The art of dealing with an economic turnaround is to keep a business alive through disciplined control over the economics of the business, intensive development of the right market niches and products as well as a leadership style that sustains entrepreneurial drive and management.
Nokia has recently reported a 21 percent slump in fourth quarter earnings. Nokia is currently in a state of distress and needs to urgently reinvent itself and turnaround the company at the speed of business. In this paper we will present a forward looking vision of Nokia for changing the game and becoming relevant in the marketplace.
Gartner had predicted that worldwide mobile connections will increase by 1.5 billion by 2010 with emerging markets accounting for 87% of that increase. According to Gartner, developing regions already account for 69% of all the world’s phone connections. With US unemployment at upwards of 10%, there are producers and consumers at the Bottom of the Pyramid (BoP) in USA who can be tapped to leverage their startup mojo and blaze fresh trails through the entrepreneurial landscape, empowered with Nokia-Microsoft co-branded mobile phones to co-create value. The BoP market is a $13 trillion market globally. Since America has a proven and superior appetite for the venturesome consumption of technology innovations, Nokia, Microsoft and the real-estate industry are naturally positioned to forge a strategic alliance to re-architect the blueprint of telecom-enabled entrepreneurial capitalism in a BoP market.
Using the Main Street retail presence of real-estate brokerage firms as a launching pad or incubator hub, the vision of the Nokia-Microsoft co-brand with a real-estate brokerage partner will serve to tap potential BoP entrepreneurs who can be trained, mentored and jump started to create and execute a business plan for a new venture or orchestrate a sustainable turnaround of a distressed asset on Main Street — with committed shareholders, tolerant suppliers, motivated employees, enthusiastic distribution channels, and loyal customers.
Integrating the art of entrepreneurship and improvisation into the mainstream thought of our everyday American culture is a powerful force for enhancing human performance, morale and energy levels. When an aspiring or proven entrepreneur adopts a mindset of being in an improv theater, the emerging show (execution of an idea, activity or plan) is completely unscripted (i.e. there is no prepared script) and every performance is different while simultaneously stimulating creativity and spontaneity. Enabled with a Nokia-Microsoft-branded mobile phone, the entrepreneur has an opportunity to create, cement and leverage her social network connections and can feel empowered to think differently and pave a path towards value creation.
Among the array of distressed companies on Main Street (including Nokia), an experienced turnaround professional will be able triage and qualify (1) situations that attract a lot of investor interest, holding promise as obvious winners that will revive as the current credit freeze thaws; and () problematical situations that require a careful due diligence process to sort the lackluster survivors from those businesses that will best respond to skilled turnaround management.
The venturesome consumption of technology innovations in America is far superior to any other market; this entrepreneurial real-estate is a perfect sandbox for prototyping BoP telecom opportunities. The confluence of the credit freeze that began in 2009, the on-going recession, well-documented increases in the number of bankruptcies and companies in distress, as well an unexpected BoP population that is seeking employment presents perfect-storm conditions for the Nokia brand with its brand promise for “connecting people” — representing clarity as championing forward-moving, energetic and dynamic entrepreneurship and helping customers take their world with them.
Nokia empowered entrepreneurial capitalists are poised to start a performance oriented conversation that can turnaround the economy, one business at a time, and impact consumers who include teachers, therapists, social workers and community organizers; engineers, doctors and other health workers; theatre and other performance artists; union activists and business leaders; economists and political activists, etc.
The American dream has been engulfed by a tsunami of foreclosures, layoffs and the destruction of our financial institutions. The path to recovery and renewal requires discipline, hard work and cooperation. The most severe recession since the Great Depression has created the most favorable climate for distressed investors and deal-makers in generations, leading investment professionals to strategize on how best to address market opportunities. Although any presence of insolvency negatively influences the entrepreneurial environment, reducing the schism between Wall Street, Main Street and Washington will require us to be imaginative, creative and innovative in order to stimulate jobs and value creation. As Thomas Friedman recently opined in the New York Times: “We are not going back to the good old days without fixing our schools as well as our banks. Or else the state of “jobless recovery” will prevail and become the norm.”
In this economy, many distressed companies have ended in extremis through bad management, or terrible cost structure, poor strategy, bad collective bargaining agreements and usually excessive leverage. As an Activist Turnaround Manager (ATM, pun intended), each person has the opportunity to think and act as an owner’s rep that is shepherding the journey of the company’s brand promise. The ATM will play several roles, including active listener, information manager, leader, designated truth-teller, solution-focused facilitator, change agent, accountability nag and lightning rod.
