Lessons from Great Depression

by 21 Jul 2009

Innovation, early cost-cutting and invest ment in R&D are three common strategies of companies which emerged strongly from the Great Depression and from which com panies can learn today.

Companies such as GE, P&G, and IBM had common strategies during the Great De pression, such as investing in areas in which other companies had cut back, leading to their success in the economic downturn of the 1920s and ’30s.

According to a report by the Boston Con sulting Group (BCG), there is much that today’s top managers can learn from the Depres sion era’s stars and the lessons are just as rel evant today as they were nearly 80 years ago.

To understand what drove industry-beat ing performance, BCG studied the compa nies which performed relatively well. The study focused on six leading companies – GE, IBM, DuPont, P&G and, ironically, Gen eral Motors and Chrysler.

The report, Green Shoots, False Positives, and What Companies Can Learn from the Great Depression, detailed strategies which involved cutting costs and reducing excess capacity in well-thought-out and disciplined fashions.

To retain as much of its talent as it could and maintain its competitive advantage in the long term, GE for example, shortened the work week, cut wages, and shifted skilled employees to lower-skilled jobs rather than laying them off. And, arguably most pivotal to GE’s long-term success, was its sustained investment in innovation.


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