Customer Reviews

Accelerating out of the Great Recession: How to Win in a Slow-Growth Economy

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While I am usually rather sceptical about Consultants who are explaining the world - this book truly does add crystal clear insights. It not only puts the financial and economic crisis into a historic perspective, it also seperates root causes from secondary fallouts, it distinguishes temporary symptoms from longlasting changes.
All very readable and easy to digest, rather entertaining - particularly the elaborate company case studies and analogies from last century - and their (non-)relevance to the current situation. I found the authors' analysis and outlook to be extremely helpful in order to define what the "new normal" we all will have to adjust to is going to look like. Mandatory reading for everyone who has to make long range and global investment decisions (or who is affected by them).

David Rhodes and Daniel Stelter are Europe-based senior partners in the Boston Consulting Group. In "Accelerating Out of the Great Recession" they purport to offer solid advice on how American businesses can survive and thrive in these trying times. They begin by observing that it would take a 32% increase in China's private consumption to offset a 5% reduction in U.S. consumer spending - something they believe is not going to happen. Thus, when combined with various spending inhibitors, they conclude business leaders should instead look for growth in the U.S., albeit slower than the past. Accompanying that slower growth will be unwanted increased efforts at government regulation, anti-immigration action, and trade protectionism. Other economic drags include downward price pressure due to deleveraging, and bank reluctance to lend due to their failure to recognize the extent of their potential losses and recapitalize.

Continuing, the authors point out that U.S. household wealth shrank an estimated $13.9 trillion (22%) in the last few years, while the savings rate rose from -2.7% in 2005 to +5.9% in 2009. Both factors reduce demand. Meanwhile, the GDP-boosting U.S. trade deficit (4.6% of GDP) cannot continue, unemployment and underemployment remain high, and most surveyed business leaders are not optimistic about soon returning to record 'pre-recession' profits.

Soaring U.S. health care costs (17.3% in 2009, expected to hit 25% in 2025 and 37% in 2050 absent fundamental change - Congressional Budget Office) receive almost no attention in "Accelerating . . .," despite the obvious fact it cannot continue. (Suffice it to say, health care reform will not occur on its own, and will have major impact.) Rhodes and Stelter continue, finally concluding that consumers will become more "value-conscious," obvious old news to most. Eg. Guess what has driven Wal-Mart from nothing to become the world's largest public corporation in 40 years and the U.S. largest grocery retailer in 21 years, while department-store market share fell from 38% in 1995 to 19% in 2002? Home equity financing reached almost $1 trillion in 2006 (7% of GDP), before home values began tanking - guess what that does to demand, especially for big-ticket items? Up to 70% of homeowners are underwater on their mortgages in some areas - those homeowners will not lead any economic recovery, period. Just two years ago the U.S. finance industry generated 41% of corporate profits - that won't be repeated soon either.

Worse yet, Rhodes and Stelter are oblivious to the reduced impact and opportunity from today's consumer sales. Decades ago when Americans bought a car, toaster, toy, shirt, tank of gasoline, or a shrimp dinner they not only boosted retail sales, but generated added activity for the U.S. auto, appliance, textile, toy, oil, and fishing industries and their U.S. employees as well. Today, that second level of activity is largely gone, both in the preceding areas and many, many more - mostly off-shored to China. Thus, adding a dollar of U.S. consumer sales not only requires more credit than before ($1 in the 1950s, $3 in the 1990s, and $5 in the last decade - per the authors), but also has far less impact on total GDP. Regaining that stronger impact requires protectionism, despite Rhodes and Stelter's unconvincing counter-arguments, unless one proposes ballooning the trade deficit - which they also oppose. What does this mean for business leaders - that major economic improvement requires government to reverse course on 'Free Trade.'

The second section of "Accelerating . . ." covers suggested business strategies. Those looking for new, sophisticated strategies and insights, however, will not find any. The material is simply a superficial rehash of Finance 101 - protect your cash position, negotiate with suppliers, focus on inventory management and reduce debt levels, divest non-core businesses, focus on bloated R&D, focus on innovation, . . .. Easy to say, not so easy to do when surrounded by excess world production capacity (U.S. - 20%, Japan - 15%, European Union - 18%, India - 30%, China - 40%, Brazil - 30%), with Asian producers especially advantaged by much, much lower operating and capital costs. Clearly, America's economic future will not be found through just working harder at more of the same.

