Winning in a Down Economy
“A pessimist sees the difficulty in every opportunity;
an optimist sees an opportunity in every difficulty.”
- Winston Churchill
We live in interesting times. The panic on Wall Street rippled quickly from the investment community into executive suites and down the line to each and every employee. Everyone is talking about how to react. What are the impacts to our nation? Our economy? Our business? Us?
How should you react? We’ve seen the full gambit in our travels. The visionaries are seeking refuge in denial and waging their bet on the “next big thing.” The conservatives are taking quick and decisive action to re-align costs to ensure survival. The pragmatists are shouting from the rooftops to focus on the things people have been buying for years. It seems virtually everyone has an opinion on what to do next. Unfortunately, we’ve found most opinions are irrelevant, and the noisiest are often dangerous!
Ignored is the most important question leaders should be asking their teams: What actions can we take today that will make our company a better one to do business with in this economy?
What are pragmatic leaders doing?
The first step to winning is to realize the rules of the game have changed…
possibly forever. We’re not in control anymore!
We wrote the Tuned In book to provide leaders, product managers, and marketers a timeless guide for how to create a business that resonates. Given the shift in market conditions, we wondered how well the principles we espouse would weather the storm of a down economy.
So, for the past sixty days, we’ve circled back to the thousands of companies and hundreds of senior executives we interview each year. We wanted to find out what was real, what was fear, and what was bravado. So our interviews focused on identifying the specific action plans leaders are creating.
Our research verified (once again) the value of being tuned in to your market. Companies who are struggling right now have fallen into the trap of chasing outcomes and guessing at what their business will become in 2009. The actions they’ve taken have largely been tactical, with a focus on cost reduction— giving executives no greater or lesser peace of mind about their prospects going forward.
On the other hand, Tuned In businesses took a much more strategic approach to the problem:
They’re busy identifying the strategy they can execute that will best align
their business to the market for the next two years—where uncertainty
is a given and cash flow liquidity a must.
Right now, leaders of these companies are behaving differently than those not Tuned In. They put little stock in the past and even less in the future. They’re focused on aligning their strategies and execution for improved performance today. They know from experience great companies and products can be built in a down economy.
One need only look to the last 10 years to realize companies such as Google, Amazon, eBay, and Salesforce.com all emerged as leaders during the last downturn. And companies such as IBM rode an e-business services strategy to a new wave of growth.
Today’s pragmatic leaders are aligning their companies to replicate those kinds of successes. Their action plans are simple and enlightening— channeling the culture of the company and the investment of their time into six missions:
Discover reality—How well are we aligned to the current market?
Find the bright lights—What’s working and why?
Pursue relevance—How do we make good decisions about where to invest?
Narrow the focus—How do we build a competitive edge?
Simplify execution—How we can make it easier to do business with us?
Rally stakeholders—How can we build a strong network of supporters?
Like the six steps to getting “tuned in,” these actions are designed to create a “Down Economy Resonator”—a product or service that so perfectly solves a problem buyers have today, that it seems to sell itself.
1. Discover reality
How well are we aligned to the current market? The first step to tuning in to your Down Economy Resonator is to get out of denial and into discovering, embracing, and dealing with reality. The market has changed. Deal with it.
Making decisions without a complete and accurate view of the world you will be living in for the next several months or years is crazy! Yet, that’s exactly what many companies will do in the coming months. They’ll guess, assume, and then tell the world they’ve made changes to keep them healthy through this downturn— when, in reality, they have no idea whether or not they really are healthy enough.
Pragmatic leaders are asking their organizations to go immediately back to square one and get tuned in to their markets. No assumptions, no sacred cows. Get real, and find out what’s meaningful:
Does the market still care about what we do (the same, more, or less) than they did 90 days ago?
What are buyers’ plans for investment next year in our market segment?
Do we understand how buyers make decisions today?
How well aligned is our ability to execute:
Is our cash flow strong enough to last?
Are our products relevant to today’s market problems?
Is our business model flexible enough to adapt to change?
What bad thing would happen if we shut our doors and went away?
These are not easy questions to ask, and the answers may be even harder to hear. In Pragmatic Institute’s seminars, attendees are challenged to break out of the mode of assuming things and start listening…really listening…to what their buyers are saying.
