Managing in Uncertain Times: Strategies and Practices for High Performance

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In the current economic downturn, high-performance businesses should take decisive action from a position of strength. Accenture has devised a framework that helps assess corporate strategic readiness and then outlines the four strategies that companies can adopt to manage through the uncertainty with the ultimate goal of high performance firmly in their sights.

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Although economic downturns are nothing new, rapidly intensifying globalization has made the business environment notably more complex, and has increased risk and uncertainty. Managing through these uncertain times is undoubtedly more of a challenge. Companies will depend on their ability to make sound decisions often based on less certain data than they would ideally like—even though the risk of wrong decisions is high. One option is not available: wait and see.

Accenture’s research on the 1990-91 recession showed that those businesses that survived and subsequently prospered practice sound, value-based financial management emphasizing cash flow and strong balance sheets during good times. This approach gives such high-performance businesses the flexibility and financial muscle they need during bad times. More recent research, building on Accenture’s High Performance Business research, shows that as companies execute strategies in a downturn, they need to keep an eye on their long-term goal of achieving high performance. They must continually balance, align and renew the three building blocks of high performance: market focus and position, distinctive capabilities and performance anatomy. Market focus and position (the “where and how to compete” aspect of business strategy) is particularly important in managing though a downturn.

Find out more about the three building blocks of high performance.

Based on its High Performance Business research and its extensive client experience, Accenture has devised a framework to help assess a company’s strategic readiness to address the challenges of the economic downturn. The framework is based on three primary criteria:

• Economic-profit performance.
• Balance sheet strength.
• Degree of country diversification.

Accenture analyzed Standard & Poor’s 500 Index in the United States and found that only one-third are in solid financial condition and able to take advantage of scale and growth opportunities.

What strategies should companies—both those at risk and those that are sound—follow to improve their competitive and financial positions in today’s uncertain times? Accenture proposes four strategic routes:

• Growth strategies. Market-penetration strategies are focused on gaining market share without diversifying outside of existing products/markets; product-focused strategies are focused on product or service innovation to gain market dominance; and geographic-expansion strategies aim to diversify via acquisition or via opening new offices.
  
  
• Scale strategies. These strategies aim to drive down costs by increasing throughput to an existing infrastructure or to leverage “in-place” competencies.
  
  
• Operations strategies. Such approaches focus on strategic cost optimization and price.
  
  
• Financing strategies. In uncertain times, these strategies tend to focus either on share buy-backs or repairing the damage to the balance sheet caused by asset write-downs.

Accenture’s experience shows that the ability to execute is arguably the most critical factor in whether a company can achieve high performance in uncertain times. This ability depends on access to the right information at the right time, having the right people with the right skills in the right roles and effective change management. Accenture’s High Performance Business research has shown that high-performance businesses do not wait for change to be forced on them, and thus are able to transform from a position of strength.

James Ellis is managing director-Finance Operations, Accenture, and also leads the company’s combined Finance & Performance Management service line for the Products operating group. He has 25 years of experience assisting clients with a broad variety of strategic and operational issues focused on achieving dramatic performance improvement and restructuring to realize transformational change.

Brian McCarthy is an executive director in the Accenture Finance & Performance Management service line. He has more than 16 years of experience in value and performance management and financial reengineering engagements. McCarthy’s primary focus is helping clients address key performance-management challenges and align their organizations around increasing shareholder value.

Roland Burgman is a n executive research fellow with the Accenture Institute for High Performance. He is president and co-founder of AssetEconomics, a New York-based strategic management advisory firm that focuses on enterprise valuation, future growth and communications issues for investor and corporate clients.