Page 124 - Accelerating out of the Great Recession

DEFENSE FIRST

mental to his company’s success during the period of economic
recovery after the Great Depression. When businesses began
expanding again and federal government programs grew in the
middle to late 1930s, IBM had the capacity to fill new orders
while its competitors struggled to rebuild their capabilities.
This same determination to use innovative employment
schemes to cut costs and, at the same time, keep talent in the
company was reflected in the actions taken by KLM, the Dutch
airline, in the Great Recession. In mid-2009, reacting to a drop
in revenues, KLM asked 2,000 of its pilots to volunteer for jobs
as baggage handlers, “hospitality agents,” and machine opera-
tors—which enabled the airline to save money by hiring fewer
temporary workers. 1

Maintain a Flexible Business Model
Maintaining a flexible business structure allows for quick
adjustments to changing economic conditions. Designing a
flexible organization at the start reduces the likelihood of hav-
ing to make difficult cuts down the line. One obvious way to
accomplish this is to avoid a vertically integrated business
model. At its extreme, a fully integrated model means that a
single company controls not only the manufacture of products
(or delivery of services) but also their distribution and sale. But
choosing not to integrate assumes that certainty of supply or
quality is not of such overwhelming importance as to dwarf all
other considerations.
As we related in our story of the U.S. automobile industry,
this was a key reason for the success of GM and Chrysler.
Limited backward integration at GM and Chrysler enabled
them to scale down and then later scale up production, with
much of the risk borne by the suppliers. To maintain a flexible

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