According to world-renowned futurist and scenario planner Clem Sunter, much of the world, including South Africa, is heading into a period of zero or at best, moderate growth.
The latest downward revision by the World Bank of our projected GDP growth to only two per cent gives further weight to this opinion, creating a scary scenario for many in business.
These are the times that separate the men from the boys. As the clouds gather there are those who will curl up around a warm fire of negativity and share doom and gloom stories with each other, and those who will stick their head in the sand and carry on regardless, as their businesses crumble quietly around them. But there is a third set of business leaders who will tighten their belts, lift their eyes to the long term future and start planning – knowing with confidence that there is opportunity in every situation.
These are the entrepreneurs who will find ways to survive, and indeed thrive. These are the businesses that will be ready to boom when the recession turns, and on the winning track no matter what happens in the meanwhile.
So what exactly defines the survivors, and what key survival strategies will they be using in a flat economy?
Scenario planning is an excellent tool for business and an essential one in an uncertain world, such as the one we currently live in. In Sunter’s book ‘Think like a Fox’ he explains the process of developing future possibilities, and crafting business strategies to deal with them.
In this way businesses can imagine ‘living the future’ and plan accordingly. Scenario planning is a fun activity, ideal for business team building and a great way to avoid becoming another ‘frog in hot water’.
Cut costs and build reserves
Firstly, wily entrepreneurs will be working hard to contain costs and build resilience including healthy cash reserves, by increasing pressure on debtors and negotiating harder with creditors.
They will be on the ball, checking unnecessary expenses and finding ways to curtail running costs – using strategies such as shared rental space, shared services and outsourced staff.
These savings will help to keep prices down without cutting into profit margins. They will also be keeping an eye on their competitors and exploiting opportunities that become available as others falter – for example by advertising in places where competitors used to dominate.
Strengthen brand and build customer support
Businesses will be building and strengthening their brands, focusing especially on service excellence and added value to customers. This brand position will be consistent all the way from the advertising promise to the delivery van, after-sales service and even the cleaning lady.
Customer relationships will be further consolidated by ensuring that everyone in the company believes, understands and expresses the best of the company, at all times.
A great example of a company that has built its market share in tough times is Sainsbury’s in the UK, who have managed to get ahead in a highly competitive FMGC market by entrenching customer-care strategies and a ‘culture of helpfulness’.
As Sainsbury’s Marketing Director, Sarah Warby, says: “We like to [share] lots of news on the business, things such as our pharmacy and health offerings and British Sourcing, that is the drumbeat of our business. We then try to overlay that by being helpful, because what this business has is 144 years of helping customers run their homes.”
The ‘Sainsbury’s Way’ is used to build a consistent, trusted brand inside and outside the company, and the results are tangible as they become market leaders ahead of stiff competition and in a flat economic climate.
Innovate on a tight budget
Lastly, the importance of innovation in a slow economy cannot be over-emphasised. In a stagnant market, as total sales volumes drop, it is fresh ideas and new product concepts that open a jaded consumer’s eyes, and wallet!
Wily entrepreneurs will know that the right questions to ask are ‘How can we innovate given the tight financial times?’, and ‘How can we find the right staff for these new tasks?’ The fact is that some local SMEs are managing to do this quite successfully, using the skills of graduate interns.
Wily entrepreneurs are increasingly electing to “Grab an intern” to access flexible resources that can be deployed into new areas of the business, to do market research, test new products and services and reach out into new markets.
If a graduate intern sounds like a resource you could use to help grow and solidify your business.
The spirit of entrepreneurship is to create solutions to challenges and to seek the thrill of new horizons. Now is the time for businesses to look the future squarely in the eye, and decide to either adapt or die.
How To Embrace An Exponential Mindset For Your Business
In the age of exponential technologies, it’s a risk not to take a risk.
Think global and exponential
If you’re an entrepreneur trying to establish a successful business, it’ll be dead before it even takes off, if you don’t build it for the future. You have to think three to five years ahead, so when it launches, it’s still relevant.
