Reading The Wall Street Journal and watching CNBC lately can drive a person (namely me) to drink. Which is fun, but beyond answering the question, "Which scotch will I drink?" the seminal question is "How do we thrive in a downturn?"
Downturns are the best time to take market share. Most companies overreact. They get too conservative. They also forget that they are not the victims of the market.
Customers buy (or they don't) based on the way we do business with them, not the other way around. So now is the time to get aggressive, compel customers to buy and hit competitors when they are weak.
I am reminded of the sage words of Steven Tyler, the lead singer of Aerosmith, who said, "Love in an elevator, livin' it up when I'm going down." Well, it's time to live it up.
Invest in new technology
Time has proven that companies that leapfrog with technology win. It is surprising how slowly Web 2.0 and other important new technologies are being adopted in the enterprise. Much of the innovation seems to be coming in the form of new consumer services and technologies. Now is the time for the enterprise to move from Web 1.0 to 2.0. There is a whole new range of new 2.0 stuff to look at and implement. Here is a list of a few of my favorites:
- Cloud services
- Enterprise social software (Social networks, wikis, blogs, prediction markets)
- New software as a service (SaaS) apps
- The emerging category of PaaS (platform-as-a-service)
- Blade servers and storage
- New virtualization & provisioning technologies
- New mobile apps (Anyone notice the iPhone & BlackBerry growth?)
- Whack 10 percent of all development projects (At least that many are no longer needed.)
- Cut production apps by 10 percent (At least that many are under-used.)
- Increase data center and application consolidation efforts
- Look at more areas to outsource
Launch a bold marketing campaign
In bad times, customers look for solid companies. Brands that are visible win. The worse thing you can do in a downturn is cut the marketing and sales budget by too much. While some belt tightening across the enterprise is prudent, this is one cost center where too much cutting can kill you. One area you can cut in marketing is the reach and frequency advertising. It is more powerful and cost effective to go big, in a very targeted way for shorter lightening strikes, than to spread an advertising budget evenly over 12 months. Don't forget, if you make your brand disappear for a while, it may disappear forever.
The seminal move is to figure out what the key differentiator is for your company. Then launch a campaign to drive home that differentiation while building the category for your offerings. Consider traditional approaches (advertising, PR, direct, events, etc.), but emphasize nontraditional, highly-viral ideas. Here are some great recent examples:
- Trek Bikes challenges people to ride their bikes more with their new Web site.
- Kinesio, the new athletic tape, gave their product away to athletes from 58 countries for use at the Olympic Games. One look at the wild, black spidery-like tattoo-tape on Kerri Walsh's body as she swatted volleyballs down opponents throats and a lot of people started buying the stuff.
- This summer legendary billionaire corporate raider and oil man T. Boone Pickens launched a bold campaign to create a breakthrough in market demand for alternate sources of energy. His ads, Web site and PR (appearances on CNN, Fox News, the New York Times and many, many more) make his case for reducing American use of foreign oil and embracing wind, solar, and natural gas, all while creating demand for his new companies.
Buy companies
Downturns are the best time to buy companies, and here are four reasons:
- Valuations and market caps are way down. Any company you want to buy is a lot cheaper today then it was a year ago.
- Doing acquisitions now allows you to expand your market footprint fast, with new offerings, customers, geographies, or markets.
- The dreaded word "synergy," which is a euphemism for layoffs and cost cutting. It may be harsh to say, but acquisitions are a great excuse to take unneeded people and costs out of both the company you are buying and your own company.
- It sends a strong message to your customers, people, competitors, and shareholders that you are a bad-ass company that is going for it, when most of your competition is hiding under their desks. This will often drive them to buy more of your product and your stock.
Making smart cuts is part of winning in downturns. But no one ever cost-cut their way to greatness. Now is the time to go on the attack. It just takes courage, cash, and conviction.
Click here for ongoing coverage from CNET News, 'Tough times for tech'
After twenty years in business and being the marketing chief at three public companies, Christopher Lochhead retired at 38. Now, he serves on a few boards and is a part-time strategy advisor. Every year he gives a handful of speeches, and from time to time writes something. Check out www.lochhead.com.
The proverbial wheels are coming off. The financial crisis is spreading across the globe. The political mudslinging is getting into full gear as the U.S. presidential election nears its conclusion and inflation continues to rise. Basically, everything costs more, with the exception of gasoline spurred by slowing demand as consumers look for ways to stay afloat financially.
The well-heeled country of Iceland, with 320,000 residents (about half the population of Alaska in an island the size of Kentucky) is nearly underwater financially. Europe, not just the U.S., is in the midst of a once-in-a-lifetime economic crisis.
Governments, via taxpayer funds, are stepping into the breach with the equivalent of Band-Aids and bailing wire to stop the potential slide into financial oblivion. But there is no escape from this perfect storm. The financial institutions played fast and loose and now they can't cover their bets. (See the 60 Minutes segment in which the credit crunch is explained in plain English.)
For the tech industry it means hunkering down. A few days ago, the legendary Bill Gates said that companies will continue to invest while the economy sputters somewhat, but "nothing like a big recession or a depression."
His remarks seem overly optimistic, given the crisis of confidence in financial markets spreading like a virus throughout the world. A hacker or terrorist hoping to destabilize economies couldn't have done a better job than the financial industry itself.
Already a steady stream of companies are lowering their forecasts, taking out any surprises as the typically more lucrative fourth quarter gets under way. The stock prices of the top tech companies are in the tank, which is indicative of a very spooked investor community. The investment community looks at those prices and sees a buy order--the stocks are really cheap--but after the last few days it's difficult to have any confidence that a seemingly good bet would pay off.
In the midst and aftermath of this perfect storm, brewed out of years of habit and taken down by mortgages for the masses, both consumers and businesses will be far more conservative in their spending habits in the coming months. As in other epochs, such as the tech meltdown at the end of the 20th century, only the strong will survive. Consolidation or extinction will be the exit strategy, reaching way beyond the broken banking industry, which has been whittled down to a handful of players.
Out of this perfect storm new financial infrastructure and regulations will emerge that bring back confidence into the markets and reignite innovation, that is until the next destructive cycle driven by irrational exuberance comes around.
Click here for ongoing coverage from CNET News, 'Tough times for tech'
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