Corporate Canaries – A Book Summary

The Big Idea

Long ago, coal miners would put caged canaries in their
tunnels. If the little birds fell silent or dropped,
this would alert the miners of the presence of poison
gas. This way, many miners were able to escape unhurt.
The business environment you live in is very much like
those treacherous mines. Hundreds of employees are laid
off everyday and more and more companies are filing for
bankruptcy. As a manager, you must learn how to detect
threats to your business before disaster strikes.

Corporate canaries are exactly like those real-life birds
that saved hundreds of miners from certain death.
“Canary” warnings will tell you whenever your business
is threatened, enabling you to stop the bleeding even
before it starts.

There are five canary warnings:

Canary Warning # 1 – You Can’t Outgrow Losses

A lot of businesses fail because management chose to
chase after sales, instead of focusing on making profit.
What you must realize is that getting more sales is only
secondary to making sure that those new sales add new
profits.

Few people fail to realize is that every new sale that
comes in means added expense to the company. As a result,
a new sale does not automatically mean an increase in
profit. In fact, it could very well be the other way
around.

Before a company can think of getting bigger, it must get
better. It would be more ideal to cut overhead costs to
fix a company’s profit margin than to take on an influx
of new customers.

Canary Warning # 2 – Debt’s a Killer

Most companies are in debt. Although a little debt can’t
hurt anyone, a lot of corporations who borrow excessively
should be made aware that they are putting their companies
at grave risk.

In a healthy economy, companies often make more than
enough money to pay off the interest rates on their
loans. Unfortunately, there is just no guarantee how
long an economy can stay healthy. In fact, even the
smartest person from Wall Street can not predict for
certain how the market will react tomorrow.

Canary Warning # 3 – Fools Fly Blind

If your company has no control over costs, then trouble
lies ahead. Most people mistake this idea with the
concept of cutting costs. Control has nothing to do
with cost cuts. Rather, controlling costs means having
an adequate understanding of all the factors involved.

You must understand where your profits are coming from.
You must understand what matters. A thorough
understanding will enable you to make masterful decisions
in advertising, representation expenses, and the
acquisition of new technology. When you understand
costs, you are able to make decisions based on what is
profitable for the company.

Canary Warning # 4 – Any Decision Beats No Decision

Confusion can be a source of tremendous problems in any
organization. You must remember that a clear sense of
direction promotes efficiency throughout the company.

Canary Warning # 5 – Markets Grow and Markets Die

The market is continuously changing. The products that
were the craze some years back are now considered
obsolete museum artifacts. A company must learn to
evolve or must be ready to give up its place in the
industry and die.

One of the first things you must learn is that it is
impossible to fix a dying market. As a manager, there
is nothing you can personally do to resurrect what is
soon going to become obsolete.

The Big Lesson: Defense Matters
Very much like in ball games, both offense and defense
matters. You must watch out for the five canary
warning mentioned above. By utilizing a strong defense
and watching out for signs of trouble, you will be able
to execute a better offense.

About the Author:

Gary Sutton is an author, top-rated speaker, and veteran
business turnaround expert. Over his acclaimed twenty-year
career, Sutton has taken over and revitalized troubled
businesses, turning these money-losing companies into
cash generators. Sutton sits on twelve boards today, and
he has been a highly rated speaker at the MIT Forum for
fifteen years. He also has appeared on MSNBC, CNNfn, CBS
News, and NPR. He’s been covered by or written for the
Wall Street Journal, BusinessWeek, and Fortune, and cover
stories on him have appeared in Fast Company and Directors
& Boards.