When business stalls, tensions rise. And prospects for a return to growth fall.

If your company isn’t doing very well at the moment, it’s safe to say that there’s probably some testiness–or worse–in the boardroom. Regardless of market conditions, that spells trouble. Consider:

–Target was thrown off its game for months earlier this year, distracted by an aggressive advance from hedge fund magnate William Ackman, who wanted control of the board (see “The Battle for Control at Target”).

–Dial-a-Mattress recently declared bankruptcy and subsequently sold out to one of its biggest competitors. Why? One reason, says founder Napoleon Barragan, was a management culture clash.

–Retailer Children’s Place is currently struggling through a vicious proxy battle between board members and its former CEO (who remains its biggest shareholder) about the direction of the company.

And these are just the examples that made the news. Most of the time, companies work hard to keep internal arguments quiet, not wanting to alarm shareholders, employees or customers. While that may be helpful, it’s no better than sucking on a cough drop to quiet the effects of bronchitis. The important thing is to treat causes, not symptoms. In my research among more than 700 corporations, the issue of management alignment (or a lack of it) was a key determinant of whether their fortunes were rising or falling.

The moral? If there’s strategic dissent within your organization, deal with it. Quit ignoring the (often subtle) symptoms like avoidance, eye-rolling or passive-aggressive behavior. Get the key players in the room, close the door, and face the facts. If you need help, trying having your team take a simple self-diagnosis derived from our research and available at www.WhenGrowthStalls.com. Have each person print out their results and lay them down on the table. If nothing else, it will kick start the conversation.

Until you all get on the same page, your recovery story can’t be written.

As of May 5th, your household’s share of the GM bailout was roughly $135 (see “What’s a Billion?”) Today, according to an accounting done by the Wall Street Journal, your “contribution” to GM and its former subsidiaries has shot up to well over six hundred bucks. That’s a very large increase in a very short time.

Meanwhile, Ford, the lone U.S. automaker standing on its own two feet, reported a second quarter profit of over $2 billion. While Ford’s profit is the result of a one-time gain due to debt restructuring, the company is nevertheless coping with the downturn better than its rivals.

As I’ve spoken to dozens of CEOs of struggling companies over the past several months, one of the silver linings I repeatedly hear about the current economic situation is the fiscal discipline it has imposed on their operations. Day after day they’ve had to come up with strategies to make their companies leaner and meaner–strategies that will serve them well long after things pick up. That’s how the free market works, and all of us (as consumers) are the beneficiaries.

GM has sucked some $70 billion of precious capital out of the private sector, but I doubt it’s the better for it. Innovation is a function of motivation, and there’s nothing more motivating than the threat of going under. No one may be throwing your company a lifeline, but keep swimming. Once you can stop to catch your breath you’ll be amazed at what good shape you’re in.

Years ago we coined the term “fragflation,” the combination of fragmentation and inflation in the world of advertising media. When the audience for any given media vehicle gets smaller,  while the costs of reaching that audience continue to rise, fragflation is the result. And like it’s cousin stagflation (the combination of high unemployment and high inflation), fragflation can do a lot of damage in a short period of time.

Here’s a current example. When Jay Leno signed off on his last Tonight Show in May, he achieved an 8.8 rating in Nielsen metered markets. That was the show’s best Friday night rating in the 17 years Leno spent behind that famous desk. By contrast, when Johnny Carson said his goodbyes in 1992, he achieved a 31.9 rating in metered markets.

From 31.9 to 8.8 in 17 years. That’s a significant decline, and unfortunately it’s the rule, not the exception. If it feels like you’re getting less for your advertising dollar than you used to, it’s because you are. Which puts all the more of a premium on strategy and creativity.

Make sure you’re maximizing both. You can’t afford anything less.

The other day I was reading a fascinating story about how Lawren Smithline, a Ph.D. mathematician with the Center for Communications Research, cracked a 200+ year-old cipher originally written to Thomas Jefferson by his friend Robert Patterson, a mathematics professor at the University of Pennsylvania.

Mr. Patterson thought the cipher was indecipherable, and until now it has been. But through a series of steps much too complicated for my mortal brain, Dr. Smithline broke the code. Oddly, however, the process Smithline used somewhat mirrors the process I recommend in When Growth Stalls to help struggling companies return to the growth curve.

