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What are you waiting for? A Recession Is The BEST Time To Position Yourself For Growth

09/11/09

When recession hits, not all firms are affected equally.  Some of your competitors who have blundered earlier may be in weakened cash positions now. 

Naturally, many of our attentions turn to downsizing expense cutting, and delaying capital and R&D plans.  If you have been thoughtful in the past you may have a choice opportunity to exploit the weaknesses of your competitors.   If you have done anything in the past that has been successful – launched a successful new product, entered a growing new segment, created an effective new marketing campaign, you may now have an unprecedented chance to grow.  How can you employ your strengths to take on rivals who have been weakened considerably?

An interesting case in point is APPLE with its legendary founder Steve Jobs.

Jobs believes that his business success has a great deal to do with hiring and keeping great talent like COO Tim Cook who has helped bring operating strategy brilliance to Apple. According to the FORTUNE article, “There are two basic ways to get great profit margins: Charge high prices or reduce costs. Apple does both. The marketing and design drive consumers wild with desire and make them willing to pay a premium; Cook's operational savvy keeps costs under control.”[1]   Once you have built a good team, retaining them is vital- even during a downturn.  Here is what Jobs says about how Apple seeks to manage during an economic downturn.

"We've had one of these before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren't going to lay off people that we'd taken a tremendous amount of effort to get them into Apple in the first place -- the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that's exactly what we did. And it worked. And that's exactly what we'll do this time."[2]   

Adopting this kind of bold strategy requires guts, instinct, and leadership courage.   

When you think about it though, isn’t the best time to get aggressive when many of your competitors are retrenching?

Here are four steps your company should consider now:

First, as suggested by Jobs above, invest heavily in research and development Spend money now to help you reduce costs, improve product features, improve quality, and meet new customer needs.  Count on the fact that your weaker competitors will not, and you will reap the benefits.

Second, spend some time learning about your weakest competitors. Now may be the best time to go after the key client or customer of a weakened competitor.  In recessions, the natural tendency is to turn inward to address costs cutting.  When your competitors are looking there, you might make moves on their key customers or even some of their key employee talent who may be pausing to reflect on their long-term security and growth potential. 

Consider also approaching the middle sized customers of your enemies – since they may not have as much time or resources to spend there.  An opportunity may present itself if you are willing to work a little harder at them.

Third, identify your most critical suppliers, Make sure you will not be left in a position to be caught short if they should falter during these times.  Now is when your supply chain team should be working overtime. 

Also, consider that suppliers facing shrinking backlogs themselves may be more willing to offer price concessions or additional services to land new business (or keep existing clients happy,) Now is the time to bring them in, one at a time, to help you reengineer the way you do certain aspects of your business, leveraging their expertise to improve your products and services, reduce your cycle time (or inventory), and reduce your costs. 

Reward those most willing to work with you with your loyalty and your business.  Think win-win collaboration.  Build an enduring loyalty that will pay off for years to come.

Finally, think carefully about your talent needs. As weak companies lay off employees, many good people will find themselves re-thinking their status and questioning their future prospects.  Now is the time for your HR team to be working overtime –to help enhance your team.  

Finally, pay attention to your in-house talent.  In a recent survey by Grant Thornton “43.9% of employers surveyed are cutting back training and development programs”.  It seems this sends a signal that in spite of your past pronouncements that “people are our most important asset” may be insincere and shallow.  It will make even your best performers consider what your company really stands for.

Now is the time to make sure they see you are committed to them.  P&G’s A.G. Lafley seems to mirror Steve Jobs playbook.  He said recently, ”Our last how-to-win strategy is to strengthen the breadth, depth, and quality of our leadership at all levels of the company. In today’s economic environment, many companies are cutting back on investments and their people.  P&G is increasing its investment . . . and we will continue to invest in their growth, their capability, and their productivity.”[3]