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The Well Timed Strategy by Peter Navarro

The full title of this book by Peter Navarro is

The Well Timed Strategy: Managing the Business Cycle for Competitive Advantage“.

In my review posted on Amazon.co.uk, I gave the book Four Stars. This means I think it is Good and Well Worth Reading.

Here is my book review.

A reminder that “when to do it” can be as important as “what to do”

This book takes a different view to strategy than most strategy books. Normally the focus is on what to do. The examples and case studies in book make it clear that “when to do it” is a vital element of success. Strategies that make sense at certain stages of the business cycle can be extremely damaging in other stages.

The book defines a Master Cyclist as someone who manages the business with a perceptive view of what’s happening in the business cycle, steering the business carefully through the major decisions.

Chapter 2 to 7 of The Well Timed Strategy look at the difference business cycle timing has on:

– Capital expenditure decisions – many businesses get caught adding capacity when the cycle is about to take a nose-dive, the master cyclist adds capacity in anticipation of the next upturn.
– Acquisition decisions – common sense says buy low, sell high but too often shareholder value is wasted as businesses make acquisitions in the wrong part of the business cycle and pay too high a price-earnings ration on inflated profits.
– Human resource decisions – careful staff policies can avoid lay-offs in the downturns and the damaging impact on morale.
– Inventory and supply chain decisions – companies who ignore the business cycle have too much inventory leading to expensive write-offs when the trade cycle dips and suffers shortages as the business cycle picks up.
– Marketing – an easy cost to cut back when times are tough but the beneficial impact of effective marketing is much stronger during a recession because competitors cutbacks reduce the clutter and noise in the market.
– Pricing and accounts receivables

The Well Timed Strategy then goes on to look at oil price spikes, interest rate hikes and exchange rate risks and the use of hedging to manage risks. It then looks at the economic shocks on war, terrorism, drought and disease. Finally it takes a look at forecasting tools for the business cycle.

This is an important book because it puts proper emphasis on the business cycle which can have such a big impact on many businesses and for that reason, I think anyone with profit responsibility for a business – large or small – should read it.

However I must admit that I did find The Well Timed Strategy irritating. It’s well written and very readable but I found myself challenging many of the interpretations, ideas and premises in the book although I can’t dispute the ideas that you must manage a business with an eye on the business cycle.

First I found it a bit smug since it was using the benefit of hindsight to look at decisions. Some of the examples in the book were plain stupid decisions, others I thought unlucky.

Second, my own research into business decline and failure shows that businesses get into financial difficulty for many reasons which combine to create a perfect storm. The book tends to be simplistic – A caused B – and that’s not the whole truth.

Third, the book tended to take a negative view of bean-counters. As an accountant by training, perhaps I’m over-sensitive but criticising people who want to cut costs and generate cash flow doesn’t seem over-helpful. Sometimes what has to be done, has to be done – it’s a TINA situation – there is no alternative. A weak business has to follow defensive strategies since offensive strategies can lead to bankruptcy e.g. acquisitions at the wrong stage in the cycle.

I think we can understand the argument that marketing in a recession can have a big impact on brand awareness and preference as the business cycle shifts upwards. But there’s no point worry about next year if the business can’t pay the salaries next month.

For a book that puts its emphasis on “when to do what” I found its guidance on assessing the business cycle weak. Managers who don’t recognise the business cycle are setting themselves up for trouble but turning points in the trade cycle are tough to recognise. It’s even tougher to make decisions that can make or break the business and go against convention wisdom.

It was pretty clear to me that the world economies were increasingly unbalanced and we were as a society building up big debt problems with asset bubbles inflating house prices, stock markets and commodities and I found it increasingly difficult to invest my pension contributions from about 2006 onwards. But I didn’t get the timing right or take the decisive actions that I should have done with hindsight.

The Well Time Strategies recommends two big signals:
– The yield curve
– The stock market
Both have been manipulated through central bank actions in the current financial crisis with quantitative easing and unnaturally low interest rates.

It also talks about the Index of Leading Economic Indicators which is flawed because of the high number of false signals it has created and the ECRI dashboard which has a better record. These are helpful but at times you have to back your gut instinct and accept the uncertainty. Some things make sense whatever the business cycle, others are going to be bets – some you win, some you lose.

It is available to buy from Amazon.co.uk and Amazon.com.


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