Swim Upstream in a Down Market
By : Jim Pinto,
By : Jim Pinto,
Many companies think of an economic downturn as a time to tighten belts and safeguard cash reserves. The executive mindset becomes survival, not growth - the bunker mentality. The irony is that this leaves a company in a vulnerable position organizationally and in the marketplace. The path to success in a down-market is to swim upstream.
Today, U.S. automation businesses seem to be focusing on foreign markets, while waiting for growth to trickle down from a domestic market upturn.
Meanwhile, executives are cutting costs through outsourcing and offshoring, resulting in widespread domestic layoffs and adding to the prolonged malaise of widespread unemployment. Many companies think of an economic downturn as a time to tighten belts and safeguard cash reserves. The executive mindset becomes survival, not growth - the bunker mentality.
In a strong economy, it's easy to remain profitable. But in a tough economy, many businesses are motivated simply to not lose money. The irony is that this leaves a company in a vulnerable position organizationally and in the marketplace. The overarching goal should be increased revenue and profits through capturing more market share and developing new markets, either with new products, or new markets or through strategic acquisitions.
Buck the trendThe time to develop significant competitive advantage and increase market share is while the competition is struggling. During lean times, advertising budgets are often the first to be cut back. The fact is that advertising is important for growth, especially in target markets. While competitors tighten their belts and cut marketing dollars, winners gain more mind share for their money by maintaining, or even increasing, media advertising.
Research-and-development budgets are usually reduced to just sustaining support for old products. Buck the trend by ramping up R&D, which enables growth in new areas and yields a strong advantage in coming years. Some companies are reluctant to change from previously successful products or target-markets. Instead, look for adaptations of core technology strengths for applications in new markets. Stimulate "outside-the-box" thinking and creativity. Develop and promote new features and function using iPad, iPhone and Droid apps.
Review sales and distribution, and eliminate the weakest links in the chain. Don't stick with products that fit the current sales-channel profile; move to new markets, with different distribution. Strategic acquisitions often provide the opportunity to do this without generating conflict with current sales channels.
Stay away from price wars. Confidence and value perception are far more important than price. It's important to keep a balanced products-and-services portfolio. Don't simply be forced into the strait-jacket of current pricing, margins and volume - look for new products in markets with higher volumes.
Evaluate all current customers. Providing extra support for good customers during bad times creates a bond that is hard to break. Don't spend resources on unprofitable customers. Profile the perfect customer. Maximize customer communications and service; increase customer confidence by delivering more value. Creating as much personalization as possible - establishing more customer intimacy - will help to retain key business during tough times. Look for competitors' customers - not just the largest, but particularly those with attractive growth prospects and strong balance sheets. Develop tactics to win their business.
Weak competitors often lay off good employees, and the remaining good people are often disenchanted. Capitalize on the opportunity to identify and attract talented employees in a slack labor market.
A side note to employees who have been or have the prospect of being "let go" during lean times. Don't simply look for another job in a similar company or business. It will lead you along the same path with a similar result. Use this opportunity to review your view of the world in the light of new technology and burgeoning markets. Seek something that can really get your juices flowing.
The path to success in a down-market is to swim upstream.
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