ATMs, guided by imagination and creativity, have the acumen to source new capital, new management, and a new strategy for growing the business. These practitioners are also adept at juggling three balls: a bankruptcy ball, a process ball and a company in free fall while imagining new services, new opportunities and new ways to recruit work. The rescuers must have the ability not only to bring in new capital and management, but also a new strategy for growing the business.
The entrepreneurial drive to become an ATM is an encore career because it combines personal fulfillment, social impact, and continued income, enabling people to put their passion to work for the greater good. Launching the activism to train and mentor ATMs is a relentless campaign. Obtaining the ATM insight is particularly relevant for closing the opportunity gap and rebuilding America in a passionate quest for service innovation.
The first step in turning around a distressed company is to figure out how much cash there is, where it is, and who has what claims on it. A rolling cash flow forecast is typically created to help the company better understand its business dynamics. The goal is for the company to re-emerge post-bankruptcy with improved business operations and be positioned for ultimate exit through a strategic sale or an initial public offering.
According to the Wall Street Journal, the number of distressed debt deals — in which creditors use their debt holdings to seize ownership control of failing companies — had increased by almost 40% in 2009. The number of completed distressed deals had grown to over 140 through 2009; compared to 102 for all of 2008. According to Dealogic, deal value in 2009 reached $84.4 billion — more than quadruple the total of $20 billion in 2008. And according to Forbes Magazine’s list of 400 Richest Americans, the biggest gainer in 2009 was an opportunity investor who tripled his net worth by buying distressed loans and assets. Usually investors hesitate to act during downturns when the economy appears most uncertain. A more prudent way to invest during a recession is to back partnerships that focus specifically on distressed companies, which may trade at trough valuations but due to demand having fallen dramatically, are now in genuine recovery situations in the medium term. Then the investor can benefit from both extremely low entry prices and the skilled reorganization plans for reviving the distressed company.
Recognizing that it takes genius, faith and perseverance to build a brand even in a recession, the Nokia-Microsoft strategic alliance should focus on increasing its brand presence in an authentic manner by co-branding with multiple national realtors that have a storefront presence on Main Street across several zipcodes all across America. The focus of the co-branding initiative is to empower the educated unemployed or underemployed professionals to get enabled with a Nokia cellphone and empower them with resources to become entrepreneurs or ATMs to do the heavy-lifting and revitalize distressed businesses. Using a realtor’s storefront to launch this co-branding campaign is a win/win outcome all around for Nokia, the realtor and the aspiring entrepreneur or ATM.
The Nokia-Microsoft cobrand is uniquely positioned to assess revenue opportunities, develop go-to-market plans and execute quickly, working closely with Nokia’s customer-facing channels and partners in order to become a viable national backbone for creating a launchpad for entrepreneurs and ATMs who have a passion to turnaround Main Street, one business at a time, including the turnaround of Nokia.
In the last decade, C.K. Prahalad and others have argued that the 4 billion people living on less than $2 a day—a group in society that wields trillions of dollars in economic power—is a major, untapped market. The Bottom of the Pyramid (BoP) approach maintains that companies can simultaneously help to reduce poverty and increase profits by targeting the world’s poor – an untapped yet potentially thriving new market for firms facing saturation in established markets. The approximately 10 million people who are currently facing unemployment in USA represents a target BoP market in a developed country, symbolically spread across various American zipcodes, because many of these individuals have lost their source of income and are descending towards poverty. This unemployed workforce, which also includes educated people, is a vital source for nurturing both rural and urban entrepreneurship that experiments with novel business models to enhance awareness, availability, affordability and acceptability of products and services to BoP and non-BoP consumers in USA and the rest of the world.
For example, Qualcomm, as part of its Wireless Reach Initiative, has worked with Grameen Foundation in a public/private partnership since 2006 and created profitable micro-franchise telecommunications businesses owned and run by poor entrepreneurs in both India and Indonesia. This success story has created at least 1000 new Village Phone businesses while serving over 500,000 poor people who had no prior access to a telephone. With an estimated market potential of $13 trillion, lessons learned from the BoP business model demonstrate the following:
- The BoP is as a source of employees
- The BoP can drive innovation
- The BoP has consumers and producers
- Respond to market needs at the BoP with design thinking
In another compelling example, Grameen Bank has turned “beggars into successful entrepreneurs” while Pantaloon has hired “people from slums” in India and been highly successful in driving employee engagement, customer service, innovation and growth. These real-world examples highlight that it is viable for companies to identify, hire, develop and utilize talent from the currently unemployed or underemployed workforce that is the job market. Metaphorically speaking, distressed companies with a depleted emotional bank account have a bonafide, not-to-miss opportunity to engage with BoP markets and tap their employees’ potential, unlock their passion, attempt to orchestrate a turnaround while enhancing their triple-bottomline.
