Economic depression: a bundle of opportunities

Citation

Surendra S. Yadav, P. and Ravi Shankar, P. (2009), "Economic depression: a bundle of opportunities", Journal of Advances in Management Research, Vol. 6 No. 1. https://doi.org/10.1108/jamr.2009.42606aaa.001

Economic depression: a bundle of opportunities

Article Type: Editorial From: Journal of Advances in Management Research, Volume 6, Issue 1.

For quite some time now, the global economy has been showing signs of recession. It is the most talked about topic in the business world. Some call it depression, others call it slowdown or meltdown but all share a similar concern about falling profit margins and dwindling customers' sentiments at the market place. This crisis should not be seen simply as an economic crisis but as a psycho-economic crisis, as there appears to be a widely perceived loss of confidence amongst the economic actors. Its impact on individuals, families and organizations is generally depressing. At the very least, the euphoria of a fast growth-rate trajectory has certainly faded away. Many people have lost jobs; far more are in a state of mind which is dominated by a fear of job loss. The manufacturing sector is facing challenges of an unprecedented nature, with a considerable dip in demand, mounting inventory, ruthless cost-cutting measures, plant shut-downs and employee lay-offs. The service sector, including banks, is no exception. Although there are few countries and few industries, such as education and telecomunications, which are relatively less affected by this slowdown or recession, yet the overall impact on the social and psychological condition of people is not exactly what we would wish to have for the long term. Therefore, the present economic scenario throws many challenges and opportunities before all of us, whether in the practicing world or in academia.

As an indicator of this meltdown, buying behavior has gone through a perceptible change in many developing economies. India is no exception. The housing sector, for example, is going through a slump in these economies. Buyers' spending patterns are very conservative despite enough disposable incomes and financial institutions' support. There are not many customers in the market place who are as aggressive as they were few months back. Other economies, such as that of USA, have similar or even more difficult challenges. For example, the US government's $787 billion stimulus package was aimed at putting a brake on the downward spiral of its economy; but this, in itself, was not sufficient to stabilize the vulnerable financial system and collapse of the housing market. How to cope up with job cuts, falling revenues, tight profit margins and cost-cutting measures are major questions. How to cope up with the individual psyche and what needs to be done at consumer level, is also a prudent research question for all of us.

Another major question for research could be the relationship between recession and innovation. Many management gurus are advocating that this is a wonderful opportunity to intensify our efforts on R&D and innovation. We endorse this viewpoint. In a situation of low market demand, we need to invest more for the future with a hope that when the economy improves, there is a possibility to capitalize on the investment made in innovation. Therefore, innovation and R&D should occupy a dominant portion of the efforts toward transforming the economic downturn into a bundle of opportunities. We can do some of these things at a considerable discount: starting a new business, acquiring another company, investing and possibly launching a disruptive technology, developing new products or evolving additional value-added services, reinforcing the customer connectitivity, institution building, talent management, reengineering enterprises, evolving and nurturing less dominant research areas and related innovations, supporting future technologies, launching new academic disciplines, integrating supply chains with unprecedented complete SHOCK (Synchronization, Holistic planning and strategies, Organizational-network, Collaboration and coordination and Knowledge economy).

Synchronization is needed for all decisions and actions through out the supply chain; holistic planning and strategies involve a complete rather than a piecemeal approach; organizational network involves an integrated yet flexible framework for decision making, which is supported by information and communication technologies; collaboration and coordination are required for a conflict-free supply chain network; and a knowledge economy is the need of the hour.

Many believe that during this crisis of downturn and depression, it is easier to manage innovations, both at product and process level. We believe that process innovation should be aggressively pursued, even if companies find it difficult to innovate at product level. For process innovation, we need the involvement of employees in redefining their role and responsibility, along with process redesign to optimize the use of organizational resources. Should organizations do something new to facilitate this and what should be done to intensity these efforts? Maybe it depends upon the country, economic situation, organization and the sector to which it belongs. Maybe other issues dominate; for example, top management commitment, competitive environment, global pressures, employee attitude, innovation culture, or something else. Should we not dovetail our efforts to properly reposition ourselves to cope up with the challenges of recession? Consider how to re-orient an employee, even at a lower level of organizational hierarchy, who, until now, was only concerned with output of conventional products or services into a vibrant R&D and innovative professional.

