Why And How To Manage Through This Inflation Differently Per Ram Charan – Forbes

Supply chain disruption
The Consumer Price Index (CPI) was 7.9% higher in February than it was a year ago, the highest rate of inflation in 40 years. In a conversation with Ram Charan this past week, he told me this round of inflation is different. Companies will need to act differently. They should focus more granularly. They should manage cash to ensure continuity. They should nurture the 2% of people that create 98% of the impact.
What’s different
According to Charan, past inflations were caused by excessive demand, especially in housing and auto, and relatively low interest rates. This inflation has been caused by excessive quantities of money in the system (which the government needed to inject to mitigate the economic impact of Covid,) supply chain disruptions, and talent shortages – not to mention the impact of the chain of events triggered by Russia’s invasion of Ukraine.
Charan thinks this inflation will not be temporary and will take a number of years to work through the system. He thinks there’s a possibility of it becoming “insidious” as people adopt a psychology of hoarding.
Strategically – Focus
Strategy is always about focus – choosing where to play and how to win. Charan is a master strategist. In this case, his overall guidance is for leaders to make more granular, specific choices. “Don’t look at the CPI.” He implores. It’s too general. Figure out the drivers of inflation in the different parts of your ecosystem.
And don’t be lazy. Don’t reduce the amount of product you put in your box to mask your price increase. Instead, keep investing in innovation to create more value for your customers – and charge for it.

Operationally ­– Continuity
Job #1 is to survive. This different inflation will impact different parts of your business differently. Forget the norms. Manage for cash. Price to manage cash. Digitize to create cash. Work the supply chain to optimize cash. As the song goes, “Cash is the oxygen of commerce.”

Organizationally2%
When it comes to people, forget the 80/20 rule. One of Charan’s many great books is “The Leadership Pipeline.” When he says 2% of the people have 98% of the impact, he knows what he’s talking about.
Just as you need to focus on value creation instead of pure cost management strategically, and need to focus on cash operationally, focus all your love and attention on the most important 2% of your people. Support them. Recognize them. Pre-emptively reward them.
Over communicate with all, every step of the way. Treat everyone with the respect they deserve, especially when it’s time for them to go elsewhere.

Click here for a list of my Forbes articles (of which this is #756) and a summary of my book on executive onboarding: The New Leader’s 100-Day Action Plan.

source