Forbes.com
Mark Gottfredson and Steve Schaubert 03.25.08, 6:00 AM ET

Even though employment, manufacturing and consumer confidence are all trending downward in the U.S., many economists are still reluctant to use the R-word. But however you define today’s business environment, CEOs are in the hot seat. Their challenge is to anticipate where slowing momentum will hurt the business most–and then take actions to blunt those effects and position the business for a quick turnaround.

While many companies batten down the hatches and try to survive, our experience is that, for prepared companies, economic slowdowns can provide significant opportunities to improve their positions and accelerate into the next up cycle.

Where should managers focus their attention? In a downturn, you don’t have to wait for a lot of data to decide. Most companies encounter four critical pressure points.

The most obvious and most important is costs. In good times, companies often focus on increasing sales and opening up new markets rather than on managing their costs down the time-honored experience curve–that practice may come back to bite them in a downturn.

As sales slow, cost leaders find that they have even more built-in advantages than usual; cost laggards find that they are even farther behind than they thought. Toyota, for example, has just unveiled the first car produced under its latest cost-cutting program. The company expects the program to generate $2.8 billion in savings. A downturn is a great time to create the “burning platform” necessary to accomplish cost savings and get back onto the experience curve.

At the same time, managers must be very thoughtful about where to cut and where to invest. Investing in the areas customers care the most about while everyone else is cutting back–though counterintuitive–can help a company leapfrog the competition.

A second pressure point is market position. In ordinary times, well-managed market leaders generally outperform followers–leaders’ profits and revenues grow faster, their returns on equity are higher and their customers are more loyal, to mention just a few measures.

In a downturn, the competition for position grows more intense, and existing positions may be vulnerable. Leaders may use their deeper pockets to dial up the pressure on followers, or to snap them up at bargain prices. Followers can sometimes turn the pressure exerted by a downturn to their advantage and leapfrog into the No. 1 position.

The merger talks now taking place among U.S. airlines reflect the imperative for every carrier to be top dog in as many markets as possible–and show how urgently CEOs facing a downturn feel that pressure. If consummated, the deals may re-order many airlines’ market positions, creating great opportunities for some and dire threats for others.

A third pressure point: customer behavior. Customers never sit still, of course. But in a downturn, both businesses and consumers are likely to shift their buying patterns faster than ever. They seek out bargains. They do without some things altogether. These changes in behavior can significantly rearrange the pools of profits that companies compete for.

The “mass luxury” market is already feeling the pain. McDonald’s recently announced it would begin serving souped-up coffee beverages at lower prices than the competition, a move widely interpreted as a direct challenge to Starbucks. In ordinary times, the move would be as risky as any attack on an entrenched market leader. In a downturn–who knows?–McDonald’s’ challenge might pay off.

A fourth pressure point–and perhaps the least recognized–is complexity. Companies in good times tend to add features, variations and line extensions, thereby complicating both their production processes and their organization. Even in good times, this can raise costs and interfere with a company’s agility.

But the drawbacks of complexity are particularly noticeable in a downturn. Japanese carmakers don’t just enjoy a cost advantage over Detroit, they also have a complexity advantage–with fewer models, fewer options and fewer different parts.

Honda requires half a day to build all possible variations on the Accord, while Detroit automakers need more than 90 days to build all possible variations of some American compacts. In a downturn, can Detroit sell enough of all those variations to cover the costs of the complexity?

These four pressure points are where any company facing a slowdown should focus. They are the parts of the business where trouble can quickly spin out of control; they also provide four useful gauges of a company’s vulnerability. A company knows it is taking the right steps if its costs are trending downward at least as fast as the competition’s, and if its competitors’ market positions are more vulnerable to a sales slowdown than its own.

Managers can also tell if they are on track when their customers’ loyalty increases (or at least holds steady), and when they can point to signs of greater simplicity in their products, businesses processes and organizations.

Downturns aren’t all bad news for companies. Our research has shown that changes in economic and strategic position are twice as likely in a downturn as during other economic periods. Firms that paid attention to these pressure points–like the drugstore chain Walgreen, for example–gained share over their competitors in the last downturn and substantially improved their positions in earnings and sales.

For companies that are prepared, managing in a downturn can open more doors than it closes.

Mark Gottfredson, based in Dallas, leads Bain & Company’s Global Performance Improvement Practice. Steve Schaubert is a Bain partner in Boston. They are co-authors of “The Breakthrough Imperative: How the Best Managers Get Outstanding Results.”

