The Five Imperatives

#1: Improve Cost Discipline: Reduce COGS And Capital Use, Not G&A Spending

• Focus on cost of goods sold rather than general and administrative expenses to achieve long-term cost discipline.
• Incorporate capital costs into SKU reduction efforts.

#2: Protect Growth Initiatives: Elevate, Consolidate, and Protect Innovation Funding

• Name and protect explicit growth bets in the capital budget.
• Incorporate concrete innovation targets into performance expectations and reporting, even amid belt-tightening.

#3: Leverage Financial Strengths: Reenvision Your Value Chain as a Capital and Pricing Chain

• Foster innovations that target the shifting financial strength of customers and suppliers.
• Use the crisis to price for the true value of intangibles that customers underappreciate.

#4: Exploit Risk Opportunities: Embrace, Don’t Eradicate, the Right Risk Exposures

• Harmonize executive risk tolerances and pursue those you are uniquely positioned to manage.
• Evaluate your contract portfolios with an eye toward renegotiating past (and changing future) contract terms.
• Robustly manage fraud risks by identifying and punishing incidents of misconduct early in the down cycle.

#5: Make Critical Talent Plays: Use Today’s Crisis to Court and Cultivate Tomorrow’s Winners

• Seize the opportunity to close critical skill gaps with “not-in-play” talent.
• Reward relative outperformance (even if you must court the wrath of executive pay watchdogs).
• Use the economic crisis to sharpen the acumen of future executives.
• Re-brand the employment value proposition to recoup productivity losses from suddenly disengaged talent.
• Embrace offshore centers as a source for critical skills and next-generation executive leadership, not just low-cost execution.

* Pseudonym