Forest Fire Analogy

Adam Werbach over at Harvard Business Review wrote up a blog entry titled Surviving a Recession – And a Wildfire. It is along the same lines as an entry of mine from April called Recessions Can Clear the Dubris. Opportunities are There.

Both hit on how even though the method is devasting in its process, its great for those that can survive the ordeal.

Here are a few excerpts from his piece that I agree with:

A recession is like a forest fire — a rush of destruction that affects everything in its path. Andfor about the last hundred years, nations and companies have sought toprotect themselves from these catastrophic meltdowns through fiscal andmonetary policy at the national level, with similar effort at thecorporate level. The results have been unimpressive at best, andcatastrophic at worst. The U.S. and the world today face the worstrecession since the Great Depression, the equivalent of a super-firethat threatens the entire forest and the people in and around it. Atthe corporate level, the U.S. is experiencing an alarming three hundred and fifty commercial bankruptcies a day, including familiar names like GM and Crabtree & Evelyn.

1. Let fires burn regularly.

The U.S. economy never felt the full effects of the bursting of thedotcom boom because we were soon swept up in the housing boom, whichwas similarly propped up by the easy credit boom. Central banks need tobecome more practiced at letting economies take small dips regularlyrather than allowing a confluence of conditions that can create a deeprecession.

2. Be prepared to survive a fire.

Trees that are prepared to survive fires have some commoncharacteristics. They’re self-pruning; that is, their lower branchesfall off regularly. They also grow thick bark and deep roots. Companiescan hone these skills as well. The first rule is to be self-pruning, toconstantly readjust your staffing to ensure that you have the rightlevels of capacity and that you’re letting go of the dead weight. Manybusiness leaders find that the first round of cuts in a downturn areones that they should have made in happy times.

3. Require change — rather than resisting it.

Through the years, the most effective change guarantor is providingvalue-pricing. McDonald’s has thrived during this recession by usingefficiencies in their operations and supply chain to lower prices whenconsumers need it most. They have also used the opportunity toaccelerate their local sourcing of foods in preparation for emergingconsumer preferences. Another emerging model follows the thirdprinciple of natural capitalism,moving to a service-and-flow business model. In this model companiessell computing power rather than servers, light rather than lightbulbs, and, in the case of Shai Agassi’s “Better Place” and car-sharingcompanies like ZipCar, miles driven rather than cars. The ongoingrelationship with the consumer prepares these new service companies tochange rapidly as consumers change. When the traditional auto-industrystumbles, they stand ready to accelerate.


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