Yesterday, I was the keynote speaker at the Los Angeles Business Journal’s annual CEO Forum. The theme for the year was “The Recovery Is On!” In preparing my talk, I conducted some pretty deep historical research into previous recessions, and what real opportunities emerged from the carnage.
I found study after study that suggested that the companies that pull out of the cut-and-save mentalities early will likely grow the fastest during the ensuing recovery. Companies that wait the longest to resume value engine investments suffer the steepest market share losses over time.
A 2003 Accenture study of the 1990-1991 recession identified what the winners got right and the losers got wrong. It’s a great piece of research because this recession had a real estate and credit freeze component, making it an apples-to-apples comparison to today. The study concluded that the winners invested in their value-creation engine even during the recession — mostly towards the middle or early ending. The winners benchmarked their competitors’ investment patterns here too, so they could pounce on value-investment gaps that show up as poor services and inferior products.
Remember when Apple released the iPod? 2001, in the middle of the crash.
If you have a business where marketing is strategic (it’s your core competency), proactive aggressive marketing during the recession will make or break you over the coming years. You can buy ads or get marketing services at a deep discount. Your competitors have pulled back their ads, so your bargain-priced ads stand out and get results. It’s like corporate hold-’em.
A great piece in the New Yorker (Hanging Tough) tells the Great Depression story of Kellogg (aggressive) vs Post (timid, wait-and-see). During the 30’s Kellogg grew both profits and market share and by the time the recovery was common knowledge, Kellogg owned the market. Hmmm, feels like Google vs Yahoo in the early 2000’s, but I digress.
NOTE: If marketing isn’t your value creation engine, one study review suggests that you shouldn’t be proactive in this area as you are likely wasting your time/money.
If customer service or product quality is your value creation engine, you need to keep up your investments in talent retention and information technology for CRM. A July 2009 study by Deloitte suggests that “once the recovery begins to take hold, business executives and talent leaders can expect a resume tsunami as voluntary turnover rises with leaders and workers with critical skills seeking new opportunities.” In other words, treat your people GREAT today or you’ll bleed when the economy gets better. You never want a soaring economy to be your worst enemy.
In my talk, I pointed out that the secret to being the Phoenix is business confidence. Not at a macro-economic level (like the stock market), but at a leadership level. We must create cultures that have some risk tolerance, some generosity and some boldness. My notes from the talk are here.
Here’s some bullet point takeaways:
1. Support the recovery through generosity. Give your employees some time off, non-financial perks or recognition. Pay your vendors/suppliers full price and refer them new business. Join non-profits in helping your struggling communities. These action not only position you as being “a good company” in a world of sinners, they will push your culture towards thinking recovery.
2. Feed your mind good stuff (see previous post).
3. Change the conversation from lack to abundance. Lead with the encouraging news and approach business problems as a solution provider and not a victim.