That’s particularly important now, because not all businesses came into this down economy with the same assets and financial strength—so a dose of reality is needed. Those with strong cash positions, relevant market segments, and a flexible business model are well aligned and can be more aggressive. Those starting from weakness in one or more of these factors have limited options.
Discovering reality is a critical first step to building a platform to win. It instills confidence because it identifies your future business opportunities. They may be the same or different than you envisioned them before the downturn. That’s neither a good nor a bad thing—just a reality.
2. Find the “bright lights”
What’s working and why?
Pragmatic leaders separate themselves from the pack in market sensing. They seem to understand buyers better than they know themselves and anticipate the actions those buyers will take. Their gift lies in identifying buying patterns and using an innate ability to filter through the useless to focus on the things that matter most. How do they gain these insights?
They ignore everything but the bright lights.
The data you’ve collected will contain a lot of bad news. Buyers are locking down budgets, cutting staff, and freezing investments in all non-revenue-generating purchases. Your sales might be down, and the future outlook might look uncertain. Progress on new products or initiatives might have stalled completely with evaluators. It can get depressing.
Pragmatic leaders absorb these data points, but they also possess two characteristics that push them past all of the obstacles they encounter:
They know from experience there is always a plan available for success, so they keep digging until they find it.
They focus more on what’s working than what isn’t.
The bright light is the set of data that shows a positive trend. Perhaps it’s the services business you hadn’t considered. Or, a particular area of your website where visitor traffic has grown significantly. Maybe a channel of distribution, geography, or product line is outperforming the rest of your business. Or, maybe an external trend has emerged that lines up to a competency you have, but have not yet exploited. Find it, and your foundation just grew stronger.
3. Pursue relevance
How do we make good decisions about where to invest?
Relevancy is your compass in a down economy. Pragmatic leaders know from experience that customers will embrace suppliers of products and services that solve important problems they have right now. Not last year’s problems and certainly not things that might offer an ROI in 2010. Solutions that help them cut costs without abandoning strategic initiatives are highly relevant right now.
Relevance combines a match for a real market problem, a distinctive competence you own, and a high-impact ROI. These measures can’t be faked, they must be real.
The mistake many companies make in these cycles is to reposition themselves to be something they are not. A product that takes six months to implement is not a cost-saving, productivity aid. A service for which you have no credentials nor a successful track record is not a recession buster.
You can’t be something you aren’t—even if it’s important to have that characteristic. One need only look to the recent presidential election and John McCain’s attempt to co-opt “change” as part of his platform. Wasn’t him. Didn’t hunt.
So how do you know where you are relevant? Pragmatic leaders use precision-based questioning to uncover the winners. They want to clearly determine how much value can be added to the business, so they dig in to question:
What specific market problem is creating this new demand? Why?
What’s causing any changes that have surfaced in service-level requirements recently?
Why are we winning, and why are we losing? Have the reasons changed in the last 90 days? What specifically is different?
Are there new needs that have surfaced as more critical buying criteria?
What solution would change the way our customers do business? The relevancy filter is designed to identify the reasons behind the bright lights you have found. The ones with real meaningful data behind them are the potential resonators.
4. Narrow the focus
How do we build a competitive edge?
Value is your profit compass through this downturn. The strategy that works for Pragmatic leaders is not to focus on major changes or big breakthroughs, but rather pragmatic, incremental steps from where they are today. What customers will value is the same thing you value… something that creates immediate value. Once these leaders assess the relevance of what they have versus what is needed today, they shift their strategy to identify those components of a solution that provide the highest incremental impact, and then they develop and launch those accelerators.
The focus of targeted value creation requires taking a step back and assessing what your buyers really need. The questions pragmatic leaders are asking are much the same as they’ve always been, but with much more of a tactical focus on the constraints under which their buyers now live. The roadmaps they’re creating include these five ingredients:
Addresses a #1, #2, or #3 market problem
Emphasizes solutions that provide measurable incremental value to core customers
Invests only in areas where they own a distinctive competence*
Utilizes resources and capabilities that are proven and available today
Provides positive profit/cash flow throughout the two-year horizon
“Getting serious about value” is the catalyst for creating Down Economy Resonators. Finding the simple things that will make your customers and prospects appreciate you more—because you have understood the problem completely— makes your business healthier overnight.
5. Simplify execution
How can we make it easier to do business with us?
