Every decade or so, a business book comes along that requires using your HR budget to bulk-buy for every manager at the company. Just published, we now have a copy of that book, Big Picture Economics: How to Navigate the New Global Economy by Joel Naroff an economist and Ron Scherer, a journalist.
Already receiving rave reviews by business columnists, the reason why Big Picture Economics is a must-read for every department head, manager, supervisor and C-level exec in business is how they communicate three key areas of context in decision-making, taking the long view, and looking beyond the borders. Below are additional insights by co-authors Naroff & Scherer and how these concepts are explored in their new book:
1. Managers need to understand the importance of incorporating context into their decision-making. If real people or real business-people want to manage their lives or their companies, they need to know why the growth, decline, or stagnation they are experiencing is occurring. We need to recognize that conditions change and any business decision must be made in the context that what currently exists may not be the case going forward.
While that may sound like a lot of economic theory, this is illustrated beautifully by Naroff and Scherer through the example of Posados Restaurants, a regional chain based in Tyler, Texas. Like many restaurants, Posados had not experienced a downturn in their corporate lifespan. The Texas economy — and the appetite for good Tex-Mex food — just kept growing. But, suddenly in 2009, the recession caught up to the restaurant chain. And, like a lot of other businesses they tightened their belts. But, they also realized that the recession would not last forever so keeping their customers happy was critical.
When guests would arrive, the chain’s management told the staff to be sure to thank customers walking in the door and give them the best possible food and service. The chain also noticed that diners “managed the bill,” by looking for specials and ordering fewer drinks. Naroff and Scherer share how the restaurant used that to its advantage, offering promotions everyday of the week. This quickly led to Posados become even more creative, offering specials such as kids eat free on Mondays and Tuesdays with the purchase of an adult entrée. The customers loved it. The two authors say the story about Posados is an example of how a company can incorporate context into a business plan.
2. Managers sometimes need to take the long view. A recession may scare a company’s management from making big investments, stock market analysts may clamor for cuts, Boards of Directors may decide the best course of action is no action. The key is to take a longer-term view, which may result in big profits later.
Big Picture Economics uses the real life example, which is the decision by a company — in the middle of the recession — to build a $4 billion semi-conductor plant. Yes, the company had very deep pockets — it was funded by Abu Dhabi, which is busy pumping oil. But, the Abu Dhabi investors also took the view that “real change takes time.”
In building the plant, the company, called GLOBALFOUNDRIES, had to take into account context: the changing nature of electronics. Most of their customers wanted to be the first to introduce new technology. In addition, the book points out that many customers barely existed a few years earlier.
Think about cloud computing. By the time the recession ended and the semi-conductor plant was producing chips, the pay-off became apparent. GLOBALFOUNDRIES was on track to ship $6 billion a month in chips.
To reinforce how context also works for companies that want to grow by acquisition, the authors interviewed David Braun, CEO of Capstone Strategic. This example demonstrates how contextual issues include whether a company is in a position to take advantage of changes in the economy, whether it is a good time to borrow or use cash and even whether the tax environment is good from a merger standpoint.
To illustrate how context works for a specific merger, Braun looks at one of its deals — Chicken of the Sea buying an importer and distributor of frozen shrimp. At the end of the day Braun realized that what Chicken of the Sea was really good at was “logistics,” moving tuna from the boat to the can and under Braun's guidance the company created a whole new category for them to grow that business but at the same time leverage what they were good at.
3. Managers need to look beyond their borders. In Big Picture Economics, Naroff and Scherer illustrate how events happening outside the US shores can affect context for a company. One of the examples: the widening and deepening of the Panama Canal. This massive effort will create lots of jobs in the US as ports will need to get dredged, bridges raised and new roads built to handle the larger vessels and the increased number of containers they will carry. As the book finds, the spillover could get as far as places like Ft. Wayne, Indiana, which is 700 miles from the nearest port.