Think like former Canadian pro ice hockey player Wayne Gretzky, who said: “I skate to where the puck is going to be, not where it has been.” And these days it’s easier for entrepreneurs to predict the future thanks to technology and data insights.
Consider what Singularity University co-founder Ray Kurzweil calls The Law of Accelerating Returns. He says the only thing that’s constant is change and that change itself is accelerating exponentially. As per Moore’s Law, information-enabled industries are doubling their performance and halving their price every 18 months, according to the price-performance ratio. The field of biotechnology has managed to surpass that.
There’s no time to slow down, your business has to constantly evolve, and you have to keep asking “what’s next”. Encourage experimentation and innovation in your company. Innovation focuses on incrementally improving your already existing products and services, while experimentation allows for fresh outlooks and breakthrough strategies that leapfrog old ways.
We should reprogramme our linear mindset into an exponential one. Don’t aim to grow your business by 10 per cent year-on-year, but rather 10 times. The first thing I learned at Singularity University is the potential of exponential growth. If you take 30 linear steps, you only move 30 places, but if you move 30 exponential steps your place doubles with each step and by the 30th step, you’ve moved over a billion places.
We’ve seen this happen with unicorns – not the magical creatures, but start-up companies that are valued at over $1 billion within their first year – like Slack (cloud-based team collaboration tools and services) and Square Inc. (a mobile payment company). It once took around 20 years for American companies to reach the billion-dollar valuation mark, now it may take less than a year.
In the early stages – until your third step – your progress may seem linear. Many exponentially-geared companies give up at this point – just as their growth rate is about to explode. Persevere!
A few decades ago it was unthinkable for an individual or start-up to disrupt entire industries. Start thinking globally, not locally. Use staff-on-demand and crowd souring to propel your business ahead of the competition. It’s unlikely that you have the world’s smartest minds working for you, however with the power of the crowd, you just might.
If you’re struggling to find a solution, turn the challenge into a game and offer prize money. You’ll have thousands of people attempting to solve your problem, but will only pay for the best solution. Kaggle is a platform for predictive modelling and analytics competitions. It lets statisticians and data miners compete to produce the best models for predicting and describing data. Mining company Gold Corp placed its geological data online and offered money to anyone who could locate gold at their Canadian mine. Four of the five winning entries struck gold. And in 2011 it took a team of gamers 10 days to solve an enzyme riddle that could hold the key to curing AIDS.
The six Ds of tech
As companies become information-enabled they should internalise what Singularity University co-founder Peter Diamandis calls the six-step growth cycle of digital technologies. These Six Ds of Tech Disruption are digitisation, deception, disruption, demonetisation, dematerialisation, and democratisation.
The first step is digitisation. Once something enters the digital realm it gains the potential for exponential growth. Think of the radio and CDs. You no longer need either, instead you can stream online, listen via YouTube or download music. After digitisation, growth appears slow, even deceptive. Sadly that’s when many companies opt out. Be patient!
No one imagined Kodak would disappear after a century. Kodak thought they were in the business of printing photographs, while they were in the business of memories. Think about the need your business solves. Kodak invented the digital camera, but was too scared to disrupt its own industry. It didn’t realise that people were no longer taking photographs in the same way, so their competitors disrupted the industry instead.
Today, the camera has become part of the smartphone and photographs are predominantly shared via social media. Instagram epitomises the next step in the equation: demonetisation. With time technology becomes cheaper and even free. Instead of printing photographs, many people instantly share them on a free smartphone app like Instagram.
Next comes dematerialisation. The radio, camera, video recorder, GPS, calculator and calendar are disappearing from the physical world as they’re being built into the smartphone. The wallet will dematerialise next with the advent of online transactions and cryptocurrencies.
Finally, democratisation happens when government, corporates and the wealthy no longer hold control and masses of people have access. Just think, the average South African with a smartphone has access to much more information than the president of the United States of America had 20 years ago.
