Roger Trapp: 'Zombies are all the rage in the movies and books this year. So it should not really be any surprise that they have entered the business language'

“Zombie banks” first emerged as a term in the late 1980s and came to be associated with the crisis that affected Japan in the 1990s, turning a once-thriving economy that was the envy of the world into a byword for stagnation. Now, Mark Thomas of the management consultants PA Consulting claims that the financial crisis that started in the autumn of 2008 has left behind a “zombie economy”. In his recently-published book of the same name, he states: “Even though many countries are emerging from a technical recession, the crisis has created a new class of groups and institutions which, although not completely ceasing to exist, have lost the ability to function normally.” As he explains, this means that, while these organisations do not cease to exist, they have become unable to perform the functions “that we expect of them in supporting growth of the economy.” Accordingly, zombie banks cannot lend as we need, zombie consumers cannot consume as we need and so on.

The worst may be over. But, with a general election campaign now in full swing and with higher taxes and a curtailed public sector likely whatever the outcome, the economy is not about to improve any time soon. As a result, organisations of all sorts need to prepare for a time when it is anything but business as usual.

Thomas, who is head of PA’s strategy and marketing practice and previously wrote a highly-regarded pamphlet “Thriving and Surviving in the Economic Crisis”, says they need to start by repositioning themselves urgently. Any business that has not been reinvented since the start of the crisis in September 2008 will no longer be well-positioned for the coming four to five years.

This involves taking four key steps. One, secure liquidity; Two, create a portfolio of potentially winning businesses; Three, remodel each business to ensure it can perform strongly in the new world; Four – depending on the success of the first three steps – take bold action to stake a greatly enhanced position in the new world.

Of course, all of these are much easier said than done. And Thomas acknowledges that taking action could be especially tough for smaller, independent businesses. This is despite the usual belief that smaller businesses are better able to deal with changing market conditions because of their greater agility.

As he explains, the current crisis is “at its heart” a liquidity crisis and “without liquidity companies cannot survive”. Larger companies can circumvent the problems in the banks by tapping the equity markets (as has been common in recent months) or using the bond markets. Such options are not really feasible for smaller businesses, which are therefore much more dependent on the banks and particularly on their bank managers’ attitudes towards them.

Equally, smaller businesses are unlikely to have a range of businesses with which to balance their exposure to the economic situation. Even larger businesses have tended to reduce the breadth of their operations in response to “focus” being the current management mantra. And smaller companies tend to see concentrating on niches as the way to succeed.

But Thomas is adamant that business leaders need to abandon the “binary mindset” of cutting costs in order to wait for the recovery and then moving into a more expansionary phase. Companies need to control costs and at the same time to reposition their businesses in order to meet the changed demands of customers. He cites how John Lewis, arguably everybody’s favourite retailer of the moment, has shifted into “affordable luxury” as an example of the sort of new thinking required.

Nobody is going to find the coming years easy. The sheer geographic reach of the downturn thanks to the rise of globalisation means that there are few markets in which to expand. But Thomas argues that those businesses that take the steps he recommends and seek to ensure that their leaders recognise the severity of the situation in which they find themselves will stand a better chance of surviving and prospering.

More than a decade ago, Andrew Grove, the former chief executive of the computer chip maker Intel, entitled his autobiography “Only The Paranoid Survive”. Such an outlook is all the more important now.

“The Zombie Economy – Leadership in Times of Uncertainty” by Mark Thomas is published by PA Consulting. To find out more about the crisis and how it might affect your business, visit paconsulting.com/financial_crisis.

Independent Comment
blog comments powered by Disqus
Career Services

Day In a Page

The 50 Best beachwear

The 50 Best beachwear

The hottest summer gear for men and women
Still standing: George Galloway reveals why his staunchly Leftist outlook is still invariably right

Still standing: George Galloway

Written off, ridiculed, wrongly accused of taking bribes the honourable member for Bradford West, has never bowed to the critics.
How will Daniel Radcliffe's fans react to his latest turn - as a damaged, drug-taking Beatnik poet?

Daniel Radcliffe as drug-taking Beatnik poet

His decade as the boy wizard may be over, but that hasn't hexed Daniel Radcliffe's enchanted life.
For whom the bell tolls: £20m 'Memo' project takes shape on Dorset's Jurassic coast

'Memo' project takes shape on Dorset coast

It started as a stonemason's visionary idea – to commemorate all the species that have ever existed and are now extinct.
Just add sunshine: Bill Granger's Turkish delights

Just add sunshine: Bill Granger's Turkish delights

Turkish cuisine is perfect for those long, sociable weekend meals with friends. It's just a shame that money can't buy the key ingredient.
Objets czar: David Usborne’s collection of myriad objects is quite the mystery

Objets czar: David Usborne’s collection of myriad objects

To others, they're junk. To David Usborne, they are his life: useful gizmos, mysterious thingamajigs and anonymous articles that dominate his home.
The iron ore lady: Why the world's richest woman is mired in controversy

World's richest woman: Gina Rinehart

Family feuds, attempts to control the Australian media and bitter public disputes are keeping the mining magnate in the headlines.
We just click: How Lego keeps building on its success

How Lego keeps building on its success

This year, Lego announced record profits. Gerard Gilbert visits its Denmark HQ.
The other bits: Mark Hix creates delicious and economical meals with cheaper cuts of meat

Mark Hix cooks with cheaper cuts of meat

Our chef creates delicious and economical meals on a budget
Strokes of genius: How to create summer's bold make-up look

Strokes of genius: Summer's bold make-up

From coral lips to fly-away fringes, make-up artist Kim Brown and hair stylist Richard Scorer reveal how to create the look
Marking his territory: Kilian Hennessy creates fragrances designed to provoke the senses

Marking his territory: Kilian Hennessy

The perfumer creates fragrances designed to provoke the senses
Photo essay: Britain's 1948 Olympians today

Britain's 1948 Olympians today

Photo essay
The top five E3 2012 triumphs: From Ubisoft's suite of titles to Dishonored and The Last of Us

The top five E3 2012 triumphs

The games and moments that left us grinning like the Cheshire Cat
The green movement at 50: Can the world be saved?

Can the world be saved?

Population growth and climate change are the big problems facing the earth in the next 50 years. But are there any solutions?
France: Will xenophobia go mainstream?

France: Will xenophobia go mainstream?

In the beautiful Rhone delta, John Lichfield visits a village where a dangerous new political landscape is taking shape