Steven's Blog

Stop focusing on the yen exchange rate! Your best hedge is innovation!

Many business executives are fretting about the weakening, and a lot of them were present at a yen forecast briefing I attended yesterday. Lots of charts and graphs, elaborate assumptions, and caveats. In the end, it boils down to the yen could up, or then again it could go down.

What is a business executive supposed to do? Move production offshore? Currency hedging? Seek lower cost materials? All textbook answers and these were abound at the briefing.

Stop focusing on the yen exchange rate. You have no control over it. Click To Tweet

You can only react. Focus on exchange rate limits thinking to cost-cutting or cost containment. No business ever prospers on these alone.

My most successful clients deal with exchange risk by frequently introducing new products and services. They focus on continuously increasing the value of what they have to offer. Offering something new and valuable allows you to set price, as opposed to increasing or decreasing the price of an existing product.

Increasing the frequency of new offerings is your best protection against exchange risk. More importantly, you have control over innovation.

Most companies do far less innovation than they could be, which is unfortunate because is not nearly as difficult or dependent on serendipity as many people think. Too many company employees view innovation as someone else’s job, not theirs, even though their minds are teaming with latent, viable ideas that simply need to brought out. It is just a matter of focusing energy, attention, and time on these activities.

So, stop trying to read the tea leaves. Manage your exchange risk, and then forget about. Move your attention to increasing frequency of innovation. I suspect there is a lot of low-hanging fruit, and taking action on that will hedge your exchange risk far more than the prognostications of analysts and standard textbook remedies.

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