Bottom-Line: The U.S. cannot accelerate out of the great recession without creating a new, significant, sustainable, strategic advantage, or at least a similar defense - especially in the industries of tomorrow. The New York Times (1/30/2010) reports that China is already the world leader in green energy wind and solar power, and pushing hard to build nuclear reactors and more efficient coal-fired plants. It also is leading in electric bicycles, and the "smart money" (Buffett's Berkshire) is betting on a Chinese state-owned company developing electric cars and their batteries. Meanwhile, China is also significantly boosting R&D efforts in nanotechnology and bio-sciences. All this while erecting trade barriers to outside competition in new areas, and refusing to revalue its currency - thus protecting old areas as well. Little, if any of these current (or former) initiatives occurred through purely private initiative, or simply across-the-board Chinese business tax-cuts. Nonetheless, "Accelerating Out of the Great Recession" ignores or takes a negative posture on the potential role of U.S. government, probably because many Americans believe it should have no role in private enterprise.

China became a modern power by facing down its anti-capitalist roots en route to a heavy government role in lifting private businesses; further, its on-going economic vibrancy is assisted by much, much lower health care costs (admittedly the government is working to expand this area) and an undervalued currency. The U.S. similarly needs to face down its anti-government roots to help maintain our modern status through government-led health care reform, severely limiting illegal immigration, imposing tariffs to counter China's under-valued currency, and guiding/helping the development and protection of nascent industries.

The authors do an exceptional job of describing the current economy and economic decisions leading into the current situation in layman terms. They also effectively layout the potential future outcomes based on actions being taken worldwide right now. The book also does a great job of explaining the global impact of U.S. economic decisions as they relate to the bailout and more.

This book is essential reading right now because it is one of the best reviews of the changing consumer mindset as well as building a road map for the future for businesses. They show what businesses that expect to grow in the future must do now. They don't offer pie in the sky take profit approaches, rather they focus on the solid opportunities that exist for companies to build a foundation for a solid future.

The authors use examples from the great depression, the recessions of the 70's/80's as well as Japan's lost decade to build a model of the future. They are also quick to point out that while the bailout of the U.S. economy probably stopped us from sliding into a deep depression, that those ideas were floated during the Great Depression but not implemented, so we have no idea what will happen as a result, it may take a completely different path and we could see another deeper depression in the short term, especially if there (and there likely will be) another huge round of foreclosures.

An interesting fact from the book was that in 1950 it took one dollar in credit to create one dollar of Gross Domestic Product, today it takes five dollars of credit to create one dollar of GDP. With tightening credit restrictions it makes it much harder for the economy to grow.

The study of the new consumer behavior is very astute (though some would say you might have already observed some of the behavior) and will help those in retail particularly thing through new strategies.

My only criticism of the book is that I'd have liked to see a much more detailed section on how different sectors could respond and a section on projected growth segments. Exceptional book, quick read, and there is something for every business owner in the book.

How are you reacting to today's recession? That seems to be the question most media sources are addressing today. But an objective, comprehensive look at the Great Recession is harder to find.

Boston Consulting Group senior partners David Rhodes and Daniel Stelter attempt to do just that in their newest book, "Accelerating Out of the Great Recession: How to Win in a Slow-Growth Economy." The book, which targets high-level corporate decisionmakers, covers how today's economic crisis happened, what the current business environment looks like, and how companies can stay successful in current recessionary conditions.

How They Figured it Out

Rhodes and Stelter surveyed 450 executives in the US, UK, EU, and Japan to get a barometer of the current business climate. Those executives run companies with sales ranging from $1 billion to more than $20 billion. The book, in other words, targets leaders of large corporations, as one might expect from a consulting tome.

Rhodes and Stelter also researched thousands of public companies that succeeded during the Great Depression, the 1970s-80s US stagflation period, and Japan's Lost Decade. Through their research, they determined what factors made those companies succeed. Note that they did not include private companies, and do not focus much outside of their target geography. As a result, the book contains conditions and prescriptions specific to the US and particularly Europe, and is most applicable to large, public corporations.

Inside the Book

AOGR (to shorten the title) is divided into two parts. Part I explains we got into this crisis, what caused it, and why it will take years to recover. It compares the US now to Japan during its Lost Decade (1991-2001). You also learn about the things that typically happen during a prolonged recession: Consumers deleverage, governments become more interventionist, and global trade flows redirect, for example.

