That’s funny. I love Stephen Roach. He’s a very interesting guy, I’ve heard him speak. He’s a very good writer. But he’s also a very conservative and, at times, pessimistic person. When you are in business, and specially when you are in a leadership position, you are required to at least have some balanced optimism. If all you see are brown shoots and good stuff turning into bad, then you drive yourself nuts. The way I look at the world is I think its possible that everything is going to turn out good and wonderful. I can’t plan on that. What I can do is have balanced optimism. I look at it this way: “Call me at the end of December, the world is going to turn around.” There are others who see it the other way.
(The) US is a proxy to the world. Business investment was down over 30%, which is the greatest downturn in annualized basis of business investment since it was recorded. That is since the 1950s. That’s staggering. This is because consumption in the US and around the world has reduced dramatically. Eventually, that pent up demand has to surface. So, as Stephen Roach says, we have to see a balance of savings and investment. But it doesn’t have to be dramatic. I don’t think it has to be balanced and sustained as Stephen Roach believes it to be.
Consultancies do well during uptrends and downtrends, and in that sense, you guys are insulated from the vagaries of business...
We are in the middle. Middle is the most difficult time to manage. When you are going down it is easy to manage. You will cut costs, live conservatively, clean up the balance sheet and focus on retaining people and clients. All these are important. When businesses are going up, (it) is also easy. They are busy hiring and training people and marketing the heck out of things and finding new clients.
But when you are in the middle, it is tough. We have to be careful in any business. You don’t give any ground to customers because...then somebody else takes that position. And we all know it is harder to find new customers. If businesses don’t grow in this period, then they lose their best people. So, this is the most dangerous time to manage for any business. What we do is focus on costs, invest more in research and marketing. We invest more in intellectual capital and in people, and we continue to fight hard to keep our clients. We hire more because you build for the future. There is still high risk to invest prematurely, but there is higher risk to not invest and be caught when there is a turnaround. Because then you’ll lose time.
Where does a consulting group such as Diamond see more business? During downtrends?
Every consulting firm is different. We are in a great position in that we are able to work on both the growth side and the costs side. There was a time in our history when we were only known as growth guys. In the mid-1990s, the only thing we used to do was growth. Unfortunately, times get tough. Clients need help with costs. We can now work on both sides. Having said that, where clients appreciate and value our work more is clearly on the growth side. It is easier in many ways to manage costs. The first thing you do is restructure the organization, including your debt. It doesn’t need a lot of genius to do that.
Diamond is a listed entity, unlike other consultants who pride themselves on client confidentiality. How does that work?