The landscape of the improv theater opportunity for acting out the execution of a turnaround company includes, but is not limited to, the following scenarios that may be role played by a band of entrepreneurs and participants in a distressed company seeking a turnaround and establishing financial consistency:
- Scan prospective countries or regions for organizations with business models able to serve the poor or unemployed people in USA or elsewhere in the world.
- Understand the strategic objectives, culture, and organizational structures of the distressed organizations in USA.
- Reach out and build relationships with a number of distressed organizations in USA as early as possible.
- Identify important bottlenecks in the distressed company’s current business model such as a bloated overhead structure that prevent them from achieving strategic goals, and, as an Activist Turnaround Manager (ATM), fundamentally rethink the value chain, attack a number of nobrainer pockets of opportunity, and build the proposed business model around providing the constraining element to orchestrate a successful turnaround.
- Start the ATM-proposed business model design by thinking about replicating existing competencies to support building markets in underserved regions (America or abroad) or redeploying competencies from other built-to-last companies, via a strategic partnership or alliance, to build new product markets.
- Ensure that the ATM-proposed business model for revitalizing the distressed company supports an increase in the real income of people.
- Monitor the dynamics of the environment and the development of the partner’s overall model and strategic objectives that have a bias towards long-term growth with good returns.
Examples of scenes in the turnaround drama include the following:
- Restoring adequate communications among various groups in the organization.
- Increasing information transparency to avoid costly mistakes at all levels of the organization.
- Stopping the bleeding and supplying products and services that the customers will pay for.
- Enhancing employee morale and accountability so that the organization can vector towards sustainable performance.
Early warning signs of potential trouble or avoiding a death spiral that companies should be gauging for can be inferred by reviewing answers to the following questions. Is there evidence of imbalance or excess, either in the company or in the industry around it? Are the perceptions held by the senior executives of the company aligned or contrary? What is the level of accountability among the employees? Has the leadership set accountability guidelines and expectations for employees, and does it monitor performance? Is management overextended? Is employee turnover excessive? Are communications effective? Are compensation and incentive programs on target? Are stated business goals realistic? Are you losing key customers? Are you bringing in new business? Have you analyzed your competition lately? Are financial and management reports useful? Are there any failed acquisition or turnaround plans?
After the management team has answered these questions to understand the company’s position, the gameplan for the turnaround is encapsulated in a one page “blueprint” that includes:
- The company values: behaviors that, once established, will ideally in place forever.
- The vision and mission: two simple, memorable sentences that describe, respectively, where we expect the company to be in five to ten years, and in three to five years.
- A few strategic goals to be achieved in the next couple of years.
- Specific actions to achieve each of the strategic goals, with clear metrics and accountabilities.
It is imperative to craft the blueprint with everyone’s input across the company. The blueprint needs to etched in the hearts and minds of each and every employee in the company and it provides a consistent means to communicate the company’s vision to customers and employees.
Situational awareness is seeing how things are really going despite our expectations. By harnessing the power of fearless, first-hand observation, the situational awareness of the people, guided by the ATMs, will align the top-down goal driven communication and bottom-up data driven communication in the company.
It is in our national interest to create a performance-oriented culture and community, in conscious and direct relationship to progressive social change. Armed with Nokia-Microsoft branded 4G powered smart phone, an entrepreneur or ATM can experience the person-to-person connection, building new relationships with people from their neighborhood, their workplace and also around the globe.
Successful private equity firms understand that the biological model of an organization drives growth, which in turn drives their investment philosophy in reviving the operational health of distressed companies. They also recognize that achieving sustained business success requires a collaborative environment for the various players to co-create value by imagining collectively, embracing change, as well as welcoming problems as opportunities to learn, grow and realize dreams.
Systematically reusing the lessons learned for the American BoP market:
- The BoP market [in the USA] is a source of employees [from the pool of unemployed and underemployed Americans].
- The BoP [in the USA] can drive [venturesome consumption of technology] innovations [as well as other innovation to rescue distressed companies on Main St and make them financially viable].
- The BoP [in the USA] has [American and non-American] consumers and producers.
- Respond to market needs at the BoP [market in America] with design thinking [which could also be a basis for new products and services that can be exported from America to other countries.]
The venturesome consumption of technology innovations in America is far superior to any other market; this entrepreneurial real-estate is a perfect sandbox for prototyping BoP telecom opportunities. The confluence of the on-going recession, well-documented increases in the number of bankruptcies and companies in distress, as well an unexpected BoP population that is seeking employment presents perfect-storm conditions for the Nokia-Microsoft cobrand with its brand promise for “connecting people” — representing clarity as championing forward-moving, energetic and dynamic entrepreneurship and helping customers take their world with them.