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Robert Kaplan and the art of winning in turbulent times

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Robert Kaplan, one of the world’s leading business strategists, inventor of the balanced scorecard, and advisor to Barack Obama addressed an audience of 150 senior executives in Dublin today.   The event was a half-day executive briefing on how to build a recession-proof company. Robert Kaplan Live in Dublin was hosted by StaffBalance, a company that implements Kaplan’s methodology here in Ireland.

Robert Kaplan led a half day master-class of speakers including: Will Roche of Bord Gais and Ciaran McGowan of StaffBalance who shared their case-study experiences, insights and methods to inspire executives with the art of winning in turbulent times.

Kaplan talked about how in growth times, people become very exuberant – recruiting customers, launching products and spending widely.  Sustained growth hides negative economic fundamentals such as unprofitable relationships, and products.  It’s only when the tide goes out, when recession hits, that the true cost of doing business becomes exposed.  “You find yourself with a bunch of unprofitable customer relationships, products and delivery channels.”

Then companies slash and cut costs.  To Kaplan, this cost-cutting frenzy is like taking a meat cleaver to yourself to remove some fat.  This action removes valuable muscle and leaves the business so badly damaged that in some cases it may not recover.

Robert Kaplan spoke out against the over-emphasis on cost-cutting as a way to manage a business out of recession.  He said: “The low-cost, low-price model – the race to the bottom – is probably not a strategy that can be sustained, whether in a service economy or the manufacturing sector, because there are always lower cost ways of producing those products and services outside the country.  The death spiral starts when you start cutting and then you have to cut some more.”

According to Kaplan, “The move-forward impetus is leadership.   Executives must continually measure customer profitability, product performance and employee development.   The challenge currently for companies in Ireland include: the economy, new competition and the regulatory environment and leadership is at the heart of that.   The world is too volatile and dynamic to stay static.  The question everyone has to ask is: What will the world look like in five years time?”

He argues that it is possible to pursue cost-cutting to the detriment of a business.  Competition will remain strong from countries outside Ireland whose costs are inherently lower.  So, Irish business must create differentiated, better and more unique products and services.  This cannot be achieved solely by cost-cutting.  Irish companies must be inventive, people orientation and innovative in their approach to product and service design in order to win in turbulent times.

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