In the age of exponential technologies, it’s a risk not to take a risk.
Why, When You Fail, You Should ‘Fail Forward’
So, you’ve fallen on your face? Consider that you’re walking in the footsteps of some ‘famous failures,’ like Steve Jobs, Oprah Winfrey and Stephen King.
5 Inspiring stories to keep in mind1000 times he failed
Teachers described him as “too stupid to learn anything.” He got fired from two jobs because he was “non-productive.”
Then he tried inventing something completely new. What’s even crazier is that he tried 1 000 times, unsuccessfully. When a reporter asked him how it felt to fail 1 000 times, the story goes, he replied, “I didn’t fail 1 000 times. “[The invention] was an invention with 1 000 steps.”
Through pure determination, Thomas Edison – initially a failure – made the world a brighter place to live in. If such good things come from success, then why do we choose to always look at the brighter days and completely disown the tough times?
Here are five more inspiring stories to keep in mind, should you ever feel that you’re the biggest failure.
The woman whose book got rejected 36 times
You’d think that once one book you’ve written becomes a bestseller, publishing another one would be a walk in the park. But it’s not that easy. At least not for Arianna Huffington.
Having produced that first bestseller, The Female Woman, when she was only 23,, Huffington tried to pitch her second book, but none of the 36 publishers she approached said yes. Still, she didn’t give up.
And that’s just one of a couple of failures from The Huffington Post’s co-founder. She has been dropped from hosting a BBC show, garnered 0.55 percent of the vote (when she ran for governor of California) and been unsuccessful when she called for then-President Bill Clinton’s resignation through her website.
But now The Huffington Post gets millions of visitors every month; she’s had a successful book career; and, if it helps, she’s very rich. Clearly, “failure is a stepping stone to success.”
The woman who was “unfit for television”
Oprah Winfrey is worth more than $3 billion. But it hasn’t always been like that. And, considering that a Baltimore TV producer called her “unfit for television” right before he fired her, it’s telling that the main source of Oprah’s success was a TV show that ran for more than 20 seasons.
Oprah also tried to get into the movie business with the movie Beloved. It lost to Bride of Chucky in terms of revenue and consequently lost the $80 million invested in it. Oprah has said this failure sent her into a state of depression.
But then, in 2013, she got back onto the horse (speaking cinematically) with The Butler.
See? Even when you make it, you’re still at risk of failure. Henry Ford, William Crapo Durant and Walt Disney (among so many others) all went bankrupt after they’d already made it big. But each one sprang back in his own way.
The man who was fired from the company he’d founded
Not all of Apple’s products have received mass acclaim. More specifically, not all of the Apple products launched by Steve Jobs have been successful.
One such failuret was the Lisa computer. This was supposed to be a desktop computer targeted at personal business users. For a purchase price of $10,000 (about $24,000 today) consumers could buy the first desktop that would allow them to use a mouse to work with a 5MHz processor and up to 1MB RAM. The Lisa sounded like a magnificent idea, at least at the time.
However, the pricey computer sold poorly, and then-CEO John Scully, someone Jobs had chosen for that position a few years earlier (there are so many lessons in this story), helped remove Jobs from the Macintosh division in 1985.
So Jobs left Apple. Then he founded NeXT, and failed again, but sold the software division of NeXT to Apple in 1997. Then he returned and became CEO in 2000, and this time he was determined to make Apple something special. He succeeded.
The man who almost gave up after 30 rejections
Stephen King was just selling short stories and teaching English when he had the idea to write Carrie. However, despite the $2,500 advance he received for the novel, he decided to give up on the book after 30 rejections.
But his wife wasn’t going to let him do that. She urged him on, and he finally agreed to submit the manuscript again.
Carrie is one of King’s bestsellers and went on to become two film adaptations, one of which won the lead actress Sissy Spacek an Oscar.
