Companies have begun to emerge from the world’s worst recession since the 1930s, only to discover that they’re not quite out of the woods yet. Business owners who thought the easiest way to outlast the economic crisis was by sticking with the playbook and keeping their heads down aren’t necessarily going to emerge on the other side unscathed.
This recession is different from others in its scope and depth, and the worst thing you can do as a business owner is more of the same. Staying the course with your current business model could just postpone the inevitable. Instead, you need to create a competitive advantage. You need to become a game-changer.
1. Get comfortable with chaos
Globalisation and technology are leading to constant economic turbulence. Being a game changer begins with recognising this new normality and understanding that business owners will not be able to count on uninterrupted periods of prosperity.
2. Reassess your customers’ values
This recession is changing people’s mind-sets, not just their spending habits, resulting in a more cautious, anxiety-ridden consumer arising in the short-term. People are re-evaluating their values and their purchases. How have your customers’ values and needs changed in the past year? The answers could spark new product and service ideas aimed at value-conscious consumers.
3. Good products always sell
A startling number of companies and game-changing products were actually launched in very tough times. IBM launched its personal computer in 1981 and the first iPod came out in late 2001. Both periods were economic low points and seemingly not the time to launch new products. Marketing research company Nielsen found customers’ willingness to purchase innovative products in good and bad times has stayed remarkably constant over the past 30 years.
4. Think new markets, not just cost cutting
Trimming costs where you can (renegotiating prices with suppliers and distributors and lowering your overhead) is very important, but don’t stop there. Game changers see levers they can pull that change a market or create an entirely new one. These include affordability, convenience, accessibility, location and cost.
5. Scarcity is a good thing
When sales are good, there’s no urgency or any real need to be innovative. Feeling like your back is against the wall actually forces you to try new things. Now’s the time to implement a few low-cost experiments and re-examine your entire business model for weaknesses.
6. Stop defending the status quo
An idea sounds great – until you realise the operating margin or some other metric will be lower than expected. Microsoft had all the tools to create Google’s search advertising business but abandoned the idea when search produced a paltry (by Microsoft standards) US$1 million in sales during its first few months. By the time Microsoft finally recognised the importance of search, Google had a commanding lead in the market.
7. Serve the customers you hate
Every company has customers it sees as undesirable from a cost or profit perspective. US-based DVD-rentals company Netflix implemented a unique business model in response to its undesirable customers who always returned their DVDs late. In early 2000, the company switched to a subscription model without traditional late fees, a move that appealed particularly to customers who have trouble returning movies on time. At the time of the shift Netflix employed 45 people. Today it has around 250 employees and its business model is thriving; proof that even the customers that businesses have learnt to hate can inspire innovative thinking.
Rules of game changing
What to Do
- Look at your business through the lens of another industry to find new ways to operate. If you’re in manufacturing, how would you operate as a retailer, or vice versa?
- Talk to your customers about what they need today. This will help you find new competitive advantages.
- Get employees on the front lines talking about how customer mindsets have changed and how the company can better reach consumers.
- Re-examine your business model for products, processes, promotions and so on that are no longer effective.
- Constantly look for ways to add value to your company, product or service. This doesn’t have to be expensive. A retailer, for example, might set up a small play area with secondhand toys to keep kids busy while parents shop. It’s the small things that can boost a revenue line.
- Stay the course. Realise the economy has changed and your company must change with it.
- Stop marketing your product or service. You need to actually communicate with customers now more than ever.
- Assume your suppliers, vendors and distributors are doing fine. Go see them in person. Check in with their suppliers, too.
- Get complacent if margins are still good because rapid industry transformations rise to the surface in tough times. The newspaper industry, for example, saw trouble coming for years, but healthy sales kept it from making necessary changes.
- Stop being creative. Aim for discipline in your core business balanced with a willingness to try new things and create new markets.