Business Owners Need to Face Strategic Truths of 2009 and Beyond
The next few years will be more than challenging for every business in the United States. Some will undoubtedly fail, some will struggle to survive, and still others will succeed and grow. Business owners and senior managers have strategic choices that must be made. Already the decisions of senior executives are shaping their future outcomes. The pressure is on. You want answers? Here are answers.
For business owners and senior executives, optimism is a hard thing of which to let go. It makes a great deal of sense. You have to be optimistic in order to be the owner or senior manager of a business. If you weren’t optimistic about your organization’s prospects, you wouldn’t want the job. And entrepreneurs certainly don’t start or work for companies about which they’re not optimistic.
Remember when the dot-com bubble popped in April of 2000? Remember the articles in business magazines that predicted a recovery by that year’s end? Then recovery was supposed to come by the end of 2001. How long did you hold onto shares of Cisco Systems or that technology growth fund, before you finally threw in the towel and accepted the loss?
Remember that fateful day in September of 2001? How long did it take you before you downsized, or took steps to reduce your costs? And what about last year? Were you expecting recovery by the end of 2009? Are you now expecting recovery in 2010? Are you still holding on? You don’t want to sell now… because you don’t want to miss the bounce?
Which plans have you changed for your company going forward? What new plans have you made? Have you reduced your overhead, lowered your forecasts, and adjusted your personal expectations? Are you nervous about what’s to come in 2009… and 2010? Or, are you still thinking: “We’ve been here before and everything will work out fine because it always has before?”
Well… it’s time to set optimism aside in order to face a few harsh realities:
1. Our economic situation is NOT one we’ve faced before. We’re in entirely uncharted waters, and we’re sailing into a category five storm.
2. Even if you’re still an optimist, you have to assume that our economy won’t recover for at least two years. Ten years, if a pessimist. And say four years, if you’re a pragmatist.
3. There will be no “bounce” in the market. The market will not return to previous levels, as it has following past recessions, for perhaps a decade, if by then. Housing prices… same thing. We’ll recover, but slowly, and quite possibly over a long period of time.
4. We are about to experience an L.C.E. – a Life Changing Event. Remember how our parents or grandparents were always very different from us? They had lived through the Great Depression, and we had not. Well, we’re about to change too… permanently. It may not be another Great Depression… but it’s certainly going to be the Great Disruption.
The implications of these statements dictate that every business executive today consider and change their organization’s strategy going forward.
Whether you agree with everything stated above… or not… it’s really not important. The point is the same. This year and next, things are going to be tough for EVERY business organization, and they’ll be especially tough for the companies that don’t think strategically and make changes now. In this regard, time is not on your side.
When it comes to crafting strategy, executives too often become stymied by things they feel they cannot know. It’s always a mistake, however, and today it could be a fatal one. What you don’t or can’t know shouldn’t hamper your ability to craft a successful strategy going forward. You don’t need a crystal ball. You know plenty. Here are three facts you can count on:
1. Your company, along with essentially every other company in the country, is going to lose some of its existing business this year… let’s figure 20%… if you’re lucky. To think otherwise is reckless optimism.
2. Replacing those clients will be harder than before… here are four reasons why:
A. Competition will intensify because others will lose 20% of their clients too.
B. Your competitors will discount prices, increase services, compete fiercely for every opportunity, and hold on to their clients more aggressively than ever before.
C. The number of competitors in your space will increase as competitors expand vertically and horizontally in an attempt to survive the storm.
D. You’ll have less money and fewer resources to market your company’s products and/or services, and you can expect results to be less than expected.
3. What we’re dealing with is anything but “the usual”. So, it’s most definitely not the time to attempt “business as usual.”
Strategic Choices: You Only Have Two.
From where you sit today, you have two fundamental choices to make… two paths from which to choose. You can choose one or the other, or you can choose to take some of each. But if you choose to ignore the choice altogether, then you have to ask yourself why. Are you holding on to optimism? Are you in denial about the economic situation confronting our nation? Or are you trying to fail, because those are the only three possible explanations for not taking action now.
You can KNOW that you’re going to lose some of your clients this year and probably next. Essentially, every company in the country will. And since that much is clear, your choices are to reduce costs or improve your growth strategy. Business as usual, in times like these, is madness.
Reduce Your Costs…
No one likes the idea of downsizing, and few executives are very good at it. The key, of course, is to do it objectively, not optimistically, and remember that sooner is likely to be better than later.
The real key here is, once again, to face the realities of what’s ahead. If your growth strategy and marketing plans are going to remain fundamentally the same… then you have to have diminished expectations and be forecasting a reduced bottom-line this year, and probably the year after that as well… if not longer.