It’s called “dynamic programming,” and it’s characterized by breaking complicated problems down into smaller pieces, solving them one at a time, and then putting them back together again. When a company is struggling it’s usually because of a fairly complex set of circumstances, many of which may not even be apparent. But by using a “dynamic programming” approach, the problem can be broken down into understandable and manageable pieces. I’ve seen it happen over and over through the course of my career.

I guess it’s not so odd after all that mathematics and business share common logic. While business isn’t quite as predictable as mathematics, the problems we as business people face tend to fall into certain patterns. And solving them takes the willingness to think critically and to persevere over time.

If you’re facing a stalled growth cipher of your own these days, don’t give up. Follow the process I recommend in When Growth Stalls and you’ll be back on the road to growth in a whole lot less than 200 years. Jefferson never did solve Patterson’s cipher, but he already knew the answer: “In Congress, July Fourth, one thousand seven hundred and seventy six. A declaration by the Representatives of the United States of America in Congress assembled. When in the course of human events…”

One of the three market tectonics I discuss in When Growth Stalls is the phenomenon I call changing industry dynamics. Nowhere are changing dynamics more evident these days than in the magazine industry.

According to Horizon Media and the Audit Bureau of Circulations, the number of paid subscriptions to digital versions of consumer magazines has nearly doubled in the past two years. That’s not a surprise, given the fact that the average U.S. adult has nearly doubled their time spent using the Internet since 2006 (from 2.1 to 3.8 hours per day).

Since there are still only 24 hours in a day, something has to give, and the print world has been hardest hit. The rapid decline in newspaper readership has been well documented, and even the most successful print magazines are cutting back. In a cost-cutting move, the New York Times Magazine recently trimmed its size by nearly ten percent, and Reader’s Digest (perennially among the top three in circulation of all magazines) cut its frequency from 12 times per year to 10 and will dramatically trim its rate base from 8 million to 5.5 million early next year.

It’s creative destruction in action. But not all magazines are sitting still. Horizon also reports that Men’s Health is introducing an iPhone app that will distribute paid content, a first for the industry. If it’s successful, no doubt others will follow. Even good ol’ Reader’s Digest is getting on board, planning to plow some of its savings into mobile apps and topical digital editions.

Rapid change can be both fascinating and disconcerting at the same time, like suddenly being able to see the secondhand moving on your watch. But these media companies are simply responding to a changing world, and it’s changing because we’re changing.

As always, what works will stick, and what doesn’t, won’t. As it should be.

Fortune Magazine recently published a thought piece by Xerox Chairman Anne Mulcahy(who retired from her CEO post July 1 after eight years at the helm) on the topic of innovation.

Mulcahy is one of those rare corporate leaders who has made tough decisions during tough times and lived to tell about it. She may have been, in fact, one of the most underrated CEOs in business over the course of the past decade. A few excerpts of her comments reveal why:

On the Past:

“When Xerox went through a downturn of its own making earlier this decade, everywhere I went, lenders and investors were demanding I cut our R&D; spending. But to me, Xerox innovation was sacred. Why avoid financial bankruptcy only to face technological bankruptcy down the road?”

On the Present:

“I know from experience one of the biggest mistakes that can be made right now is to slash investments in innovation. And by innovation, I don’t just mean product research and development. It can also be innovating in new markets, launching new businesses, and even disruptive innovation in work processes… In the cost-cutting discussions we’re having right now – and there are many – I remind my team that the next generation of technology and services will be born out of decisions we make at this unique moment in time.”

On the Future:

“To be sure, a company’s R&D; investment pool looks tempting in tough times. And draining it might save a few jobs or help make the quarterly results less painful. However, if you fail to fund the future, all you’ll be left with is a really lean company trying to churn old ideas into new business.”

Wise words, those. I hope she writes more.

Kodak is one of the featured companies in When Growth Stalls, for good reason. The company has been through the wringer over the past decade due to the evolution towards digital photography (the speed of which Kodak greatly underestimated), the decimation of travel (and the picture-taking that goes with it) after 9/11 and hordes of aggressive competitors.