The authors emphasize that although the world managed to avoid another Great Depression, we're going to grow slowly. This is not a temporary blip in the economy, the way some might have us believe. No single region or country, notably China, has the economic heft to pull the world out of this.

Part II tells you how to succeed as a business in the current economic conditions. It underlines what successful companies did to get out of the Great Depression, notably the Big 3 US automakers.

You also learn how to protect your company's fundamentals, for lack of better jargon, in recessionary conditions. Tips include reducing costs, keeping your business structure flexible (notably by avoiding vertical integration), and pricing strategically.

After covering your defensive bases, AOGR tells you how to go to battle in a hypercompetitive, but recessive, economy. If you're a regular business book reader, you've probably heard these tips before: Innovate, advertise and market more, invest in M&A, and don't get into a price war, for example.

The final chapter was my favorite. It gives you specific tips on leading your company during a recession. The authors share tips on relevant leadership issues, like dealing with globalization and honing your political skills. They also emphasize revisiting ethics, compensation systems, and shareholder influence.

Thoughts

AOGR provides a big-picture overview of current business conditions, based on a historical perspective. It offers sound prescriptions on how to succeed in recessionary conditions, bolstered by research and case studies.

Despite containing a fair amount of business jargon, AOGR is not a technical read. It's unusual to find an objective, comprehensive overview that's this easy to understand. For that reason, I found AOGR valuable.

I do have a few criticisms. For one, the book was a bit Eurocentric. I'd like to see any book talking about America's economy go into more depth about endemic conditions like our lack of a manufacturing base, restricted capital flows, healthcare problems, and job-creation issues. Based on case studies and number of details on the European economy, I also got the sense that the authors, themselves Europeans, were more intimate with the Europe's situation.

Also, the book's research was specific to large public corporations in Europe, Japan and the US. It doesn't talk much about BRIC countries, which are crucial to today's global economy. So I wouldn't see it as a definitive, all-encompassing resource on thriving in the Great Recession. Rather, it applies most to the demographic, as it were, mentioned above.

To conclude...

I recommend this practical, well-researched read to any corporate leader fitting the target audience. I also recommend it as a general overview for anyone who wants to read about the Great Depression and Recession in plain, historically-relevant language. If you want a more US-specific read, or a book that features more contentious material, look elsewhere. (Book review by Drea Knufken)

Accelerating Out of the Great Recession examines the state of the U S and world economy with precision and clarity providing an insightful reference work in just 190 pages including an extensive bibliography. The authors' research of winning strategies employed by companies to exploit growth opportunities in past recessions makes for a useful screen to find the new leaders in this one. Add the perspective of two international strategic management consultants, and you have a book well worth reading and adding to your library.

Boring history and economic lessons can drop some students into zonked-out slumber. Fortunately, this book will rouse them. International consultants David Rhodes and Daniel Stelter deliver a mix of entertainment and education that is enhanced by engaging examples and an appealing style. They solidly package business and historical lessons from the Depression era and apply them to the "Great Recession." Their text is concise, albeit with occasional bouts of redundancy. Although the authors have attempted to create a politically neutral analysis, an astute reader might detect an apparent but not intrusive preference for conservative fiscal politics. That's because the writers highlight the shortfalls and downsides of Democratic-administration interventions at some length and offer only minimal criticism of Republican deregulatory policies, without deeply analyzing their role in opening the door to securities crises, Ponzi schemes and the mortgage market meltdown. However, the text's benefits outweigh any political oversights especially since modern literary evenhandedness often amounts to little more than a "plague on both your houses" anyway. The authors go beyond just diagnosing economic problems. They supply concrete, evidence-based solutions for executives who are trying to generate profits in a rigorous fiscal environment. getAbstract recommends this book to corporate leaders, strategists and managers who want to spur sales and excitement in a period of slow business growth.

Probably contains the most up-to-date and complete instinghts about current recession. I'm giving it only four, because to the end it becomes extremly boring by repeatig general truths; also sometimes found that the book states something, but leaves the statement without any solid evidence or reasoning flow (we are just supposed to believe to the authors).

Of course my instant "title reaction" was "everyone always thinks these are the worst of times and wish for the good old times to return".

