Valuable Advice from Workshop 2
Emerging A Winner From The Recession

Mark Lowndes introduced the session on a lovely spring morning by wondering if the workshop was too late. Had we also reached the economic spring? Was it too late to talk of emerging a winner from the recession?

Reflecting further, he felt that whilst we are probably past the worst of winter, there are likely to be cold patches ahead. Whilst the worst was probably over the recovery is likely to be long and slow, and there are still plenty of opportunities available.

Mark introduced Alasdair Thompson from EMA.

Alasdair opened by noting how often you hear that manufacturing is failing, and yet never seems to die. Many of our manufacturers have survived previous recessions and thereafter they thrive and prosper. To seize opportunities from a recession, there are three key activities that need to be undertaken: cost reduction, restructuring, and revisiting strategy.

With respect to cost reduction, the majority of the cost in manufacturing businesses tends to be labour costs. In 2008, the EMA spent significant amounts of time assisting members to decrease their labour costs. In terms of an approach he recommended being open and candid with staff. It is important to tell staff the situation and to tell them what the plan is to survive the recession. Getting staff buy in is important. You will be surprised at how your staff will back you. This year there were no pay increases, there was much consolidation of business and an increase in the numbers of mergers of small businesses. All of these allowed for cost reductions, boosts in productivity and increased efficiency.

It wasn’t all about cost cutting. Many businesses were decreasing the number of labour resources they had, but were investing in upskilling those that remained.

Alasdair’s second point was around renewing the organisation. A recession is a great time to challenge everything you do in your business. For a start, consider whether the vision or mission of your organisation is still relevant. Is the strategic plan still relevant? Do the stakeholders in your business believe in the strategic plan, the vision and mission, especially in light of the changed circumstances?

The final point that Alasdair made was around the challenge of how to grow again in the changed world. Businesses really needed to focus on innovation and research and development. There are processes to follow to become an innovative business. The importance is that innovation is where productivity is born. He emphasised how important it was to innovate, change things and do them better.

The second guest speaker was John Keane from Vero. He didn’t see the big deal about the recession. A recession should be considered an input rather deterministic of the business model. In essence, the recession was yet another change in a world where change was constant.

In China the dragon is a symbol for change. It represents the responses a person can make to change, in relation to an approaching dragon. One approach is to put your head in the sand. For a while the dragon won’t be able to see you, eventually the dragon will and then you will be in trouble. The second approach is to lasso the dragon around the neck and hold on. Again this will work for a while, but eventually you will get tired and the dragon will prevail. Finally, you can ride on the back of the dragon. This is the best way to approach change.

John indicated that Vero have five simple steps to riding the dragon:

1. Have High Standards: At Vero, they use Baldridge as a conscience. Vero is one of only two New Zealand companies that have Baldridge certification, the other is a smelter at Tiwai Point which produces the purest aluminium in the world. In essence, the Baldridge standard is customer and process focussed. It is about identifying and continually improving key organisational processes in the interests of delivering better value to clients.
2. People Make an Unassailable Difference to the Organisation: You must ensure that your people are engaged and enabled. It is the people that create an unassailable business difference every day.
3. Simplify: The significant few should not be sacrificed for the insignificant many. If you concentrate on the important things and deliver them fantastically then you will be a success.
4. Execution is Key: You need to make sure that you are executing on the things that make the biggest difference.
5. Deployment: While it's good to have a project delivered, you need to make sure that two years later the project is still delivering.

The final presenter was Rod Drury from Xero Limited.

Rod started by asking rhetorically how small business had been affected. In fact, lots of small businesses appear to be going really well. Certainly that’s the feedback he’s been getting from the people he’s been talking to. Maybe that is a good thing, but maybe it means that we are not as connected with the international markets as we ought to be. This is indicative of a significant problem. It is really hard to do business from New Zealand. New Zealand has a comparatively small market. There’s a high, high threshold you need to get over if you want to expand overseas, which makes it a hugely difficult jump for businesses to make.

Commenting on Xero Limited's business, its approach is to see change as presenting opportunities which need to be exploited. Having identified change, they look to the technical types for a way to exploit the change. A key way to do this is to look at stakeholders. If you can identify what pain points people are suffering and can then solve the pain points, you have an excellent business basis. Rod noted that their technical trend is to move everything online. He saw the recession as just a smaller trend within the larger online trend.

Talking more about Xero. Rod said that at the moment people aren’t investing. Xero was concerned it was going to need to do a downround. However, what Xero did was to look overseas. The company found that it was much easier to fundraise in Australia than in New Zealand, largely as a function of increased market size and increased experience on the part of the investors.

So today, Xero is a public company with money in the bank whereas the incumbant competitors were loaded up with debt and had weaker balance sheets. Xero has opportunities to raise money and is able to do acquisitions. It is difficult for new entrants in Australia and even in the US. The recession has really been positive for Xero – it has effectively increased Xero’s runway by decreasing the risk of competition. The listing decision has meant that they were able to fund through equity rather than debt and this has made a huge competitive advantage to the company.

The session concluded by the audience showing its appreciation in the usual fashion after Mark Lowndes thanked the panel and all of the participants and sponsors of the second of the 2009 series.

We look forward to the rest of the 2009 Business Intelligence Series, which concludes with Workshop 4 on Wednesday 18 November - The Big Debate - New Zealand Will Get to the Top Half of the OECD by 2020. This will be a special debate format with two speakers arguing that New Zealand will get there by 2020 and two arguing that we won't.

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