Business Strategies To Survive & Win COVID-19 Economic Recession
Before beginning our journey, a couple of Cautionary Notes -
- Experts were proven wrong many times.
- The following content is a collection of the best practices adopted by companies who not only survived the depression/recession but also became a market leader in their respective fields. So, the caution -Lessons of managing past depressions/recessions might not assure success now. Some of the practices might not apply to your business. However, there’s nothing wrong with gathering knowledge.
We all know that COVID lockdown is pushing the economy to a critical stage. Businesses had to stop their operations. As a result, there’s less money in the economic system & very soon, the problem would reach the doorsteps of every consumer. It appears that the recession might be around the corner. I sincerely hope that it would only be a recession and not a depression.
Though there would be considerable differences between COVID and other recessions, one thing would remain almost constant -Change in Consumer behavior.
The past recessions showed that consumers cut back on spending. So, we could expect the same consumer behavior post-COVID lockdown.
Consumers would become cost-conscious and reduce their consumption by eliminating, postponing, decreasing, or substituting purchases. They are going to defer many of their non-essential products. Impulsive buying would take a back seat for some time.
So, what could be a possible solution? What are the strategies a company can adopt?
The answer -There’s no one solution.
SOLUTIONS THAT LINK EACH OTHER
To win World War II, Britain didn’t rely on one strategy. The country had to depend on several activities. A few of those activities are -The country developed better aircraft, weapons, tanks, submarines than Nazis -Established diplomatic rapport with Russia and supported their fight against Nazis at the eastern front -Broke open ENIGMA coding machine which helped them to intercept German’s secret messages -They also sent trained agents to European nations to keep the resistance against Nazis alive so that German’s army would be spread too thin -The country also kept attacking Germany’s industrial installations & oil supply routes and so on.
The bigger part of War’s success did not lie in a single venture, but the whole system of activities -Importantly, those activities helped one another -the activities fit and reinforced one another.
As Michael Porter said -The fit created a chain that is as strong as its weakest link.
Similarly, to overcome the recession, a company has to change or adapt many of its business support activities & that should fit and reinforce one another.
01. KEEP IT SIMPLE
Being price-sensitive, the customer would become less loyal to brands and look for cheaper alternatives at reduced prices. The past lessons show that customers would desire for value offerings. As a brand, you need to strip away all non-essential features/things from the product/service, bring the cost down as much as possible and sell it. Remember, a customer wants to buy a simplistic product that meets their needs.
02. DON’T OVERDELIVER
In regular times, consumers would feel happy when you deliver products with a higher value than the expected, for the same price. We all learned that exceeding customer’s expectations was one of the ways to convert them into a loyal customer. However, the same approach would backfire during a recession. As customers are price-sensitive, they would think that the company is charging them extra for additional values. It would affect the customer’s loyalty towards the brand. We have to understand that the consumers are looking out for ways to reduce their expenditure. They want a product that would meet their needs -Nothing more or less. Instead of producing a product with a higher value, the company should aim to deliver the product with the required function at a lower price.
03. THE CHOICE PARADOX
During the period of recession, many things keep a customer anxious, partially loading his/her cognitive memory. If you overwhelm them with choices, then it would burden the mind further, resulting in indecision. It would be cognitively tiring. On the other hand, no choice means no freedom to choose. A customer needs to feel that he’s in control of his life decisions. So, a brand has to provide a few choices(maybe 2 or 3) but not too much.
Remember, a customer wants simplistic products/solutions & the same concept extends to the case of choices.
A brand has to help a consumer from the stress of complex decision making. Make it simple.
04. BUILD TRUST
We saw that as consumers became price-sensitive, they would abandon their loyal brands for alternative cheaper options. If you are a premium brand manufacturer, it’s going to wreak havoc. On the other hand, if you are one of the mass brands, you have an opportunity to attract customers from competitive and premium brands.
Care For Customers -As customers leave their loyal brand and look for options, they would be overwhelmed by the choices. Most of them would be like walking in the dark, not knowing which product should they choose. To attract them, share information that would lower a customer’s anxiety. Address the customer’s concerns and give them confidence. Do whatever is desirable for them. Demonstrate empathy. The communication has to manifest that you care for them.
Help consumers in whatever way possible & also, at the same time, it should fit your business strategy. Don’t talk about your brand. Talk about what a customer needs. It’s a way to build trust.
If you care for customers, they would care for your product.
What customers need is a comforting message from a brand.