Improving growth strategy means making marketing strategy work overtime…
So, the real question is: Are you going to resign yourself to shrinking… or are you going to capitalize on the realities we’re facing and grow your business during the troubled years ahead?
You should know that it’s very possible to grow even during the worst economic times. Not every company limped along through the Great Depression of the 1930s. In fact, the depression era of the 1930s is full of case studies that demonstrate that marketing success is more than possible regardless of economic conditions. For example, during the 1930s:
- Chevrolet took Ford out of the number one slot that Ford maintained in the 1920s.
- Kellogg bested C.W. Post, and the company has dominated Post ever since.
- And Proctor & Gamble became the force it is, largely because of the lead it captured in the 1930s.
The companies that grew to dominate their competition did so largely as a result of their marketing strategies… and through their innovative use of the “new” communications technology of the day: Radio. Americans turned to their radios for much needed entertainment during such terrible economic times. They wanted to feel connected. They needed to escape. But before they did… a word from our sponsor. Proctor & Gamble doubled their budget for radio advertising every two years throughout the Great Depression.
Okay, Fast Forward… to 2009
Of course, no one is suggesting that, in this day and age, you beef up your budget for radio advertising, or even your budget for other forms of marketing. In the years ahead, you have to plan to spend less on marketing than you have in the past, and today’s traditional advertising mediums are, for the most part, as ineffective as they are expensive.
At the same time, however, the next few years are no time to retreat into oblivion. You have to segment markets, tighten targets, and reach out more memorably… all in all, you have to market smarter and more cost effectively than you have in the past. The years ahead may be described using many terms, but “forgiving” isn’t likely to be one of them.
The President of the United States… and Web 2.0
2008 was an historic year for our country. It was the year that a young, relatively unknown junior senator from Illinois would become our nation’s first African American President. But, Barack Obama didn’t just win the race for the presidency, he dominated the consciousness of the entire world, and he shattered all records for fundraising.
It was also the first year since the 1960s that television advertising wasn’t the dominant advertising medium of the winner. Barack Obama was the first presidential candidate in U.S. history to master the use of the new technologies referred to under the banner of “Web 2.0”.
Web 2.0 is a term that’s been coined to describe a basket of new technology-driven communication tools delivered via the Internet. You’ve probably heard about several of these new tools, some have been around for a couple of three years, some even less. Lately, they’ve received more attention from the business press because of how Barack Obama leveraged their exceptional power to become President of the United States.
Many business executives, however, have either not seen much about Web 2.0 technologies, or largely dismissed what they’ve seen as not being relevant to their company’s growth. It’s understandable. After all, how many business executives over forty could possibly jump up and down over things called Twitter, Facebook, Linkedin, Reddit, Delicious, Mixx, Propeller, or any of the similarly named Web 2.0 technologies.
What seems to have happened is that we in the business world, all paid very close attention to World Wide Web technologies during the second half of the 1990s… Web 1.0, if you will. But we learned about the new technology, not because we were reading technology news, but because the companies involved were going public and the stock market was flying high. Then the dot-com bubble popped and we all saw clearly what the World Wide Web was… and what it was not.
From that point on, for many business executives, having a Website became little more than a necessary evil… something along the lines of an electronic brochure. We had been told that the Web would bring us a “new economy,” but after April of 2000, the thing we would remember most were the losses we sustained as the economy slid into a recession that, compounded by the tragedy of 9/11, would last for close to three years.
(Luckily, real estate values started rising by double digits annually, so we’d soon recoup our stock market losses, and be able to forget those dot-com decisions. Yes, as a nation, we’re shrewd investors all right… no question about it.)
Well, as we might have expected, technology continued to forge ahead, but since the companies involved weren’t going public anymore… we, in the business world, weren’t hearing about them. And then Barack Obama became the 44th President of the United States, and we all watched the celebration in Chicago’s Grant Park, and in New York, and in Los Angeles… and then, according to CNN on that memorable night… “In 70 countries around the world… “
That was the moment that we might have all paused. As we sat there watching the organized celebrations of Obama’s victory going on all at the same time in places like India, Singapore, London, and Prague, we should all have been thinking … “How the hell did he do that?” Not win, we all knew how he did that, but how in the world did Barack Obama get people in 70 countries to attend organized celebrations at the same time? Because, that’s no easy feat, just ask the people that run the Olympics.
Obama accomplished what he did, among other things, because he harnessed the power of Web 2.0 technologies, and he was the first political candidate to do so effectively. Howard Dean raised a few million over the Internet, but that was Web 1.0. Obama used the Web 2.0 tools, and he raised 187,500 times the amount of money that Dean raised four years earlier.