The company took drastic steps to right itself, and was making good progress when the current economic mess hit. Despite its most recent woes, it looks like Kodak will make it after all–but not without change. Kodak announced last month that it will no longer make Kodachrome film. While anyone could predict that was coming, there’s something sad about it–like Simon & Garfunkel breaking up all over again.

Kodak, like every other company, must respond to changing dynamics in order to stay relevant. While it may be ditching Kodachrome because, well, nobody uses it anymore, Kodak is introducing a new line of printers that moves the expensive silicon technology off the ink cartridges and onto the machine. Which makes the printer cost a little more, but the ink cartridges a lot less (>50 percent less in many cases). Which means we won’t be getting robbed every time we hit Staples or Office Max to buy new ink. For that alone, Kodak deserves high praise.

Let the world keep turning. It’s good.

A nice thought for a Monday:

“As the careers of numerous writers, singers and businesspeople demonstrate, the true test of creativity isn’t the first hit product. It is coming up with a second success.”

–The Wall Street Journal’s Martin Peers

For many companies, success over the past decade or so has felt like a birthright. It’s time to stop licking our wounds and start creating the future. Again.

The Wall Street Journal recently ran a feature about C.F. Martin & Co., the storied guitar maker based in Nazareth, PA. It seems Martin is responding to the slack in demand for discretionary products like premium guitars by manufacturing a solid-wood model for under $900 (compared to the normal price of $2,000 – $3,000). Chris Martin, the company’s CEO, admits, “We needed something so we wouldn’t have to start laying people off.”

On that score the new guitar can already be called a success. Launched in April, over 8,000 copies of the instrument have been sold. One grateful music store owner said, “It was really smart of Martin to come out with these in the current economy. They seem to be filling the niche quite well.” No doubt they have.

While the new guitar is clearly a hit, I have to wonder what long term impact its launch is going to have on the Martin brand. It’s always easy for a premium brand to grab a quick handful of market share by going downmarket, but it’s often a mistake (Mercedes is a prime example, the case for which I make in When Growth Stalls). As the music store owner above went on to say about the new guitars, “Soundwise, for the money, they’re very good, but aren’t necessarily comparable with the more expensive models.”

There’s the rub. While longtime brand loyalists may be somewhat forgiving of Martin for its move to cope with the downturn, other (especially younger) guitar aficionados won’t have the same context and may think of the Martin brand in lesser terms than they normally would. Especially when competitors like Taylor are determined to maintain their quality and price points. It could change the perceptual playing field for some time.

Martin does already offer some cheaper, laminated guitars, which may soften the effects of this decision. And Chris Martin hearkens back to a similar strategy his great-grandfather pursued during the Depression (building guitars for tens of dollars rather than hundreds) as evidence that this was the right move. But the brand landscape in the early 1930s was nowhere near what it is today, nor was the level of consumer sophistication. It’s a different game now, and there’s no guarantee that the rules haven’t changed.

I hope Martin not only survives, but thrives, as it’s a legendary brand. I just wonder if the company considered the potential unintended consequences. And whether it will be able to cope with them as economy–and the guitar industry–shakes out.

Saunda and Paul Kitchen own the Mr. Rooter Plumbing franchise in Sonoma County, California. The Kitchens are consistently rated among the best franchisees in the Mr. Rooter system, and in 2008 their operation was again recognized as No. 1 in sales for markets of their size. They run a tight ship and a great business.

I recently heard Saunda speak about their accomplishments and how she and Paul have managed to maintain their focus despite the horrible economy. She says, “When times get tough we all tend to start looking for the next big thing, and we forget what got us here. We already have the tools; we just need to remember to use them.”

That philosophy has served the Kitchens well, and their steady and deliberate approach has kept their business healthy and ahead of the competition. When growth stalls, inconsistency is one of four factors that tend to plague struggling companies. But Saunda and Paul understand that to reap the rewards of consistency, they have to do what they do–and do it well–day after day.

Events beyond our control are challenging even the best-run companies. At times like these there’s no silver bullet solution, and chasing one can actually set an organization back. The Kitchens understand that the best thing they can do is continue focusing on the thing they do best, even if they, too, need an occasional reminder.

Paraphrazing Zig Ziglar, Saunda says, “Motivation is temporary, But so is bathing.”