Peer Reviews -As a customer would be overwhelmed by the competitor options, he/she would also seek help from fellow consumers, advisers, influencers to help them in choosing a cost-effective product. They would also search social networks or product ranking web sites or private reviews for any help that can simplify their decision-making. The brand could focus on the above channels to build trust with the customer. They could also seek cooperation from existing customers in promoting the product/service.
Be Transparent -One of the ways to build trust is, to be honest at all the time. Maintain transparency. As a brand, don’t exaggerate product features or your abilities. Avoid misleading sales campaigns. If something goes wrong, acknowledge it publicly. Communicate frequently and clearly.
05. TARGET YOUR LOYAL CUSTOMERS
Some researchers show that acquiring new customers cost as much as five times than retaining existing customers. In the time of recession, it’s much more expensive to gain new customers. Customer retention initiatives are going to be more valuable than ever.
Though it is necessary to acquire new customers, the brand also has to devote a larger share of its resources to target its existing customers. It would be mutually beneficial to each other.
Sub Brand -If you are a premium brand, then you cannot lower your premium product prices as it would affect the brand value when the recession ends. One option could be to launch a sub-brand that meets the customer’s current value requirements, with minimum advertising.
Sub-brand is another way to leverage a customer’s trust in the brand.
Other Strategies -During the recession, several companies had modified their loyalty program to retain the customers. The brands had also offered deals/discounts/cashback to support customers in the dire situation -It helped in increased sales. If possible, run regular promotional deals. Companies had also removed penalties/late fees to retain the customers.
Brands could also incentivize customers who could share their opinions, experiences about the product/service. Remember, there would be unknown customers searching for authentic reviews to help them make decisions. Leverage your loyal customer’s opinions.
06. MARKETING AND ADVERTISEMENT
The past lessons of a recession show that advertising/marketing during a downturn was the main difference between the continuation and downfall of businesses. The companies that continued to advertise not only attracted customers from other brands during the downturn but also could achieve the same at a lower cost when the good times arrived. Marketing during a recession laid a strong foundation for post-recession growth.
During a recession, when so many brands vanish without a trace, a company that advertises garners attention. It shows that the brand is capable of weathering storms. Nobody loses his/her job by buying an IBM computer. Customers would feel confident in trusting the company.
The Budget -It’s not that a brand needs to spend a large amount of money on promoting themselves. The company needs to find a delicate balance.
Unfortunately, several companies cut down their investment in advertising and marketing. They go for uniform layoffs without analyzing case by case in the marketing and advertising department. That’s a massive mistake. Even cash-poor firms should invest some money in marketing and advertisement.
The Advertising/Marketing Content -During a recession, a brand has to be cautious in promoting its product/service, considering the consumer’s dire situation. The content should not be about our product/service but should be about what is desirable for the customer. The brand has to communicate that it genuinely cares for its customers. The content should offer emotional support.
Help Your Customers to Help Yourselves -Through advertisements, help your customers.
Recently, I came across an advertisement from a curd manufacturer -The ad explained how to prepare a delicious snack out of curd in easy steps with a few ingredients. It was enticing to try the snack. During the lockdown, people would be eager to eat something. It was a desire. And, the ad showed a way to meet the desire. I also wanted to try that snack. Naturally, I bought the brand’s yogurt. The company didn’t ask me to buy their product. The association played a role. Help your customers to help yourselves.
Customer Education -Recession is the best time for a brand to invest in customer education. Sharing knowledge can help a customer to become an informed buyer. Offer accurate and concise information that can help them solve several problems related to your core field -specifically in the context of a recession. Example -One of the hair-related product manufacturers teaches a customer about more simplistic ways of self-grooming during COVID lockdown. Customers would not forget your help. They would become a believer in your brand and promote it as much as possible.
Customer education would build trust. It’s a way to build long term relationships.
Marketing/advertisement during a recession would ensure that your brand stays at the top in a consumer’s mind in the specific category. Nail the brand’s core position in a consumer’s mind and exploit the familiarity heuristic.
07. FOCUS -REVAMP YOUR PRODUCT LINE
Recession is the time to optimize the resources. Every penny, effort counts. Cash flow is critical in business.
Have a look at your product line. Analyze whether your resources are spread too thin in manufacturing your products. It is time to prune your oversized product portfolio to optimize your resources.
The company can dump products that are too different from each other, having no common attributes/parts and products that are already on life support before the recession(This might not apply to some product industries). Invest time, effort, and money only on selected few products. The smaller product line would help the company to concentrate on improving the quality and lowering the cost of the product. It will also benefit employees, other stakeholders in the system, vendors, distributors, and supply chain teams to know what should be their focus.
