Lei believes such reinvention will go from anomaly to necessity once the economy recovers. The reason? Technology. Technological innovations not only make businesses more productive and transparent, but the adaptive nature of those innovations means that competitors can pop up anywhere. “Who would have thought that [GPS manufacturers] TomTom or Garmin would actually have to compete with digital cameras?” Lei asks, adding that next-generation digital cameras will be equipped with GPS. As a result, businesses and entrepreneurs must avoid temporary palliatives because the future economic environment will likely be very different from the one leading up to the downturn, says Maria Minniti, strategy professor and Bobby B. Lyle Chair in Entrepreneurship at SMU Cox. “An uncertain environment, like the one provided by the current economic crisis, is filled with unexploited entrepreneurial opportunities,” she says. “Rising unemployment and pay cuts are forcing many people to become alert to opportunities and reinvent themselves.” Yet Lei concedes the current economic downturn poses challenges that weren’t present in previous recessions, namely the credit freeze that makes it difficult for businesses to disinvest, reinvent and adapt. Many organizations, such as GE, are relatively healthy from a cash flow standpoint, says Gordon Walker, strategy department chair and David B. Miller Professor of Business, but its balance sheet is weighed down by billions
of dollars in liabilities from GE Capital, a fact that has driven down its stock price 66 percent over the year through April 2009.
Rediscovering resources
So what can businesses do to survive, or even thrive in the current downturn? Companies should take stock of their non-cash currencies, or resources that might save another company cash, says Ed Frazier, who has been active in development activities with several Fortune 500 companies and now is managing partner of Arlington, Texas-based Corporate Smoke Jumpers. This might include unsold advertising time, vacant real estate space, unfilled air travel seats or unused freight or fleet space, which can be swapped for other goods or services or even equity. “I run into situations where people are actively talking about distressed asset funds,” says Jerry White, strategy and entrepreneurship adjunct lecturer and director of the Caruth Institute for Entrepreneurship at SMU Cox. Local real estate firms have set up distressed asset divisions, says White, with specialized groups focused on acquiring and managing these assets with an eye toward upgrading and holding them until the market recovers. Minniti emphasizes that businesses and individuals with good credit can negotiate very favorable financing to channel resources into improvements and
Under relentless pressure from inexpensive Windows-based PCs, Apple Computer reinvented itself as Apple Inc., zeroing in on consumer products such as the iPod and the iPhone while de-emphasizing the personal computer market.
New risk management and insurance program addresses leadership and transparency The current financial crisis highlights the critical need for effective insurance and risk management strategies. Transparency and credible leadership in the insurance and risk management industry will be crucial to restoring future economic stability and growth. That’s why the newly created Risk Management and Insurance (RMI) undergraduate major at SMU’s Cox School of Business is so pertinent and timely. “There is without a doubt some sense that properly assessing and diversifying risk is assuming greater importance in a properly functioning marketplace,” says Robert Puelz, Dexter Professor of Risk Management and Insurance. One of only a handful of similar programs in the U.S., the Cox RMI program provides students with a firm foundation in insurance economic theory and insurance law in tandem with experience germane to current industry operation. Effectively managing risk will be a crucial component of corporate governance as the economy recovers. “The more effectively companies manage the cost of risk, the higher their net income is going to be,” Puelz adds. Key to the RMI program is the SMU Insurance Council, an organization that links Cox with risk management and insurance professionals to provide insight and networking opportunities.
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