The theme of turbulence as “the new normality” is explored in a recently released book by Philip Kotler and John A Casilone “Chaotics: The Business of Managing and Marketing in the Age of Turbulence”. Ann O’Dea of Marketing Age points that the book postulates that turbulence, risk and uncertainty are the more normal conditions of industries, markets and companies, and that turbulence has two major effects – vulnerability, against which companies need defensive armor, and opportunity, which they must exploit.
Kotler states “And, if I’m right that turbulence will be normality, then companies have to set up damage control systems and early warning systems so there are not as many nasty surprises..One step you can take is to better read what’s actually happening to your customers, your suppliers and your employees, and that itself is the idea of what I call early warning systems..”
Example of new customer normality – Price and quality: Tradition states that higher price is a sign of better quality; however, the price/quality relationship no longer applies. In this economy, everyone is looking for a deal. Remember, your customer’s problem is not having enough money is also your problem too. You need to be able to do something better and more efficiently than your competition. Then you can pass those savings on to customers and solve their problems. Do you have the tools to optimize the financial performance of your business so that you can afford to pass on savings? Do you understand how everything links together – your taxes, your expenses, your costs of goods sold, your cost of capital, etc…?
Example of new supplier normality – Demand and leadtime: Many suppliers are struggling and carrying inventory at the bare minimum. As a consequence, the frequency of shortages is increasing which is results in rising delays in delivery. Does your operation have the information to be aware of changes? Do you have the information systems in place to see changes in demand? Do you have the information to see changes in the delivery from your suppliers?
Tips on how to manage in turbulence:
- Arm yourself with the right information and the rights tools. Understand your processes from your customer all the way through to your supplier using tools such as Lean. Understand how everything links together and how one impacts the other, but limit your scope so that you are not overwhelmed. For example, use a metric that crosses functional barriers and strategic goals – such as economic value added.
- Setup and establish alerts or Kanbans. Kanban means "visible record" in Japanese, it is a system of notification from one process to the other. Make it immediately visible that a new normality has occurred.
- Setup capability to take action on alerts. Be able to position yourself and be able to communicate the change to your suppliers, employees, and customers.