How easy is it to do business with your organization? Most of us think we’re a kind, gentle business that customers love—but, honestly, do we really know?
A significant component of your plan should be to assess each of your business practices and identify a handful of ways to tune them in to today’s market. In a down economy, decision-making by consumers and businesses tends to have a very short fuse. Difficult selling cycles or systems that seem to align to better serve you rather than buyers are often fatal.
The culture of a tuned in business is not just built around finding and solving problems with great products, it embraces the complete customer experience and consistently seeks to create service-oriented breakthroughs that make it easy for buyers to discover, buy, use, and activate relevant support. The key to success is to become a “servant-based” company, creating more reasons to buy. Here are some examples:
Make the discovery process enlightening through free, thought-leadership content that helps buyers better analyze which solutions make sense.
Make the buying process incremental by offering simpler, low-cost, entry-level solutions that allow customers to take a go-slow approach.
Provide lots of productivity aids and flexible purchase options that enable cost-conscious buyers to defer payments.
Increase the level of support services that surround a complex product sale (think Best Buy’s Geek Squad).
Eliminate the things that make sense to you but not the customer (such as the silly surcharge fees airlines require for basic services). Buyers no longer tolerate these transgressions.
They’re consolidating their reduced purchasing power to companies and businesses they trust. Gaining trust through a keen and intense eye on maximizing your service impact is critical for three reasons: It maximizes value to your customers, reduces their risk of purchasing, and increases long-term loyalty.
6. Rally your stakeholders
How can we build a strong network of supporters?
Pragmatic leaders know they cannot win this battle alone. That’s why they look at their organization as a network that includes employees, customers, partners, service providers, communities, and the shareholders that support them. Their goal is to create an army around them to help.
A big part of their success comes from the power of their network and a willingness to open the communication lines. Companies who go quiet or ignore disenfranchised stakeholders run a substantial risk of adding a barrier to execution in this environment. Pragmatic leaders do the opposite—getting out in front of each issue, and using it as an opportunity to create positive PR for their business at a time when it’s needed most. The secrets to success include being:
real about the situation in which you find your business
open about the need for help
clear about your strategies even when it includes bad news for a key constituency
Pragmatic leaders communicate status frequently through all forums available—utilizing traditional and new forms of social media to get their messages distributed. While they may not master the communication discipline, they respect its value and work diligently to ensure it’s not a one-time event, but rather an ongoing process that supports the health of their organization.
Get everyone on the same page
The consolidation of all discovery, analysis, and assessment needs to be packaged into a new roadmap that triggers an organizational change cycle. Focus teams on looking at a full portfolio solution and creating a strategic plan that leverages their distinctive competence.
In a down economy, the bar needs to be even higher—focused on an organizational alignment that spans five areas and bridges the organizational gaps that often exist:
People—aligned to their roles and responsibilities
Problems—prioritized based on current market demands
Products—that are market-relevant and leverage your distinctive competence
Personas—that identify what your target buyers value and how they make decisions
Performance metrics—that measure your overall effectiveness and efficiency
With crystal clarity, Pragmatic leaders are organizing their companies around these areas to ensure alignment to the things that matter most. They’ve come up with a remarkably similar timeline for developing these new roadmaps— two years. Yes, that timeframe is somewhat subjective, but also very tuned in. Why? Because it’s long enough to ensure that everyone understands the depth of the challenge ahead; yet, it’s short enough to not seem insurmountable. And, it’s far enough into the future to embrace strategic thinking.
Pragmatic leaders have discovered that the value of going through a road-mapping exercise is they can make investment decisions that are more disciplined and simple to filter. Typically, they require only an analysis of two factors: How does the investment align to the top priorities of our strategy? And what is the most profitable way to implement it?
Want to Lead in a Down Economy?
Follow these Ten Rules
You can create a winning path for your organization in the toughest of markets. In fact, if you follow the ten rules that pragmatic leaders use, you’ll not only survive, you’ll thrive:
Be authentic in everything you do
Find time to observe and listen
Be both agile and pragmatic in decision-making
Create roadmaps based on what people want to buy
Start new conversations with your customers (and aim higher)
Leverage your social network
Activate your best experts as a service
Look for (and celebrate) quick wins
Create a continuous feedback loop
Communicate a consistent plan (often)
If you stay calm and focused on this foundation, your next 90 days will be game-changing.
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