DODGING THE-ALL-THE-EGGS-IN-ONE-BASKET-SYNDROME

Posted in Anticipating A Crisis, Anticipation, Business Crises of our own making, Crisis Management Consulting, Crisis Management Planning, Diversification on January 13th, 2011 by mnayor

Secretary of Defense Robert Gates will most likely cancel the $14.4 billion program to develop a Marine landing craft designed to navigate water and storm beaches. Gates’ decision represents a change in fighting strategy. Now that ships and landing craft can be hit by missiles from a range of distances it is a signal that this type of warfare may be relegated to the ash heap.

What should companies take away from this development? Easy. Doing work for the Federal Government can, no doubt, be rewarding, (even though highly frustrating; red tape can turn crimson and frustrations can escalate) but a business must be ever vigilant and conscious of the winds in Washington. Certainly many high level decisions make a great deal of sense. But others can be politically motivated, or motivated by nothing more than the need to squeeze the national budget. Whatever the reason, it behooves any company that is a government contractor, to always have an ear to the ground.

The Marine vehicle in question is being built by General Dynamics. Although the cancelled $14.4 billion program was to have been spread out over a number of years cancellation will certainly still be a blow. At the end of 2009 GD had sales of $32 billion. The Combat Systems Division alone in 2009 generated 9.6 billion in sales and the company had an overall profit of $3.7 billion. So putting the project in this proper perspective, it was not just loose change.

GD has a diversified operation. With over 90,000 employees worldwide, it does not just rely on the government for business. It has thriving Aerospace, Marine Systems and Information Technology and Systems divisions, with many commercial customers. Its Gulfstream brand of business jets is known worldwide.

The moral of the story is clear. While GD may be diversified enough to withstand the travails of cancelled programs and losses of billions of dollars in sales, not all businesses are as prepared. Crisis management is not just for the “now” when the crisis has struck and everyone is scrambling. It includes crisis planning. A way for executives to focus on this is to consider it an offshoot of long range planning. Where does the company want to be in five years? In ten? What are the company’s vulnerabilities? How do we soften the exposure?

By treating crisis management not as a something to deal with as a rarified event, but, rather, as a necessary corollary to a normal function of long range planning, you will be able to mitigate the losses that come from the cancellation of your very own amphibious landing craft project.

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