MARCH 31, 2002
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Stanley Fischer Unplugged
He has the rare distinction of having advised through the half-a-dozen economic crises of the 90s. But now economist Stanley Fischer is calling it quits at the International Monetary Fund, and joining Citicorp as Vice Chairman. In India recently, Fischer spoke on IMF, India, and the global recession.
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Tale Of A Ticking Turn
The Turnaround CEO has to sit back and ask how he can use existing resources to find a suitable niche for the products his company can make and sell.
Pradip Chanda, is a turnaround consultant based in Delhi. He is the author of The Second Coming--Creativity in Corporate Turnarounds

Managing a sick company is about taking calculated risks in the deployment of resources and unlocking value from existing assets. This is particularly true when there are sudden discontinuities in the business. Instead of analysing the trends, which are substantially changing the market structure, some companies end up trying to buy a greater share of a shrinking market, thus accelerating the downward slide.

The Turnaround CEO has to sit back and ask how can he use existing resources to find a suitable niche for the products the company can make and sell. The answers at times are fairly simple. The channels may have changed. Demographic shifts may have opened up totally new opportunities for the company to explore profitably a new but do-able product mix.

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The Waterbury Watch Company of Middlebury, Connecticut, was once known for making one-dollar pocket watches. That was in the 1940s. During the war the company saw a big opportunity in using its clock-making expertise to develop a range of timing fuses and became one of the largest suppliers of such devices to the US army. A company with a turnover of barely $300,000 suddenly became a $70 million company.

The timing fuse bonanza ended as the war was over. The company went back to what it knew best-making watches. But the market had changed. Pocket watches were passé. Young people were looking for watches that they could strap on to their wrists and were prepared to pay more than the pre-war one-dollar pocket watches, but not the kind of fancy prices that the premium watches fetched.

The company, believing that they can combine their watch making know-how with the precision tools techniques used in making fuses, focused on developing a watch that was simpler and cheaper than the Swiss watches. They succeeded in doing so by replacing jewels with metal bearings to maintain the balance in the movement. Believe it or not, the prototype was based on the mechanism used in Mickey Mouse watches. The company also invested in plant automation to increase capacity.

The next step was to develop a communication strategy to convince potential customers that the new cheap watch not only told the time but was also hardy enough to withstand rough treatment. Convinced that demonstrations were more effective than clever advertisements, the company developed a point of sale-window display unit. To the utter amazement of window shoppers, a lever-operated arm first dunked the watch into a beaker of water and then dropped it on an anvil to be struck by a hammer. It then held it up to show the time.

The other important element in the communication strategy was to dump the Waterbury brand, too closely associated with dollar pocket watches and promote a more precise and modern sounding new name-Timex.

So far so good. But the real problem arose when jewellers, the traditional sellers of watches, refused to handle a cheap watch. Used to making $50 on a $100 watch, and in the process creating a life-time customer beholden for service and repairs, the jewellers could not see themselves handling a $7 watch for a piffling two-dollar margin.

The company was dumbstruck. But the Timex management was equal to the task. The company salesmen tirelessly explored new avenues and finally found their ally in corner drugstores. Nestled among prosaic home remedies and toiletry items the Timex watches had pizzazz. Spurned by jewellers as down-market cheapies, Timex watches became class merchandise in the drab settings of drug stores.

A classic in dealing with discontinuities that should inspire many a Turnaround CEO to look deeper into the assets he inherits.