Market changes create opportunity for your firm to emerge as an industry leader. Learn which offensive strategies you should implement to succeed.
It’s safe to say that even the most effective business leaders don’t look forward to slowdowns, recessions, depressions or other economic disasters. What effective business leaders excel at is being nimble when those moments do, inevitably, occur. They swiftly implement the defensive and offensive moves necessary that both keep the business afloat and put it in a position to succeed after the crisis ends.
Economic downturns and fickle market conditions have a way of leveling the playing field. When this happens, new market leaders have space to emerge and disrupt the status quo at the expense of incumbent industry leaders. The shuffling of market pecking orders during economic slowdowns is typically long lasting. While defensive moves must be taken at some level to keep the doors open, balancing your defense with a good offense will set you up for success for years to come.
“Be fearful when others are confident, and be confident when others are fearful.” – Warren Buffet
Let’s leave the defensive moves to your inferior competition for now, and focus on getting your offense on track. Here are three tried-and-true offensive strategies you should consider now:
A solid Research and Development plan is essential to success no matter what the economic climate looks like. It’s perfectly reasonable to examine priorities and reallocate your resources. Successful businesses do this as a matter of course no matter what the economic conditions are. But abandoning your roadmap and NPD initiatives altogether is a huge mistake.
Sony is a prime example of what happens when a business underinvests in R&D during a downturn. Before the dot-com bust in the early 2000s, Sony pumped out innovative, market-leading products like the Walkman, PlayStation console, and cutting-edge televisions. When the bubble burst, Sony took a purely defensive strategy and locked down spending on all fronts, including R&D. Between 1999 and 2002, they successfully managed to increase profit margin from 8% to 12%. When the Great Recession arrived in 2008, they repeated this strategy, but this time Sony’s sales growth tumbled from the 11% average annual growth they enjoyed three years prior to the dot-com bust. That’s what happens when you don’t invest enough in markets with rapidly advancing technologies. In spite of Sony’s best effort to play catch-up with new product initiatives like e-readers, gaming consoles, and OLED TVs, they had fallen too far behind the likes of Amazon, Microsoft, Nintendo, and Samsung and have yet to fully recover.
During times of uncertainty, it’s important to resist the temptation to solely depend on your current product lines. Don’t treat R&D like a discretionary expense you can cut at will and expect no long-term impact. Always remember, development is an investment, not an expense! You’ll pay for those budget cuts tenfold down the line.
If you’re working on an innovative new product offering that will still be valued by your customers once things stabilize, don’t stop. Staying the course on the right product development efforts is the easiest way to maintain your position ahead of competitors.
As important as it is to forge ahead with R&D, your product roadmap needs to be examined and updated …stat. Things have changed, and you need to deal with that. When you re-evaluate your roadmap, do it through the lens of your customers, and ask yourself:
Changes in the economy and consumer behavior go hand in hand. But always remember that emerging technologies will impact your customers’ new set of needs during times of disruption as well. There are great tools out there to help you assess the impact of emerging technologies in your industry and how “events” might speed up adoption of certain technologies. For example, think about the impact of Covid-19 on telemedicine adoption. Shifts in consumer behavior and technological advancements open up exciting opportunities- if you can detect them and provide new solutions before your competition does.
Netflix took advantage of the recession of 2008 by reinventing themselves as a streaming platform. They gave their customers what they wanted. On-demand commercial free TV without being gouged by cable networks. They were savvy enough to take advantage of the explosion in cloud computing and broadband networking coupled with sluggish market incumbents (the big cable companies) and took over!
In 2008, the Harvard Business Review published an article analyzing the characteristics various organizational leaders demonstrated as they dealt with past economic downturns. Not only did the “winners” invest more than their rivals in R&D, they also invested heavily in marketing.
Some of my favorite examples of successful marketing during a downturn date back about 100 years. During the Great Depression, GM and Procter & Gamble invested heavily in advertising and became market leaders in their respective markets. GM overtook Ford when they focused promotions on their high-volume discount brand, Chevrolet. P&G embraced new advertising outlets, such as radio, and pioneered novel marketing concepts, essentially creating the entertainment genre of soap operas. P&G still follows this methodology today: They don’t reduce advertising budgets during tough times. If anything, they increase them.
Marketing and advertising aren’t the best places to cut your budgets during tough times. After all, it’s difficult to sell something if nobody knows it’s for sale.
Regardless of the tactics you implement during disruptive times, be sure to keep a dialogue open with your customers. Discern if and how their behaviors have changed, and position your company and your offerings to them in a way that is relevant. That means considering their new and modified-by-events needs. Make sure you are consistent across the board with your marketing messaging, interactions with your sales channels, the experience on your website, pricing strategies, and the way your product offerings are packaged and sold.
And let them know you are still innovating. Your customers need to see you are still creating new, exciting and quality products and services for them. Not just sticking your head in the sand trying to survive.
Visualize how your market, customers and technologies will look when things stabilize, and deploy your resources in the right places now. In short, prepare for success.