Turnaround Management of America’s Economy
The Business Case for Reverse Outsourcing through Intrapreneurship (ROI)
The preservation of American liberty is the most demanding of tasks, requiring unrelenting work and a resilient spirit, but to whom much is given, much is expected. Roosevelt closed by quoting words by expressing what he called Jefferson’s “noblest and most urgent meaning,” the sentence carved inside the frieze of the marble monument: :”I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.” In a voice from the past, a vow worth keeping in our own time, and for all times. (Jon Meacham. American Gospel. Random House, 2007, ISBN 978-0-8129-7666-3)
In order to compete for the future, let us choose to reimagine an America that aspires to compete for the future and has a revving economic engine that is an incubator of entrepreneurial capitalism. Rhetoric aside, the overall appetite to compete for the future remains high. In this economic recession, I see a not-to-miss opportunity to rehone my problem-solving skills and be of assistance to a distressed businesses on Main Street that is struggling to remain viable and compete for the future. Every business in Main Street or Wall Street is an integral part of America, Inc. Thoughtfully considering and executing the required actions to help a business compete for the future is not usually in “my dad’s restructuring toolkit” and, in a paradigm shift away from conventional wisdom, requires a profit with purpose foresight.
Hailing originally from a software background, I prefer searching for clarity by zooming out (macro view) and zooming in (micro view). This is part of the disciplined imagination that I require to figure out the lay of the land and share my thinking process with fellow Americans.
The purpose of this memo is to align with America, Inc.’s leadership team regarding a not-to-miss turnaround opportunity to (1) recalibrate the pulse of the capital markets (Wall St and elsewhere) and (2) build sustained investor optimism, momentum and agility while navigating towards a global services economy. According to a report published by the U.S. Council on Competitiveness several years ago, “the time has come for the United States to invest in the innovation capacity to propel its dynamic, wealth-generating service sector globally.” While there is considerable strategic dissonance between actions and the strategic intent, we should use our creativity and courage to push ahead relentlessly. Competing for the future is greater than the sum of the parts of building, organic growth, industry redefinition, envisioning the long-term possibilities, leveraging resources and striving. Given the turbulent nature of the American economy, purposeful action will speak louder than words in order to rebuild a hard hat area under constructruction.
The choice to compete for the future requires recalibration and possible reversal of the current transformation agenda as described in the map below so that there is an increased bias for rebuilding the core competencies of the talent pool in the distressed company.
What Keeps Investors Awake at Night
The loan markets have been characterized as falling victim to “extraordinary disruptions” and, as a result, there has been a glut of foreclosed homes. The global sentiment is still anxiety laden and, yet reflects the current reality, that “America influences all […].” The ensuing debate vis-a-vis the current state of the loan markets is whether it is a hiccup, turmoil or credit crunch.
Key factors impacting consumers’ emotional bank accounts include, but are not limited to, the following:
- Personal savings rate has dropped 1% from 5% in 1998.
- Servicing the debt now absorbs nearly 15% of total after-tax personal income.
- Ratio of total household debt to total disposable income has risen to 136% from 100% in late 2000. (In a six year span, we’ve added as much debt as we’ve tacked on in the previous 40 years combined.)
Buckling under soaring debt payments and plunging home equity, how much longer can the “fabled” US shopper carry the weight of the economy? The current turnaround opportunity in the “distressed for control” investing industry is to pull the consumer from the brink of fend off and sustain the resilient optimism and turnaround activism rather than maintain the status quo by tolerating aberrational explosions and pushing on a string. Private equity is the ideal catalyst for ignited minds with a renewed passion for entrepreneurial capitalism and shifting the Z score (corporate finance metric) of each distressed business to the non-bankruptcy zone.
As an Activist Turnaround Manager (ATM, pun intended), I remain proactive in learning how to juggle three balls: a bankruptcy ball, a process ball and a company in free fall. I share the core belief that true value is created by recreating businesses.
Akin to an owner’s rep (in the construction industry), an ATM needs to be able to play several roles, including psychologist, information manager, leader, designated truth-teller, facilitator, change agent, accountability nag and lightning rod.
I view the paradigm-shifting opportunity to turnaround the American economy as fostering an authentic ecosystem with a private-equity focus that has a compelling connective quality for all its stakeholders in its vision, mission, culture and structure. An ATM is also a cultural architect who (1) creates a sense of community, (2) brings a sense of enjoyment to exploration and assertion, and (3) pay invaluable attention towards creating a sense of meaning that strives to achieve great people decisions.
Made in USA Brand Promise
Building a business often requires a dynamic balance between onshoring and offshoring. Every distressed business that needs to be turned around has a fantastic opportunity to contribute to the “Made in USA” brand where the following attributes are invariant:
- People are our greatest asset.
- We will maximize our enterprise value by working as a team.
- Our products will be made in the USA
- We will build the best products in the world and establish a brand with a rich authentic American heritage.
- We exist to serve our partners and customers. They are part of our team and we always need to understand their value.
- We will have fun — our team, families, suppliers, customers and shareholders.
- We will make our products available throughout the world.
- Integrity, honesty, persistence and knowledge will be expected, fostered and rewarded.
- We must profit in order to provide a livelihood for our team, families, suppliers, customers and shareholders.
Nurturing the Entrepreneurial Ecosystem is a Hard Hat Area under Construction
- An Activist Turnaround Manager (ATM) is the change agent that focuses on evangelizing the reinvention of entreneurial ecosystem in a distressed company.
- Such an ecosystem, guided through an astute private-equity focus, has two dimensions in order to shape the compass for entrepreneurial capitalism.
- A Founding Fathers’ touch (e.g., Benjamin Franklin, George Washington) which constitutes individualism; industry and frugality; experimentation and honesty. These are part of the cultural DNA that originally shaped American management. Put simply, the sentiment should be: “let’s throw a dash of George Washington (or any Founding Father’s touch) in everything we do.”
- Calibrating a sustainable Z-score (corporate finance metric) that is in the non-bankruptcy zone across the entire portfolio.
- Understanding the Impact of Debtor-In-Possession (DIP) Financing on Distressed Companies
- Realizing that the pursuit of excellence has no bounds, we need to proactively “scour the earth” (US zip codes and emerging markets) to sow and germinate the seeds entreprenurial ecosystem.
- In doing so, we can raise the Tenacity Quotient, Intelligence Quotient, Emotional (Intelligence) Quotient of the talent governing the portfolio and create a resilient “bubble of optimism” that achieves equilibrium at the scale and pace of the capital markets.
- For brevity, we can regard this production capacity as the “TIEquilibrium” for the entrepreneurial value constellation on Main Street.
- The entrepreneurial instinct in emerging markets spans production and production capacity. This nuanced understanding at a global level needs to be marketed as an iconic brand using the influence of private equity.
The restructuring of distressed companies should also include rebuilding core competencies and core capabilities of the talent in the organization. We strongly recommend that managers avoiding the trap of denominator-based management. Instead we urge an attentive focus on dialogue mapping the collective intellectual and emotional intelligence of the organization to envision and create the future.
The Activist Turnaround Manager (ATM, pun intended) is the all purpose utility player for American Commerce Turnaround (ACT).
About this Blog Post
Blog authored by Ramu Iyer, Last Mile Resource