If you’re concerned about your company’s prospects for growth during the difficult years ahead, you need to strategically consider your pricing, your product or service offerings, your vertical and/or horizontal opportunities, and without question the astounding power of what they call Web 2.0, which incredibly, is also essentially and comparatively free. And, if you think social networking was only for the young demographic, think again. The Institute for Corporate Productivity (“I4CP”) surveyed business professionals in 2008 and found that 65% are now connecting to social networking websites.
In August of 2007, the Wall St. Journal reported a story about a radiation oncologist, Dr. Michael Tomblyn, who had recently seen a 21-year-old patient who had an eye that was protruding from its socket. Dr. Tomblyn consulted with his fellow physicians, and dozens of them offered suggestions, including fungal infection, HIV-associated lymphoma, one even suggested it could be a cocaine-associated sinus problem. Eventually, he was steered toward the correct answer: rhabdomyosarcoma, a fast-growing cancer most often observed in young children.
The consultations and diagnosis, however, didn’t take place on the phone, via Email, or in a hospital or office. It was all done on sermo.com, a social net for licensed physicians. There are 25,000 physicians in the U.S. that use the sermo.com site regularly.
Social networking was first popularized by teenagers, has long since become commonplace in the business world, thanks to new social networks that enable professionals and executives in essentially any industry to “rub virtual elbows with colleagues,” as the WSJ put it.
Something like 35 million professionals in 150 different industries can be found on broad-based networking sites like LinkedIn, but there’s more to it than just linking up with people you know. A lot more, actually. Fundamentally, social nets connect people at very low, or no cost, which obviously can be highly beneficial for entrepreneurs and businesses executives looking to expand their customer base, or market products and services.
Professional networking sites function as online meeting places for business and industry professionals. Individuals interact with each other and/or within groups that share common business interests and goals. Members of these groups can also post their own content in the form of blog articles, photos, slide shows, and videos. The executive in such a group essentially becomes a publisher.
From the WSJ, August 2007…
“Professional network services attract, aggregate and assemble large business-focused audiences by creating informative and interactive meeting places. Business decision makers are now preferring communication channels that are two-way dialogs, channels that resemble social networking applications. This is a great way for businesses to advertise their product. It is also a way that has already proven itself to be more effective than the previous “word of mouth” influence.
Social and business nets are only the tip of the iceberg. With Web 2.0, you can target audiences more precisely, and deliver content in any medium without any of the costs associated with other communications or advertising mediums.”
The Internet has changed our world forever in many ways, but most fundamental of all, is the way the Internet puts information at our fingertips. That’s why we use it all the time, to find information. We don’t want to read, watch, or listen to ads anymore. We don’t want to be “sold”. We want credible, interesting and valuable information on our own terms, and we want to control how and when it comes to us. Because of Web 2.0, we now can.
What this means to business organizations today is that they have to stop thinking like marketers and advertisers, and start thinking of their organizations as publishers of valuable information. They have to stop thinking of their prospects as prospects and start thinking of them as fellow members of their respective communities. It’s a real change for most companies, or at least they perceive it to be that way, and therefore most will falter or fail in their Web 2.0 endeavors.
It’s NOT About the Technology…
Web 2.0 is not about the technology… in fact the technology is largely irrelevant to its users. There’s no HTML coding to be concerned with, anyone can “do it”. The challenges faced by companies attempting to utilize the power of Web 2.0 will be found in three areas:
1. The learning curve – Not that it’s hard, by any means, but it does require some dedication and time before it all comes together.
2. The ramp-up period – Just like joining a club or networking group that meets in a physical location, you can’t expect to walk in and start picking up new clients over night. People have to come to value your expertise and trust your intentions.
3. The content strategy – This is where businesses are likely to struggle the most, because now that they have to think like publishers, the questions will be… what should be published for whom, and how often. With Web 2.0 delivery tools, although it’s relatively easy and inexpensive to publish and receive information, it’s also easy to sort through and ignore that which has no value.
I started learning about Web 2.0 technologies last November 6th, the day after Obama won the presidential election. I’ve been reading everything I could get my hands on ever since. There is unquestionably new power in today’s technologies. And businesses, if they are to succeed in the future will have to learn to harness the new ways of communicating with an audience that has new ways of learning.
The writing is on the wall. There will be no recovery in 2009. I think it’s safest to assume that 2010 isn’t going to look dramatically better, even if it does improve. So, it’s time to think strategically about the implications of that reality. It’s not time to pretend everything will just be okay.
Web 2.0 technologies are one are in which business can gain a competitive advantage and be noticed by their target audiences. Many have already adopted these new tools, and some implementations are better than others, but most have not.
It’s not too late to start thinking strategically about the next two years and beyond. But, on the other hand, for some it may be later than they think.