February 2008 Archives

Given that economics is a behavioral science, one would think that the media would realize that trumpeting recession is just creating a self-fulfilling prophecy.  But if a slowdown hits your business, it doesn't matter why.  For those of you who are veteran survivors of recessions past, the following will be old hat.  But it's always good to be reminded of the basics.  Recessions are never fun and never easy but they are so important.  For a fun read and in important illustration of the importance of recessions, pick up a copy of Never Cry Wolf by Farley Mowat.

The following are my Seven Laws of Economic Jujitsu to use the downward momentum of a recessionary economy to fling you into greater levels of prosperity. 

1. Attitude is everything.  It's easy to get discouraged when things slow down, but it's useful to remember that recessions are the most important things that happen in the life of a business.  Why?  Because it is only in a recession that you learn what you really need and really don't need to make your business work.  Prosperity can hide all manner of ills in your business.  So step one is get your head on straight and see this as an opportunity.  Your company needs to be a victim free zone.  You're not going to die over this so take a deep breath and do the work.
2. Scrutinize all your expenses.  Ask yourself, "If we got rid of this would it impact quality or service to the customer?"  Ditching something might impact convenience for you, but that convenience may not be something you can afford right now.  Along with your expenses, look closely at your processes to eliminate waste.  If you aren't familiar with process improvement, get educated.  Read W. Edwards Deming's Out of the Crisis, the father of the quality disciplines who taught the Japanese how to do it or any of the other excellent books on the subject.
3. Increase your market penetration.  You can't really save your way to prosperity since there is only so much cutting you can do without cutting your own throat, so increasing your market penetration is the answer.  When times are good, it's easy to go into cruise control.  It has been my experience that increasingly there are only two kinds of businesses: kick-ass marketing companies and companies that work for kick-ass marketing companies.  Guess who makes the money.  If you are not a marketer by nature, learn to think like a marketer.  Read Jay Conrad Levinson's Guerilla Marketing books.  There are many others relevant to entrepreneurs.  You probably don't care how Proctor & Gamble does it...that's a different world.  You need to learn how entrepreneurs do it.  Remember, even in a recession, there is massive amounts of money changing hands.  Your job is to figure out how to get your piece of it.  A logical starting point is to work your way up the food chain with your customers.  (More on that in another post.)
4. Look at the internet.  I don't care what business you're in, if you aren't taking advantage of connecting with customers or prospective customers on the web then shame on you.  You're asleep at the switch.  If you don't know where to start, call Tom Walker at Web Teks (www.webteks.com).
5. Take a hard look at your business and/or business model.  The world is changing around us with incredible speed.  Is your business in an evolutionary dead end?  Is your industry consolidating to the point where the small firms can no longer be generalists but must build their franchise around a narrow niche specialty?  We get so buried in the trees of daily operational details that it is very easy to miss the information that says your corner of the forest is on fire.  
6. Break the cyclicality of your business.  If your business is intrinsically cyclical, start thinking about how you might diversify into areas that either aren't as cyclical or which are counter cyclical to your existing business.
7. When things go non-linear, follow these rules: a) Stay awake.  You are going to have to let go of what you've been doing even though you don't what new things to do. b) Pay attention.  You need to question every assumption, scrutinize everything you're doing. c) Run experiments.  When the old stuff isn't working, you need to run lots of little, cheap experiments to gather the knowledge and information you need to find your new path.  As they say in Italy, rapido, piccolo, economico.  Fast, small and cheap. d) When something starts to work, throw more resources at it to validate that a new model or approach is actually working.  When you are clear you have a new trajectory to follow, institutionalize it, define it, publish it, train your people in it and promote it.   

Do all this stuff and you will look back on a recessionary time as the best thing that ever happened to you and you will never fear a recession again.

Many years ago, Bob Dylan said, "The times they are a' changin'.  The bad news is that during these times our experience becomes less and less valuable and more dangerous to rely on.  The good news is that our competitors are busy relying on their experience which means we can create signficant opportunities for ourselves by letting go of the past and opening ourselves to new possibilities.  The status quo is clearly the most dangerous strategy.  Never before have the bold moves had less risk associated with them.  Getting stuck in an evolutionary blind alley is painful, expensive, and frequently lethal to an established organization.

Welcome to my blog.  To find out more about me, click on my bio.  I've been around entrepreneurial businesses for a long time and i hope you'll find my thought unconventional, interesting, maybe a bit eccentric, but of practical value.