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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Jun 15 2015

The Black Hole of Strategy

“Strategically and tactically managing the business cycle … is truly the ‘black hole’ of corporate strategy – for it is arguably the case that the business cycle is one of the single most important determinants of corporate profitability.” This was the conclusion from an analysis of hundreds of companies. The key, however, is a systematic framework to determine the importance and impact of the business cycle on a given industry.

ECRI has developed such a framework that determines how cyclically sensitive an industry is likely to be; outlining the advantages – tactical and strategic – that an organization may derive from developing an ability to ride the business cycle. Lee Iacocca, a legendary manager of a very cyclical business, is credited with saying to his chief economist Don Hilty following Chrysler’s near-death experience in the early 1980s -- “the only thing I want from you is to let me know six months before the next downturn.”

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Simple Math: ½% + ½% = 1%

ECRI June 11, 2015

With productivity growth and potential labor force growth both averaging ½% a year, trend real GDP growth is converging to 1% a year. More