Winning in a Down Economy or Building Businesses in Turbulent Times

The current economic crisis still worsens, and we read in the newspaper that the German economy will probably shrink for 6% in 2009 on average.

As this decline concentrates on few sectors of our economy, the situation in the highly affected sectors is even worse. This sharp decline imposes new requirements to both, corporate strategy, and business orientation.

Today, I want to recommend you several articles and studies, which suggest possibilities to rewrite or rethink how we do business, and how we deal with innovation in these tough times.

Building Business in Turbulent Times

„Battered by contracting markets and frozen credit, many businesses today are fighting for survival. Indeed, the current global financial crisis provides a mandate for restructuring. But survival is not the end goal“ says Harvard Business School professor Lynda M. Applegate.

In her article → Building Businesses in Turbulent Times, Harvard Business School professor Lynda M. Applegate suggest us to not only think in terms of retrenchment and cost saving measures, but to understand growth as the most important focus, even in the current downturn.

Concepts

In an interview, she presents the following key concepts:

• She sees the current crisis is a reminder, of what happens if innovation is not able to drive economic growth. As an alternative to further deficit spending, and innovations in the financial markets, we now need to work on real innovation that creates jobs and drives productive economic growth. In her opinion, firms that survive the financial crisis and that are able to identify and exploit innovation have good changes to be the economic growth engines and industry leaders of the future. In the short term, see suggests to look for opportunities in the market, which result from crisis. Thus, we should understand the economic crisis as a disruption to the status quo, and should identify for new areas of pain to solve.
• She states that retrenchment might help us to survive, but will not prepare our companies for the future. She thinks, we require the following new mindset „We will not just survive, but we will be successful“. As change will happen in any case, the company leaders better take control of this process, and not just wait. The current crisis is reality globally, and is giving the unique opportunity to lay the foundation for the future. As everyone acknowledges the existence of the crisis, people are prepared to accept changes that were not possible in the past. We should use the time to critically rethink our products and services, markets, business processes, and the organizational structure, and we should take the opportunity to improve these areas to allow for future growth.
• She reminds us that it is currently unclear how long this crisis will last, and thus sees it as important that we carefully manage risk, when working on new opportunities. This time, we should take into consideration and manage risk that is tied to the global economy. In the current economic environment the success depends on people who are able to stabilize the company, while they are looking for new growth opportunities in new market niches, or while they design new innovative offerings, or while thy restructure and reposition the current portfolio.

Innovation 2009: Making Hard Decisions in the Downturn

“No company can hope to outrun this bear market and emerge unharmed…. But companies can take steps that will vastly improve their standing versus competitors, and they can position themselves optimally for an eventual economic rebound. Innovation can and should play a key part in that effort” – Innovation 2009/ The Boston Consulting Group

The Boston Consulting Group runs a yearly customer survey about innovation.

In these annual studies they identify the most innovative companies, and describe the innovation strategies, which these high performing businesses use. This year’s report →Innovation 2009: Making Hard Decisions in the Downturn deals with objectives, tactics, and perceived strengths and weaknesses of innovation strategies, and includes interesting information about innovation in general.

This year they conclude with thoughts on innovation strategies, which companies can employ in the economic downturn to improve their long-term competitive position.

Strategies

To deal with the current crisis, BCG suggests the following aggressive innovation strategies:

• Stay invested in innovation: For companies with the appropriate cash position this is the time to stay committed to innovation, in particular as competitors might not be in the position to do the same.
• Acquire intellectual property on the cheap, in particular if small innovative companies run out of cash, and accept favorable conditions.
• Alter your business model in strategic, game-changing- ways, as it is in particular in a downturn harder for competitors to see, copy or adapt new business models.
• Go bargain hunting, and buy interesting innovative companies including their people, patents and competitive position.
• Empty your competitor’s talent pool, and hire talent at conditions, which are more favorable than in a bullish market.
• Invade your competitor’s networks, in particular as a downturn offers good opportunities to capture partnerships, collaborations, and customer networks.
• Use innovation to attack competitors’ profit strongholds, in particular if your competitors are under financial pressure.

They conclude with the following statement, which provides us with their view on importances:

“In our experience, while the vast majority of companies batten down the hatches in times of crisis, leading companies take a more sophisticated and proactive approach” – Innovation 2009/ The Boston Consulting Group

The Approach of Pragmatic Leaders

My colleagues from Pragmatic Marketing have recently published their new -> Tuned In book. In their → blog, they suggest product management to elaborate simple and enlightening action plans around the following 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?

– http://www.TunedInBlog.com/

Product Management Priorities

Product Management is not in all those areas in the driver seat that deal with the corporate repositioning in the current crisis.

However, there are several areas were Product Management can contribute to the top-line. The following figure summarizes my own PM priorities for the current tough times. Remember, a proper Product Management function helps you in several of these focus points by means of knowledge and customer focus.

Weiterführende Informationen

Das Original dieses Artikels ist auf →Der Produktmanager erschienen (©Andreas Rudolph). Regelmäßige Artikel gibt es über die (→Mailingliste), oder indem Sie →mir auf Twitter folgen. In der Online Version finden Sie hier die versprochenen weiterführenden Links:

This entry was posted on Dienstag, April 28th, 2009 at 9:17 pm. It is filed under Thema des Tages, Wirtschaft and tagged with Corporate Strategy, English Content, Management, PM Strategie, Stabilität, Wirtschafts-Krise. You can follow any responses to this entry through the RSS 2.0 feed.