The Time to Invest is NOW!

This article was originally published at Inside Indiana Business and can be accessed at http://www.insideindianabusiness.com/contributors.asp?id=1643

I was at the monthly meeting of the Venture Club of Indiana recently. The organizers had invited respected entrepreneurs, angel invertors and venture capitalists from around the country to comment on the Top Trends Impacting Midwest & Indiana Business in the Upcoming Year. The panelists accepted questions from the audience and seemed very open and passionate in their responses.

One topic that came up repeatedly was that a recession is a great time for buying companies. The reason is that there are lots of good ideas to pick from and valuations of many companies are relatively low when compared to a booming economy. To prove a point one of the members of the panel asked the audience how many individuals in the audience were looking for money? About 75 hands went up from the group of about 400 individuals. When asked how many people were ready to invest today only about 10 volunteers raised their hands.

I think it is human nature that when times are bad many of us hide in our “box” where it is safe until we are convinced it is safe to come out. However if you look at history a lot of winners did just the opposite and invested in times of turmoil. I read an article recently that stated 16 of the 30 companies that make up the Dow Jones Industrial Average were started during a recession or down economy. These include Procter & Gamble, Disney, Alcoa, McDonald's, General Electric and Johnson & Johnson. Some other companies that made their start when many were pulling back are Hyatt Corporation, Burger King, IHOP, FedEx, LexisNexis, CNN, and Microsoft. Why did these companies succeed? The founders knew their customers, understood their needs, understood the changing environment they were operating in, and created new products and services to meet the needs. They identified a solution and were not afraid to move forward.

In a recession the reservoir of business is drained to critical levels exposing the rocks on the bottom. Companies set in their ways with aging policies/mindsets are like ships that were able to succeed in good times but are now too bulky and crash into the rocks. This creates opportunities for nimble, flexible companies (visualize a speedboat) to take advantage of the situation and change.

In the climate today here are a few investments to consider to achieve a sustainable competitive advantage.

1. Market your existing products aggressively. As others decrease marketing and promotional spending keeping your level of spending the same or even increasing it will help you build share of voice in the marketplace. This increased share will give you an incredible advantage over your competition now and once the economy begins to grow again.


2. Innovate your product line. Has your market changed? Can you come up with a better mousetrap that will allow you to meet your customer’s needs at a lower price point.


3. Improve your production process. Can you produce more for less allowing you to lower your price and buy market share?


4. Fill a new market vacuum. How are your competitors responding to the recession? Are they pulling back creating a vacuum that you can fill?


5. Talk to your existing customers? Are they happy? What are their needs? Identify things your company can do to increase sales to them. A satisfied customer is much easier to sell than a new one.

Entrepreneurs willing to take risks with their time and/or financial resources understand that this is a time to invest rather than pull back. It is what makes them entrepreneurs. This is what separates them from all others.

In summary don’t be afraid to invest now. When the economy improves and your competition climbs out of their box you will be several steps ahead.

Until next time - all the best!

RolandB

Photo credit

Explode Your Box!!

There has been a lot written and said recently about thinking outside the box, thinking outside the lines, and expanding your horizons. Steve Coats and Tim Heuer wrote a very good book titled “There is No Box” with compelling ideas about why and how companies and their executives need to think differently.

Marketers know that the way to bring attention to a product or service is to stand out from the crowd, do something differently, and deliver a compelling message in a unique way. During a recession when others are pulling back one line of thought is to increase investment in advertising. In many cases not only will you stand out from the crowd but you may be able to buy market share more economically than in times of economic growth. Unfortunately in many companies it does not happen. Opportunities are lost.

Why is it so hard to change?

My hunch is that each of us has a box we carry with us. For some of us the box is bigger than others. When times are rough, such as in this recession, human nature is to go where we are safe. Go hide in our box. Maintain the status quo. Ride it out until things get better.

We are missing a big opportunity. It is time to explode the box. It is time to explode your box and think creatively about the future.

When I was in the Navy we regularly prepared for our job by participating in “war games.” The crew of the submarine would simulate a situation where we would attack the enemy, accomplish our mission and hopefully live to fight another day. We learned a lot about our decision-making ability as a team, about the way we communicated with each other under stress, and about what tactics work and which ones didn’t. Our payoff was the confidence that we would know what to do if and when we ever needed to play the game for real. So why can’t we do this in business? Rather than retreat to our box lets explode the box!

What are the “givens” in your business?

The givens are the absolutes, the critical assumptions that if upset would be game changing. How would you compete if your givens suddenly changed?

What if you lost the patent protection on your best product? What if your best product received a failing grade in Consumer Reports? What if your competitor lowered the price on their product by 50%? What if your competitor figured out how to reach your customer in a new, cost effective way that made your current sales force obsolete?

These examples ask what would you do if your competitor moved first. Another way to look at the exercise is to ask what game changing moves can and should you consider to put your competitor on the defensive and build a sustainable advantage?

How do you get started?

The first rule is to perform the exercise proactively, before you need to in real life. That way you can make mistakes and learn from them. The second rule is to take the exercise seriously, consider performing it off site with few distractions (i.e. leave the Blackberry at the door). Gather your team together and ask yourself what you would do if a game changing event occurred to you and your business? How would you respond? How would you make lemonade out of lemons?

In this day when so many are running scared explode your box, change the rules of the game and have fun!

Until next time – All the best!

RolandB

This article was first published in the Inside Indiana e-newsletter December 15, 2009.