The zombie economy: surviving in the zombie economy

We are still in the middle of an unpredictable financial crisis far outside the experience of anyone working today. The crisis has dramatically affected the four major economic groups, creating half dead, half alive zombies: banks, governments, companies and consumers. These groups have lost their ability to function normally.

PA Consulting Group's book 'The zombie economy' discusses these groups and the challenges that they present. It outlines some uncomfortable actions that business leaders need to take to survive.

To order your free copy of 'The zombie economy' please click here.

The twin challenge - illiquidity and irrelevance
Businesses need to secure their short term survival while ensuring they are well positioned to succeed in the zombie economy. Some leaders are waiting for recovery, but in the zombie reality this is a high risk strategy. The zombies, created by the crisis, will have an effect across the corporate landscape. As a result, we will see many losers but some big winners. The winners will be those who act now to avoid the dangers and reposition their businesses for the zombie economy.

One danger is illiquidity. zombie banks cannot provide the support that businesses need for growth – or even for survival. In this environment, capital ceases to be a commodity and becomes a powerful competitive weapon. 

Another danger is irrelevance: zombie consumers are unable to spend in the same way as in the past. Businesses whose products and services are still focused on last year’s customers will struggle badly.

The four key steps to survival
The companies which continue to prosper in a zombie economy will be those which act now to reposition. They must take four key steps:

Step 1: Secure adequate liquidity to ensure survival: There are many ways of doing this and though all are unpleasant, none is as bad as insolvency. Despite strenuous efforts by management, liquidity is actually lower now than a year ago because falling profits have hurt interest cover

Step 2: Create a portfolio of potential winners: managers need to identify the baggage and stop pouring capital into these parts of the business

Step 3: Remodel each business to fit the new world: winners in the zombie economy will be those who build new business models to meet the needs of today’s customers

Step 4: Finally, if you have been able to complete the first three steps, stake out a massively improved position in the market of the future: with weakened competitors, and a likely correction in the stock-market, your business will be well-positioned both to take market share organically and to drive consolidation in the sector.

Immediate actions
To reach this position, managers will need to check that they and their top teams have a good grasp of the economic situation. The focus then needs to be on diagnosing their own position and that of key customers and suppliers and ensuring that their existing plans meet the twin dangers of illiquidity and irrelevance. Only strong and united top management teams will be able to achieve this.

These are daunting steps and not all managers will feel ready to take them, but in many cases their survival depends on it. Those who take action now to challenge the zombie economy will emerge as winners, coming out of the recession stronger than they went into it.

To order your free copy of 'The zombie economy' please click here.

To discuss how to steer your business successfully through the zombie economy please contact us now.