With reference to the abstract of this paper, let us analyze what has transpired in terms of commercial hardship in the last 12 years in Asia commencing with; (1) the 1997 the devaluation of the Thai Baht that precipitated the currency meltdown in Thailand, Malaysia, Indonesia and Korea before the contagion spreading to Russia, Mexico and Argentina. The IMF and the World Bank had to step in to calm markets and assure creditors that their investments were safe – or so they thought; (2) as a result of the currency meltdown Indonesia’s strongman Suharto was forced to abdicate his rule after 32 years of undisputed and autocratic leadership. The ensuing political turmoil plunged Indonesia into violent street protests and left a power vacuum where various political factions fought for leadership; (3) the events of September 11, 2001 heralded a period fear of the future, Islamic xenophobia, anxiety and stagnant growth, notwithstanding panic among Americans to fly; (4) the first Bali bombing in October 2002 by Islamic extremists compounded economic hardship throughout Indonesia and tourists stayed away en masse for two years from the island of gods; (5) SARS, another killer endemic nobody could foresee and caused havoc from China to Singapore and Hong Kong and brought international travel to an almost standstill before the virus eventually burned itself out. Wearing surgical facial masks became a fashion statement; (6) after SARS came the bird flu threat in Vietnam, China, Thailand and Indonesia; (7) the Asian Tsunami in December 2004 cost approximately 225,000 human lives and brought the economies of Sumatra, southern Thailand, Sri Lanka and other Asian nations to a grinding holt; (8) and if one Bali bombing was not enough a second one on 1 October 2005 caused less human fatalities but plunged Bali’s fledging tourist economy, after barely recovering from the first bomb, into a severe economic depression; (9) to round it all off the current banking and liquidity turmoil precipitated the largest financial crisis since the great depression in the 30’s. And if this would not be enough the recent A/H1N1 virus or Swine flu made us all again painfully aware of how vulnerable and fragile our economies have become.

In light of all the calamities, do managers actually remember how to operate a business under “normal” circumstances? And, what constitutes normal in this context? Business environments are never “normal”, in fact they are characterized by stock market fluctuations, political instability and economical uncertainties, social upheavals, currency fluctuations and above else fierce competition for market share. Stock markets are by nature volatile and unpredictable, quality minded consumers will always demand the best product / service and value for money and the best and brightest employees will always look for greener pastures. Shareholders and Institutional Investors will always demand higher returns on their capital and the ROI is never considered good enough. Welcome to the new business world order. So what else is new and why do business leaders complain about the current state of affairs? We better get used to flawed information and imperfect alternatives. It is organized and systematic chaos that rules the market and we better get used to understanding it. Successful leaders recognize they cannot change the given status quo dictated by environment and economic conditions and other ‘ungovernable’ factors beyond their control. Importantly, they know how to prioritize issues and allocate appropriate resources where they are needed the most. Skilful and economically sensitive leaders understand this and make the best out of the available information – they don’t complain, they recognize and accept the facts on the ground. The rules of trade and commerce don’t change, what changes is our often narrow interpretation of competition and the impulsiveness of market forces. Leaders in this time and age require an inquisitive mind to explore new frontiers and a sense of (marketing) adventurism if they want to succeed in the face of economic adversity. Without the intellectual rigor and curiosity managers must posses, their existential survival is jeopardized. It is a combination of intellectual depth and breadth and to understand market forces that govern prudent decision making in times of crisis.

So how does a company survive or even prosper under such dire circumstances? How do we trade off unit price and volume without compromising market share or eroding our earning potential – whilst at the same time maintaining service quality and brand integrity? A unit price reduction of approximately 20% does not automatically guarantee a corresponding increase of 20% in volume. Notwithstanding such a strategy could lead to a wider price war and increases variable cost that does not benefit anybody. I see this as a classic lose-lose scenario. If we drive prices down we do it for the entire market and everybody loses. Strategic price adjustments are an absolute must in this present climate – but it has to be done intelligently, market segment by market segment and prudently so as not to jeopardize brand image that takes significant years, effort and resources to build. It all comes down to decisive leadership and inspiration. Successful companies in times of crisis and uncertainty have a way of identifying leaders who have an uncanny ability to galvanize their people to see beyond the current market trends, they mobilize resources and project an optimistic outlook. They keep an open mind and are flexible and adaptable to changing circumstances. Importantly, they are quick and fluid in their response. Central bankers adjust interests rates when economic conditions change regularly on a quarterly basis (as clearly demonstrated by the ECB, the BOJ and the Fed, albeit to late and too slow) – if they possess the flexibility and wisdom to change forecast patterns on a quarterly basis why can business leaders not adapt to the new changing parameters as aptly? Is it arrogance, complacency, corporate inertia or simple ignorance? Market dynamics are traditionally unpredictable and highly erratic. Budgets and business plans are not engraved in stone and successful leaders know when and how to change their plans reflecting the latest market changes. In uncertain times like these how can so called experts predict - irrespective of the level of sophistication of forecasting models - a terror attack or a pandemic that brings world wide travel to a complete stop? Many international companies resort to “rolling forecasting” models. These rolling budgets are revised on a monthly basis to reflect changing market conditions and trading patterns thereby gauging the financial impact on a company more accurately than a static five or ten year business plan. Human beings cannot forecast natural disasters, geopolitical unrest or social upheavals, demonstrations or viruses. In fact a forecast is exactly that, a forecast, not a certainty.

Unfortunately business leaders manage on three controversial premises: (1) Intransigence and refusing accepting that market conditions have deteriorated or the inability to know when, how and what to change; (2) having a fundamentally flawed understanding of customer / consumer expectations and (3) lack of strategic vision and an inability to identify shifting market and consumer trends.

What sets successful managers apart from their less successful counterparts is the ability and capacity to set realistic objectives commiserating with prevailing market conditions and measuring progress against these goals. It is not enough to conceive objectives or set targets and develop a corresponding action plan to achieve it. Any plan must be monitored for its relevance to determine whether the objectives are achieved. If not they must either revise the plan or change the objective; either way you act upon the findings. The essence of a manager’s job description is identifying problems and opportunities; and consequently challenges the key people in the organization to think deeply and realistically about alternative courses of action and what the consequences entail. Joseph Schumpeter, the Harvard Economists got it right in the 1940’s when he spoke of forces of (deliberate) “creative destruction”. Companies that survive and prosper adhere to his principles by destroying old processes and creating new ones. If they fail to adhere and adapt to the new paradigm of radical innovation it will be just a question of time before a competitor does and they ultimately place their business at risk of becoming obsolete. Consequently the successful corporation of the next millennium has to reinvent itself constantly like a chameleon changing its skin color depending on the environment and its ever changing circumstances; creative destruction thus becomes a reinforcing cycle that feeds on itself. Failure to adapt to the changes will be a recipe for corporate suicide.

Dietmar Kielnhofer PhD