Since 1993, Bain & Company's global Management Tools and Trends surveys have been an excellent gauge of the business climate. That remains true today. In an extraordinary time, the 2009 questionnaire produced a telling set of findings.
Benchmarking, a cost-cutting tool, was the most heavily used among the 25 tools surveyed. Outsourcing, another way to reduce costs, jumped to No. 4, while Business Process Reengineering remained on the Top Ten list. As another indication of where executives feel their companies are headed, the vast majority—88 percent—of those who downsized in 2008 plan more cuts in 2009. And only 24 percent of executives believe that today's market leaders will still lead in five years.
Yet, while our 12th survey revealed that tool use has declined since 2006, presumably as companies tackle financial exigencies, executives are surprisingly optimistic about the long term. There's also regional variation-and a wake-up call-in that hopefulness: Managers in Asia's emerging economies are much more focused on growth and innovation than their counterparts in North America.
Cost cutting is key
Seven out of 10 executives surveyed say they're worried about how they'll meet their growth targets in 2009, and six out of 10 are planning for a downturn lasting at least until early 2010. That concern is reflected in the increasing popularity of Benchmarking. But while executives—particularly in North America—have flocked to Benchmarking to cut costs, they're not necessarily satisfied with the tool. It landed in the middle of our satisfaction list. Nevertheless, and as a sign of the times, Benchmarking knocked out Strategic Planning, now No. 2, which had topped the tool usage list since 1998.
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Optimism about future growth
Our survey sheds light on a paradox. Even as executives express deep concerns about their short-term financial outlook, they are voicing optimism about their long-term prospects. Some 75 percent say they will use the recession to improve their competitive position—a statistical impossibility. One financial executive explained: "In the short term, the extent to which our customers are having difficult times reflects on us. But from a long-term perspective, we're very confident. We have the right business model, and even if we lose some customers in the short term, we are confident that we'll win some back in the long term."
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Confidence in India and Latin America
Internationally, different story lines emerged. Confidence remained relatively high among Indian and Latin American executives, even as projections for GDP growth dropped in both places. Executives in China, however, who felt the downturn earlier, appeared less confident. When asked if they are planning for the downturn to last until early 2010, 70 percent of the Chinese executives said yes, compared with 65 percent of Latin American executives and only 56 percent of the Indian executives surveyed. This difference is underscored by downsizing plans for 2009: 40 percent at Chinese companies say they will have significant layoffs, but just 23 percent of Indian respondents expect significant layoffs.
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Tool use by region
Distinct differences emerged around the globe. Downsizing was widespread in North America, as was Strategic Alliances as a tool for adjusting to capital and credit constraints in a low-growth environment. European executives used some popular tools less than their counterparts around the globe, including two strategy-related tools—Strategic Planning and Growth Strategy Tools—and two tools focused on working with other companies—Outsourcing and Strategic Alliances. In contrast, Latin America companies used both Strategic Planning and Growth Strategy Tools significantly more than other regions. Latin American companies also downsized less. In Asia-Pacific, Chinese executives embraced three cost-management and planning tools: Benchmarking, Strategic Planning and Supply Chain Management.
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How industries vary
We found tool-use variations that underscore how the global downturn is affecting sectors differently. Financial services executives have the most pessimistic outlook of all sectors surveyed. They are planning for a downturn lasting until early 2010. Strong believers that the downturn will affect consumer behavior for at least three years, they are the biggest users of Downsizing: 70 percent said that they downsized in 2008 or are likely to do so again in 2009. Technology and telecom executives, conversely, are the least concerned about the recession's long-term impact. They are the most focused on innovation. In fact, seven out of 10 of these executives believe that they could dramatically boost innovation by collaborating with other companies.
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Darrell Rigby, a partner with Bain & Company and leader of Bain's Global Retail and Global Innovation practices, has conducted Bain's Management Tools and Trends survey since 1993. Rigby is also author of Winning in Turbulence, published by Harvard Business Publishing. Barbara Bilodeau is director of Bain's Customer Insights Group.