The man who quit – just before striking gold
One last story comes from Napoleon Hill’s book, Think and Grow Rich. In it, the author writes of an interview with a millionaire named R.U. Darby who in turn described an uncle of his who, having heard of the riches that came from finding gold, set out to do just that. After weeks of commitment, this miner finally spotted a vein of shining ore. He raised the money for the necessary machinery and went ahead and he started shipping the gold. However, before long, he’d lost the vein of the gold ore.
He tried to find it again and was unsuccessful. Then his workers quit and sold the machinery to a junk man. The junk man called in an engineer to inspect why the project had failed, and it was determined that the vein was just 3 feet (three) away from where the Darbys had left off.
The lesson? Before you stop trying, try again. If not for yourself, then for other people. What would the world be like without Thomas Edison’s invention? How about Alexander Graham Bell? Use failure as a step to elevate you because it’s by learning to accept failure that we can see great success.
This article was originally posted here on Entrepreneur.com.
How To Recession-Proof Your Business
South Africa is in a technical recession. Here’s how to navigate the turbulent times ahead.
For the lay-man like myself, it’s important to understand that a technical recession is an economic term that describes two consecutive quarters of negative growth in an economy. For South Africa, gross domestic product (GDP) declined 0,7% during the first quarter of 2017 after contracting by 0,3% in the fourth quarter of 2016.
Why is this a big deal? Because the economic outlook, even without the technical recession, was bleak. Ratings agencies are losing confidence in South Africa. S&P downgraded the country to junk status earlier this year, followed by Moodys, which revised South Africa down a notch.
How organisations respond to recessions
There are a number of knee-jerk reactions to a recession as a direct result of decreasing revenues and profits. The most relevant to SMEs are:
- Cutting R&D spending. This means no new product lines, and no incremental innovation expenditure unless it returns direct value to the business.
- People get fired. In a time where underperformance has a double impact on the business, people that aren’t performing are performance-managed out the door.
- Market shares shrink. This is often due to reduced R&D spends.
- Processes are evaluated. Companies start looking for efficiencies that should have already been in place.
Outlook and opportunities for SMEs
For SMEs, sales and product planning in a recession is key and must align to the way big business is responding to the recession.
Fundraising for capital expenditure is more expensive, but not impossible. It may be valuable to invest ahead of the curve to capture the emergent big businesses during this period and therefore external investment may make sense.
In an increasingly collaborative economy, SMEs should look to each other for partnerships and complementary projects that cost little to assemble, but amount to great value for a big business.
Survival of the nimblest
SMEs have the ability to be nimble and move quickly to change organisational structures and deliver on just-in-time value. This can be hamstrung by unpredictable fluctuating expenses like cell phone contracts that may vary in cost in an unpredictable way from month to month. The fewer of these costs on your books, the better.
The term ‘always be closing’ is a famous sales mantra, it’s also applicable in a recessionary context. First, because you don’t know what they don’t know and unless you tell them — who will? Second, the feedback loop of understanding the concerns and actions from your customer or client can only be understood through interaction.
Is it clear that you are the best provider for the job that needs to be done? If not, it is important to build a stakeholder strategy that puts your business in front of the key procurement and strategy custodians. This may be a great opportunity to exhibit demos, case studies and showcase the efficiency that you offer.
Focus on value
I can’t over-state this. Value, value, value. It goes without saying that one of the key reasons anyone would consider an alternative supplier is because of the specific problem they solve, so this should be your approach in reinforcing the value you bring to the table. Repetition builds memory structure.
One recession doesn’t fit all
It’s important to understand that for SMEs a recession can have an expansionary effect in the same way the lipstick effect applies to luxury goods and services.
The lipstick effect is the theory that when facing an economic crisis, consumers will be more willing to buy less costly luxury goods. Instead of buying expensive fur coats, for example, people will buy expensive lipstick.
A series of psychology experiments have confirmed for the first time that while tougher economic times decrease desire for most items, they also reliably increase women’s yearning for products that boost their attractiveness.
So, for SMEs, the formula is simple — don’t panic, analyse your customer value chain and position your solution accordingly and then sell, sell, sell.
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