The Phoenix Effect - 9 Revitalizing Strategies
No Business Can Do Without

by Carter Pate and Harlan Platt

More companies failed in 2001 and are expected to fail in 2002 than in any previous year. A record number of companies face restructuring or liquidation. A new book offers urgent advice on how to get a troubled company back on track before it's too late.

Written from the frontlines of restructuring large companies in crisis, The Phoenix Effect - 9 Revitalizing Strategies No Business Can Do Without (John Wiley & Sons; 2002; hardcover) by PricewaterhouseCoopers restructuring specialist Carter Pate and Northeastern University professor Harlan D. Platt, gives all managers the tools to revitalize companies large and small, healthy and troubled.

"This whole country is a metaphor for second chances," say Pate and Platt. "Built on comebacks, it is the one culture where failures nearly always get another crack at success, providing they display the savvy and the spirit needed to get off the canvas and start swinging again." The Phoenix Effect will help managers keep their company far from the "slippery slope to oblivion" and on the right road to perform at their peak. In The Phoenix Effect, Pate and Platt show how to overcome denial and spot potential trouble with a clear eye toward the nuts and bolts of a company, which are far too often neglected.

After showing managers how to diagnose the health of their company, Pate and Platt offer nine revitalizing strategies to return any company to growth.

1) Determine the Scope
Examine your resources, economic indicators, the competition, government regulation, and social and technological change to choose whether your company should enter a new business, withdraw from an existing business or stay in the same business.

2) Orient the Business
Use market data and research and actively set the value and utility level of your products to aim them at the right market. And regularly and quickly fine-tune your orientation in response to new trends or changes.

3) Manage Scale
Accurately assess your resources and the demand of the market to decide if you can grow your company to get an edge with economies of scale. Choose between mergers or internal growth to accomplish this, and keep a tight rein on costs to avoid unproductive growth.

4) Handle Debt
Restructure, renegotiate or merge to reduce the burden of your debt with strategies including equity-for-debt swaps, relaxed debt covenants, and asset exchanges in lieu of debt payments.

5) Get the Most from Assets
Carefully scrutinize your working capital to identify superfluous and underused assets and weigh the short term benefits and long-term downsides of outsourcing, dismissing employees, reducing inventories and securing funding from suppliers.

6) Get the Most from Employees
Use creative strategies for increasing the quality and productivity of employees while lowering costs and if layoffs are imminent, remember to keep your most loyal managers to ensure they will stay with the company.

7) Get the Most from Products
Actively decide which products to sell, what customers to keep, and how to set prices to make sure your products satisfy actual customer needs.

8) Produce the Product
Consider and analyze alternative ways products can be created, including owned or leased facilities (domestic or foreign), plantless production (outsourcing), combining operations with another company, even a competitor, and just-in-time (JIT) production.

9) Change the Process
Evaluate your processes and your competitors to maximize efficiency. Small but smart changes can increase production, save time and money, and diminish waste.

From Toys "R" Us, Inc. to BankBoston Corporation to Yahoo! Inc., The Phoenix Effect provides scores of real examples offering a range of fatal mistakes and successful comeback strategies to learn from. These proven lessons from the frontlines of rescuing big business will help managers:

  • identify whether their company needs a tune-up, a turnaround, or crisis management.
  • define their company mission and stick to it.
  • position their product against competitors with a product/price mix strategy, a product orientation strategy, and process improvements.
  • put their companies in context, make the right decisions, and choose the right strategy to suit their company's resources and culture.
  • focus attention on critical trends and real-time data that can minimize their company risk (working capital, cash flow, inventory, process time, assets and liabilities, economic indicators, etc.).
  • restructure and renegotiate debt with creditors to get the upper hand.
  • handle layoffs elegantly and ethically when there is no other option.
  • conquer denial, get over past glory, and confront and address flaws and weaknesses.

"The best renewal insurance is leaders who always know exactly how their companies are doing," say Pate and Platt. "These leaders never dwell on past glory, the siren call of complacency. They are masters of today's vital signs, the indicators of tomorrow's success or failure."

About the Authors:

Carter Pate is a world-renowned restructuring expert at PricewaterhouseCoopers with more than twenty years experience providing strategic consulting and implementation strategies. He has served as both CEO and Chairman of several public companies and advisor to companies including Ericsson Corp, Crown Books, K-Mart, and NeoStar Retail Group, and was a founding partner of Pate, Winters & Stone, a national consulting firm. Mr. Pate received his B.S. in Accounting from Greensboro College, Greensboro, N.C., and is a past member of its Board of Trustees. Mr. Pate is a contributing author to Workouts and Turnarounds II, published in 1999 by John Wiley & Sons, Inc.

Harlan D. Platt is Professor, Finance and Insurance Group at Northeastern University. He created and now administers the certification exam for the Turnaround Management Association. Platt holds a B.A. from Northwestern University and M.A. and Ph.D. degrees from the University of Michigan. He is the Associate Editor of Finance for the Journal of Business Research, and is the author of Why Companies Fail: Strategies for Detecting, Avoiding and Profiting from Bankruptcy, The First Junk Bond: A Story of Corporate Boom and Bust, and Principles of Corporate Renewal.

The Phoenix Effect The Phoenix Effect
9 Revitalizing Strategies No Business Can Do Without

by Carter Pate and Harlan Platt
John Wiley & Sons
2002

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