As would be expected this book contains lots of interesting statistics. One point that I found interesting because people are often saying that China can help us accelerate out of the recession is "This is not going to happen". Facts just do not lie. Even if China doubles consumption, the impact will be minimal.

There was a section on what they thought today's agenda for CEO's need to be; "Reassessing the challenges and opportunities presented by globalization". "Rethinking how businesses are managed for shareholder value". "Reorganizing compensation systems to align with the risk taking". "Regaining public trust in business". "Developing new models for business leadership". "Helping the management team to think ambitiously about growth by looking beyond today's tough economic environment".

There was a chapter on strategies that included the following: "Focus on innovation". "Capitalize on changes in the external environment". "Unleash marketing and advertising power". "Take the flight to your competitors". " Invest in the future through M&A and divestment". "Employ game-changing strategies".

I particularly like the section on leadership during our crisis: " Walk the floor -and be visible".
"Set clear expectation". Employees respond more positively if they have well-defined expectations. Leaders need to establish the measures of success, both for the short term and for the future. They need to provide clarity about what is the most important in this environment.
"Mobilize the extended leadership team". Leaders should not pilot through the difficult times on their own. They need to bring in their broader leadership group, which will provide complementary skills and multiply the personnel power and brainpower available to tackle critical issues. There is strength in numbers.

It's a good book worth reading with a fairly hopeful message.

The structure of this book is very easy to follow and understand. The first part offers a great summary on the recession and explains the new world after, what the authors call, the great recession; including an interesting take on the new role of politicians.

I really liked how the authors went and researched so many companies from the past. The best is that they use GM, Ford and Chrysler as examples. Nowadays, the business models of these three companies are totally out of date, but back in the 30s/40s they were able to beat out their competitors. Similarly, there are several other interesting examples from the last century (Great Depression, Japan's Lost Decade and the 70s/80s in the US) that are highlighted. These examples are the best part as they show you how hard it often is to use basic strategies in a successful manner. Additionally, it offers some great detail on how some of today's best known companies became leaders in their fields, several of the stories that I had not heard of.

In the second part you can find a lot of well-known strategies that are more less all taught in b-school. They are interesting to read but not new. Applying them is what is hard and neither this nor any other book can tell you how to do so. However, reading them is a great refresher.

The book is a nice read with a clear message, unlike other books from consultancies. The chapters are short and not overloaded with business lingo as you would expect.

I would recommend this book to anyone with an interest in the economy, business or even politics.

This is a very important book. The two authors are from the Boston Consulting Group (BCG). I am a fan of BCGs research and this book does not disappoint. They look at the Great Depression, Japans lost decades and the 70s NA bust, to take lessons from companies that grew despite the slow growth economies. Since at Rocket Builders we hope the best, but plan for the worst these lessons are gold. They make a good argument that we are in for many years of slow growth and they had not factored in the recent sovereign debt problems as well as Canadians extremely high levels of indebtedness. Just a few of the dozens of notes I made from this book:

Companies will faced increased market competition as their markets shrink
Governments will become more extreme in their interventions and protectionism (As well as increase role in business ownership)
Consumption patterns will change (retrenching, payment of debt takes priority over consumption
Massive triggering of the deleveraging process in the business and private sector
Increased private savings with reduced consumer consumption drops interest rates, reducing exports and imports
Resource inventories will rise, prices will stay low for long periods
Attention will be paid to building internal markets vs export markets if possible (this will not help China enough).
Industry restructuring will accelerate, as the weak business models fail more quickly, M&A will increase for the strong.
Governments will be forced into massive debt levels to finance infrastructure ala FDRs New Deal
Deflation is a real threat to those in heavy debt as their asset values drop
Taxes must rise, but govt services will come under attack ( reduced public pensions, wages, employment rolls)
Health care and energy costs will be scrutinized and attacked relentlessly
Countries reliant on exports to drive their economic/employment growth will suffer from increased internal strife as job losses mount
Anti immigration feelings in First World will rise internally as job losses stay high, impacting the Third World even more.
Todays teenagers could become more conservative, better savers, but suffer longer terms of unemployment than their parents, this may reduce their interest in entrepreneurship.
The book goes on to show areas where the authors believes there are opportunities for growth, as well as ways that companies who did well in previous downturns did well. But I will leave them for you when you read this book.