transparent and visible” and to “present staff with a credible plan on how the company will emerge from troubled times.” His overall goal is to ensure his company “is prepared for the brand new world” that will emerge when the world’s economy comes out of the current recession.
Concentrating on your primary business strengths, eliminating unnecessary costs, and remaining open and transparent with employees were precisely the lessons I also took away from my experience as CEO of Lucent Technologies Canada. When I first joined the company in 1999, the market for telecom products and services was ballooning. But eight years ago, the bubble burst. In a matter of months, Lucent restructured from 11 business units to just two. This restructuring focused intensely on becoming more responsive to Lucent’s major customers. It also concentrated on continued innovation and superior service, Lucent’s key strengths. Although our efforts were driven by the necessity to lower costs and to generate more revenue, Lucent didn’t just want to become a smaller company, they wanted to become a better company.
I believe now, as I did then, that this was the best strategy for Lucent at the time. Nevertheless, the changes were dramatic in scale and scope. They came fast. And change of that magnitude and speed is excruciating. So throughout the restructuring, my leadership team and I made sure that employees were kept on top of developments. We answered their questions and addressed their concerns, openly, honestly and realistically.
In the end, these collective efforts proved successful. We stemmed the cash flow out of Lucent by almost 90 percent, while increasing share in our target markets. But even more important, we strengthened teamwork across the company’s business lines. Our sense of community became stronger. In fact, with the restructuring well underway, 90 percent of employees reported that cooperation among our own internal groups had improved considerably.
Many highly successful companies, like GE, Microsoft and Dyson, were founded during recessionary times and prospered. Here in Canada, Magna International, Second Cup and McCain Foods among others, all began and later grew significantly in a tough economic climate.
As Simon Parker, Director of Ivey’s Driving Growth through Entrepreneurship and Innovation Cross-Enterprise Leadership Research Centre, says “The success of some companies in challenging times can’t just be chalked up to good luck. Downturns are notorious for being hard on companies, but they also offer opportunities to reinvigorate a company. Companies that are resourceful, innovative and focused on their vision have greater chances of winning when there is an uphill battle.”
Larry Rosen and Anton Rabie demonstrated at the Ivey Idea Forum that their companies have that winning formula. I also know from my leadership experience, that it’s the best, perhaps the only way, for any business to thrive in turbulent times.