Restructuring for the 'new' normal.

• Author: Melville, Paul
• Position: READ FOR CPE CREDIT

There is little doubt that even when the economy returns to good health, things will be different. Organizations focused on growth are advised to prepare for anything but "business as usual."

There is little debate that the fallout in the financial markets and the resulting economic crisis has altered the landscape of American business. Among the casualties of this crisis has been the notion of "business as usual." Instead, organizations must adapt to a new way of thinking to first get through this difficult economy and then position for the future. In a sense, the job of business during the recessionary period is to restructure to compete in the environment of what is emerging as the "new" normal.

Sustainability and Conservatism Make a Comeback

One of the emerging core trends in this new business environment is the mass movement toward a focus on sustainability. Though "sustainability" means different things to different people--strategic, economic or environmental--the new economic scene is proving that it defines all of the above, and more.

The abundance of easy credit during the past few years often led to the erosion of strategic discipline on behalf of businesses. Flush with cash, many companies engaged in prolific, often ill-advised nonstrategic acquisitions, massive global expansions and investment in noncore businesses. Risks were taken as organizations aggressively expanded because the availability of liquidity provided a safety net--but, unfortunately, one that has systematically unraveled.

As financial markets collapsed, businesses have had to focus on outlasting the downturn and then rethinking their strategies for growth. Explosive, short-term gains funded by ever-increasing debt have become a thing of the past; organizations have to focus on long-term, sustainable and often organic growth.

With this trend, strategy becomes critical. To remain competitive, firms must learn to harness their strengths, focus on key competencies and stick to their core business. This is no time to drastically change direction or invest in ancillary businesses. "Tried and true" is the battle cry for this economy. And, perhaps most importantly, companies need to focus on customer retention to drive organic growth. Strong emphasis on customer service and commitment are crucial to long-term sustainability.

Today, any business that uses leverage in its capital structure--and that's virtually every business--is affected by the liquidity crisis. Put simply, if a company doesn't have cash now, it's at risk. As a result of the glut of credit during the past few years, many firms found themselves in a chronic...