Ways of coping up with depression, whether at a psychological or at an economic level, have some similarity. Thinking too much about the problem and diving deeper into the drain of self-pity, yet doing nothing tangible to overcome the problem, will only aggravate it. Diverting attention to something different, preferably unrelated, “pulling up one's socks” to do something new, seeking peer company and support, being optimistic about a better future and investing vital resources to prepare for that future, are just a few ways to come out of depression. Relationships matter at a time of depression. For businesses, it is the time to re-build or rejuvenate relationships with customers and suppliers. Have a better connection with all those who matter and evolve joint strategies.

The more serious the problem, the higher should be the deployment of corrective measures. Meditation is recommended in India to overcome an individual's depression and also in the case of organizations. Self-introspection helps. Similarly, organizations can concentrate within – very carefully and consciously looking at every minute change happening inside and continue to do so until the turbulence settles. Set the most soothing new rhythm within the existing processes and supply chains. Process redesign, product re-configuration and deployment of new value-added features may help. And, like serious cases of individual depression, when the help of a professionally qualified expert is needed, organizations should look for hand-holding. Why are most organizations still shy in seeking experts' advice for some of the redesigns and innovations that are needed now? Only the ignorant, in a state of depression of this magnitude, act this way. The academic world and professional consultants can possibly contribute most in this regard.

Evolving networked organizations and coordinating their supply chains are needed to pool the common resources and focus on cost cutting, while paying increased attention to investment in R&D and innovation. Diverting attention and “listening to music” may help an individual cope with depression. Possibly, listening more to the “voice of customer” may help companies to better innovate their products and services to deal with the economic depression. Also, in both types of depression, time is an important dimension. If we are successful in devising conscious strategies to survive in the most troubled phase, each passing day, without asking, would provide opportunities to move out of it. Therefore, the first priority of organizations is survival for the time being. Optimists believe that opportunities to grow are bound to come, as depressions do not last for ever. Until that time, doing different things certainly helps. Innovating products and services should help organizations chart new ways to conduct business afresh. New products, services and related innovations provide hope and optimism to organizations and also to their customers. For example, Tata Motors, a leading auto manufacturer in India, has just launched its four-seater passenger car, Nano, in the midst of the economic slow down. The new car is priced at about $2,500. Undoubtedly, for this low-cost, attractive car, Tata Motors has invested a lot in innovations at product, process and supply chain levels and the result is that, despite economic slow-down in overall economy, there is an unprecedented, positive customer sentiment for this car in India. Low cost provokes customer sentiments; so is the case with higher valued products. Mobile services are good examples of value-added services. Incidentally, the telecommunication sector is doing relatively better in most parts of globe during this economic down turn. We believe, when the going gets tough, the tough get going. In the past, new market leaders have emerged in turbulent times. If Apple could achieve this during the last depression, why not others in this depression? We look at the present crisis as a bundle of opportunities.

We conclude with a quote from Gita, the most revered ancient book in India, which is in Sanskrit, one of the richest ancient languages of our time. “Samatwam yog uchayte ….” In the present context, it means: remain in the state of equanimity in success as well as failure; in good times as well as in bad times. But, be reflective so that new ideas come and then have the capability to implement them. Finally, this should lead to a new set of expertise and a new set of products and services. All this makes you stand out. This is described in Gita as “… Yoga karmasu kausham”, meaning – dexterity in thought and action.

Professor Surendra S. Yadav and Professor Ravi ShankarDepartment of Management Studies, Indian Institute of Technology Delhi, New Delhi, India