By Steve Conner Science Editor, March 24, 2008, The Independent UK – A potential cure for Parkinson’s disease has come a significant step closer today with a study showing that it is possible to treat the degenerative brain disorder with cells derived from cloned embryos – a development condemned by the Roman Catholic Church.

The research was carried out on laboratory mice but scientists believe the findings are proof that the techniques could be applied to humans suffering not just from Parkinson’s, but a range of other incurable diseases.

Researchers have demonstrated the possibility of treating Parkinson’s disease by transplanting laboratory-matured brain cells back into the individual who supplied the skin cells that were turned into cloned embryos – a process known as therapeutic cloning.

“This is an exciting development, as for the first time it may be possible to create a person’s own embryonic stem cells to potentially treat Parkinson’s disease,” said Kieran Breen, director of research at the Parkinson’s Disease Society – a charity representing the 120,000 people in Britain affected by the illness.

Dr Breen said: “Stem cell therapy offers great hope for repairing the brain. It may ultimately offer a cure, allowing people to lead a life that is free from the symptoms of Parkinson’s disease.”

Proof that therapeutic cloning is more than a pipedream will be used by British scientists as justification for their push to expand the boundaries of their research to include the use of animal-human “hybrid” embryos for medical experiments, a process that is bitterly opposed by the Catholic Church.

Scientists say that, because of the shortage of human eggs for research purposes, they need to use cow or rabbit eggs for cloning experiments, and have lobbied hard for it to be allowed under the Human Fertilisation and Embryology Bill currently going through Parliament. Even though the stem cells derived from cloned hybrid embryos will never be used on patients, the practice is condemned by the Church, which wants all MPs to be given a free vote in the Commons.

The latest development, published in the journal Nature Medicine, is further proof-of-principle that therapeutic cloning can effectively treat – and possibly cure – a degenerative brain disorder.

For the first time scientists have been able to create healthy, working brain cells from immature stem cells, derived from embryos cloned from skin cells, and transplant them back into the diseased brain.

The laboratory mice in the study suffered from a type of Parkinson’s disease, which is marked by the death of certain nerve cells or neurons in the brain that produce the neurotransmitter dopamine. Skin cells were scraped from the tails of the animals and cloned using mouse eggs, which had their own cell nuclei removed. Stem cells taken from the resulting cloned embryos were grown in the laboratory into mature dopamine-producing brain cells. After transplanting the cells back into the brain, the mice showed significant improvements in a range of experiments designed to test skills that become notably worse in those with Parkinson’s disease.

The team of American and Japanese scientists, led by Lorenz Studer of the Sloan-Kettering Institute in New York, were able to produce 187 different strains of embryonic stem cells from 24 Parkinsonian mice. A key finding of the experiment was that there were no signs of tissue rejection because the transplanted brain cells were derived from the same mouse that supplied the skin cell for the cloned embryo.

Professor Robin Lovell-Badge of the Medical Research Council said the study provided further proof-of-principle that therapeutic cloning was a potential treatment for severe disorders of the brain. He said: “The authors were also able to test several independent embryonic stem cell lines corresponding to individual mice, and could show that most seemed to work well. This is very encouraging as it indicates that the cloning process is a sufficiently robust method of reprogramming cells back to an early embryonic state, at least when the early embryos are used to derive embryonic stem cell lines.

“Ideally one of the next steps will be to repeat the whole procedure with a monkey model. This will allow much better tests of functional recovery and safety.”

Life with the disease

“I wish one of these pontificators could get inside my body and see what it feels like. Parkinson’s is like being locked in your own body when your mind is still there. I can become as rigid as a plank and my legs won’t bend. It’s as though there is a ton of cement on my chest and an army of ants crawling up and down my body with spears. It’s like being buried alive.

“By the age of 70, three-quarters of those in this country will have Parkinson’s disease to some degree as it is a degenerative illness. Once you have it, it never goes into remission. But no one tells you how difficult it is to live with.

“It makes me so angry when I hear academics, theologians or medics arguing about cloning. For me, it is like hearing any hopes we may have of returning to normality being taken away. By mixing ethics with religion and politics, which is a lethal concoction, they are not thinking about the people who have the disease. I feel like saying, ‘Get off your high horse.’

“I would not want to stop any process unless it I knew it was categorically not going to work for those who are suffering. I don’t believe cloning embryos is like taking life. Parkinson’s is such a desperately painful disease. You would have thought that everyone would support anything reasonable to find a cure, and I believe what is being suggested is reasonable.”