Times are tough, but tech companies don't need to suffer

Back when I was a public company auditor (yes, you read that correctly), I quickly realized after discussing business with top-level executives that few were prepared to meet the challenges that (at that time) seemed unlikely to affect us again. They believed that the economy would continue its rapid expansion, consumer spending would rise by staggering amounts each year, and we would all profit greatly.

But over the past few months, the walls have started closing in and we find ourselves in a recession. Notice I didn't say "historic recession" or "calamitous recession", but simply, "recession"? It's because a recession, by its very nature, is open to interpretation. There is absolutely no proof to show that this recession will be as bad as the Great Depression even though some news stories like to throw that in. Even though times are tough and uncertainty in the market is rampant, companies need to remember that a recession is only as bad as they make it out to be.

The Consumer Electronics Association announced Thursday that it has revised electronics revenue forecasts down for next year after witnessing sales that were on par with last year. Growth is expected to be 0.1 percent--3.6 percentage points lower than it originally forecast.

I'm sure that figure spreads fear through the industry and companies will look at an expected drop in sales as an event that could destroy the market. But instead of fearing what may come, companies should capitalize on this time and allow others to fear for the worst, while they use that as an opportunity.

The term "recession" means very little when taken at face value. Sure, we hear it on the news every night and seeing how some folks react makes it easy to believe that a recession means the end of the world. But if we remove ourselves from that frame of reference, we quickly realize that recession, by its very nature, doesn't mean we should panic or believe that the world will end. And ironically, it's the Western world's corporate culture that feeds this.

Did you know that Asian countries, especially Japan, believe a recession is both good and bad? Japanese organizations feel a recession reminds them of the mistakes they made, makes them more aware of business opportunities, and view the time as an opportunity for action, not reaction. Maybe that's why the recession of the 1970s created a world environment that saw Japanese organizations take a leading role in innovation, and thus, profits.

But it's that idea--action versus reaction--that tech companies need to focus on. If they want to beat CEA forecasts and turn the industry around, they can't simply react to "expected economic downturns" without finding a way to use it as a business opportunity. After all, while every other company is fearful and tightening belts, why shouldn't other companies view their competitor's weakness as an opportunity to invest in better products, take a leadership role through product or price, and deliver the products people want to those who are buying them?

Tech companies need to realize that although times are tough, they can achieve great things and re-emerge on the other side of this recession much stronger if they realize that recessions are only damaging if they've failed to respond to consumer desire.

So what can companies do, exactly? Although each is different, the solution isn't necessarily unique to every organization.

For one, it's time tech companies eliminate products, services, or entire divisions that are simply not performing. Why keep something that has no value to the consumer?

Secondly, they need to start evaluating the market far more effectively and find out which consumers are buying and what those people want. Maybe Mac sales are on the rise today because a certain, profitable portion of the market wants a high-end machine with greater potential for longevity. If so, Dell and HP can get rid of most of the cheap machines they offer and start focusing on more capable computers.

Thirdly, companies need to stop being so short-sighted. What does it solve by worrying about 2009 when the possibility for a recovery by the end of next year or early 2010 are so high? It's OK to invest money now as long as a company is armed with the knowledge that it will yield a positive return a few years from now. Sure, the company might take a hit next year, but remember when I said all of its competitors were running scared? When the recovery hits, those competitors will need to play catch-up.

Lastly, and perhaps most importantly, if the tech industry wants to thrive during this recession, company executives need to realize that changing their perception of the current state of affairs is the key to success. Failing companies only see the worst of what a recession offers, while successful organizations recognize the worst, but see the benefits of a recession. Successful companies know that applying the same strategies they employed during a boom are useless in a recession and understand that knowing consumers, improving the operation, and creating compelling products are the integral elements in a successful strategy. Granted, there are macro-economic issues that are beyond a company's control, but for everything else--the vast majority--it's how executives perceive a recession that will determine a company's success.

Say what you will about the "severity" of this recession, but when I look at macro-economic indicators, I see opportunity. Unfortunately, most of the tech industry sees nothing and feels fear. And the longer that lasts, the longer the industry will suffer. Companies in this space have an opportunity to do great things, increase consumer spending, and carry the entire economy. It's time they realize that.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.

[severdia]

Finally, some rational and cogent thought on the best approach for the current climate.

[TomMariner]

We are a medical tech company and our business is expanding. These layoffs from huge companys are a brain-dead CEO's way of admitting that he or she has no clue how to manage. And this is a great opportunity to downsize. Instead of actually innovating and taking market share from another jerk who has no clue how to raise the top and bottom line.

The interesting item is that these Dodo Bird turkeys will be getting a gigundo payday because they "made the tough decision" and laid off tens of thousands of families. And the idiot share holders are applauding because a leader inherited a business of a certain size and then proceeded to cut its size in half. Applaud? I would string the imbicile up -- after I sued him for "Practicing Managment while asleep." And for the record -- "The tough decision" is laying yourself off.

The good thing is that once we are through this managment meltdown and the economy picks up again, these same stupids will claim credit (and a big bonus) for their top line raising less than their competitors.

[aelam7]

Love the article. We all need to start looking and focusing on the opportunities.

[eileenelam]

Don,

I concur with your viewpoint in your article ?Times are tough, but tech companies don't need to suffer? and appreciate your request to think positively. I also want to add my speculation -- orders for technology products will be given to those companies that continue to market themselves. The likely outcome for those companies that go quiet is that they will be perceived as hurting, and as a result, they will be less inclined to secure customer wins. Companies should be evaluating their outbound marketing programs and determine which messages will work best to bring in new customers and which communication vehicles are best for disseminating their messages.

Eileen Elam
President, KJ Communications, Inc.
[e-mail]