Make the Bad Times Work for YouBy Faisal Hoque | Posted 2009-01-20 Email Print
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Some of the most famous products, brands, and companies in the history of business were launched during bad economic times.In October 2001 the United States was officially in recession. Companies were laying off employees by the thousands, and many high-paid manufacturing and professional employees were having to take service jobs that paid much less.
And Apple chose this time to introduce something that might be considered a luxury -- the iPod.
Today 84 percent of teenagers with an MP3 player own an iPod. Of those who purchase music online, 93 percent use the iTunes Store. Of those planning to buy an MP3 player 79 percent plan on getting an iPod.
At the time, Apple CEO Steve Jobs said:
"We're not laying off boatloads of people. We're taking those talented people and saying that if we're going to get out of this, we're going to get out of it by innovating our way out of it."
He elaborated in a 2003 interview with BusinessWeek:
"What has happened in technology over the last few years has been about the downturn, not the future of technology. A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of [customers], they would continue to open their wallets. And that's what we've done."
Was this a fluke? Not likely. Apple itself was launched on April Fools’ Day 1976 during a worldwide recession. Today Apple has about 32,000 employees worldwide and annual sales of $32.5 billion.
An isolated case? A bit of Steve Jobs magic? Consider: Frederick Smith launched FedEx in 1973 just as jet fuel prices were beginning to skyrocket. Bill Gates and Paul Allen started Microsoft in 1975. Time Inc. introduced People magazine in February 1974. Then again, it had launched Fortune during the Great Depression.
The audacity of launching a magazine named "Fortune" during a major depression! Not only that, Luce priced it at an outrageous $1 per issue. But by 1937 Fortune had 460,000 subscribers and was earning a half million dollars.
Perhaps it was something more than sheer nerve. Perhaps it was the intuition of a brilliant publisher, Henry Luce.
Professor Andrew J. Razeghi of the Kellogg School of Management at Northwestern University says this was no accident: "Fortune worked for the very same reason that all great new products work: it made a uniquely relevant contribution to its customers’ lives (period)."
"In fact … the stock market crash actually piqued interest in the culture of business. People were more attuned to what went on behind closed doors, in boardrooms, and in the hallowed halls of corporate America. Fortune magazine worked not in spite of the Great Depression. It worked because of the Great Depression. Luce did what all great innovators do: he found an unmet need in the market and filled it."[i]
I have written before about what I call the "Transformation Triangle." This expresses the three things that all companies need to be doing simultaneously, no matter the current economic climate: 1) eliminating activities that no longer work, 2) improving the way it performs activities it wants to keep, and 3) using the resulting savings for new activities.
A company conducting its business this way does not have to
suddenly slam on the brakes, fire a bunch of people, slash spending across the
board – and generally set itself up in a much weaker position to ride out the
storm and be prepared for the upswing when it comes.
Two things are critical in this posture. The company’s
business management must be converged with its management of technology, on
which business increasingly depends for execution. A divided company is not
transformed and can’t compete against those that have converged.
The other essential is that the customer must be in the
center of the triangle. Nothing should be done that does not contribute to
pleasing the customer. The customer, after all, has the money.
Contrary to ingrained thinking, as Professor Razeghi points
out, a downturn is an excellent time to really connect with the customer.
"A recession … does not make market needs disappear into the ether. Not only do they still exist, new needs emerge. During difficult economic times, market needs are more exposed than they are during an economic boom when the market is saturated with everyone’s 'great idea' -- many of which are chasing needs that have already been satisfied. When markets turn south, it’s easier to discern what the market needs precisely because the market is thinking more about what it needs and why it needs it. We are simply more thoughtful, more aware, and more focused during economic downturns."
The all too normal reaction is the easy way out – slash and burn willy nilly. Everyone should sacrifice! This really doesn’t work. While everyone else panics, some companies are quietly moving ahead despite the difficulties. They have converged the once-competing fiefdoms of their organizations, are executing against a strategy that includes letting some things go, becoming more efficient in what remains, and investing in the wholly new.
And they know that the customer is still there and more in need than ever of what they can offer them.
[i] Andrew J. Razeghi, Innovating through Recession: When the Going Gets Tough, the Tough Innovate, The Andrew Razeghi Companies, LLC, 2008.
Faisal Hoque is chairman and CEO of BTM Corporation and author of a forthcoming book, The Convergence Scorecard, to be published by the Harvard Business Press. BTM innovates business models and enhances financial performance by converging business and technology with its unique products and intellectual property. © 2009 Faisal Hoque