November 2001 FAQ

Q. Wow! The world is upside down! How do we find the new business reality that faces us today and tomorrow?

Answer:

I'm sure there will be a number of answers to that question…and maybe no one answer will be right. But each of us needs to work with an answer that shouldn't be too far off the mark. So here comes my answer…

1. Trust the intelligence of the marketplace

Many of us have come to believe in the collective intelligence of the free marketplace where buyers, sellers, and speculators alike mix it up in what appears to be a totally chaotic ball of fur. Many of us do trust that the market can, over time, read the tea leaves on what is wanted, needed, valuable, and worthless given any set of economic and geopolitical assumptions. The key will be to read through the overall level of indices like the Dow Jones and look for new patterns in the underlying securities.

2. Find the value template in market intelligence

The goal in this step will be to construct a value template for industries based on your reading of what the marketplace is telling you. A further step would be to try to factor out the general mood of pessimism or optimism and just look at the relative movements of industries against each other. Your template would be your best guess of the shape of the value marketplace for the future.

3. Review your business in light of that template

This step would require a soul-searching comparison of your template with your present portfolio, set of businesses, markets, and/or product/service lines. Those pieces of your business that fit the new template would be "invest" businesses and those that do not fit go on your "needed action" list.

4. Convert The Needed Actions Into Red Zone Maneuvers

The idea here would be to take actions as necessary but to envision them as Red Zone Maneuvers that have potential upside along with the significant risks that always come with such maneuvers. For example, a needed action to reduce costs on a product line could become a Red Zone reengineering maneuver aimed at both lowering costs and changing some of the other attributes of the product to provide more customer value. Or a divest action could be envisioned as a Red Zone asset swap with another company that might have the opposite problem.

5. Use the Red Zone Management Principles…Religiously

There is no doubt that the ten Red Zone principles are the management means needed in tough times. No company should count on its normal Run-the-Business management practices to see it through the needed actions to adjust to a new Business Reality. And if you can't make those principles work, then scale back on the maneuver to one you will be able to handle.

 

Dutch Holland, CEO of HDI, has worked as a management consultant for 30 years, helping organizations and leaders manage and implement change successfully. If you enjoyed this short article on Red Zone Management, you'll love his new book, Red Zone Management, Changing the Rules for Pivotal Times (Dearborn Trade, Chicago, Fall 2001.) Check your local bookstores or read a review at amazon.com or barnesandnoble.com! Contact Dutch at 713.877.8130.

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