Use every available penny in promoting products that have a long-term future. Utilize the saved money to enter new product markets where the brand’s core competencies could be employed to meet different customer needs. The latest product should have some shared attributes with the company’s existing products.
Success is not only about what to do but also about what we should not do.
“It is better to do one product well than two products in a mediocre way” -Reed Hastings.
During the recession, there would be constant pressure to deliver a value offering at the lowest cost. The profit margins would suffer. Only innovation could help in overcoming the profit pressure.
At the same time, the available pool of customers for the existing product would be lower than regular times, as many would have postponed their purchases. In that scenario, the brand has to target adjacent, parallel, or uncontested marketplace by launching new products. Again, only innovation can help it.
As the economy recovers, consumers would slowly show interest in exploring new products. The company that launches unique products could sustain market leadership or gain a massive competitive advantage. Again, innovation only can show the way.
The past lessons show that brands that invested judiciously in R&D have survived the recessions and also harvested ample sales afterward.
Culture of Experimentation -Innovation happens only when experimentation is an integral part of the organizational culture.
“The most important and visible outcropping of the action bias in the excellent companies is their willingness to try things out, to experiment.” — From the book ‘In Search Of Excellence’.
Relish The Challenge -It is not easy to innovate during a recession, but at the same time, it’s not impossible. The team would face several unfavorable conditions -It would be difficult to get the resources -Cash would be hard to get. Remember that we may not be able to control the environment, but we could control how we experience adverse conditions. You either see problems as obstacles or opportunities. You could enjoy your work only when you find it challenging. Unfavorable conditions are a way to challenge yourselves. So, welcome it.
09. AUTONOMY AND FREEDOM IN DECISION MAKING
Several companies survived the recession because they had already given freedom and autonomy to people in the frontlines(lower down the hierarchy) to make their own decisions -People in the shop floor, middle managers, production people, financial analysts, and the salespersons who are in direct contact with the customers/market. They would be the first one to understand shifting customer demands, needs, and attitudes.
Intel -At one point in the late 1970s, Intel’s memory business was in the doldrums. The leadership was worried about the way forward. In the meantime, a small team inside Intel developed a microprocessor chip and began to sell in small quantities. And another thing happened -When the demand for memory chips began to fall, little by little, the middle-level production managers allocated more and more of the resources to manufacture microprocessors. They had the freedom to make their own decisions. They were also one of the earliest to sense the change in the business environment before the company as a whole came to know about it.
As part of their daily work, those middle managers slowly took away the production capacity from the money-losing memory business to profitable microprocessor business.
Andy Grove, Intel’s CEO at that time, writes that those managers didn’t have the authority to get the company out of memories, but they had the jurisdiction to fine-tune the production allocation process by lots of little steps. They didn’t wait for approval from the top management.
Allowing people further down the hierarchy to make their own decisions play a critical role during uncertain times like recession. The company could adapt quickly to the changing environment. They could instantly launch new products in response to change in customer’s behavior.
When Hitler invaded Russia in 1941, the country’s president Stalin controlled all the critical decision-making. The Russian army suffered heavily at the hands of the Nazis and lost several cities. Finally, after a year of blunders, Stalin ceded control to his army commanders and ministers. He allowed them to make their own decisions and plan their strategies. The Russian squad turned around the failures. They slowly began to push the German army out of the country. And, they succeeded.
The recession is also like a war. Cede control to the people in the war zone.
10. DON’T FRAME AS COST CUTTING
The research shows that humans feel worse for losing than gaining something of the same value. It is one of the mental shortcuts we have in our mind & it affects our decision making. It is called Loss Aversion Bias.
The Loss Aversion Bias forces a person to act in such a way to avoid losses rather than exploring ways to gain something. A focus solely on cost-cutting by the leadership team would activate Loss Aversion Bias in the minds of employees. It would cause several problems -Employees and managers would approach every problem/decision from a loss-minimizing perspective. It’s a negative mindset. They would try to cut down expenses uniformly across the organization instead of reviewing each case. The organization would stop investing in innovation, new hires, or new technology. Loss Aversion would also force employees to cut down the number of parts or costs of processes/materials, leading to poor quality. It would affect customer satisfaction. Negativity will permeate the organization, affecting employee’s morale.
Maybe, the leadership has to frame the cost-cutting differently -Call it as optimization or improving operational efficiency or any other way.
11. NO UNIFORM LAYOFFS
Recession brings hard times & companies with cash have a massive competitive advantage. So, it’s natural for businesses to go for uniform employees layoff across all departments. However, the past lessons show that it’s a myopic way of handling a crisis. The best way is to analyze thoroughly from the perspective of meeting customer’s needs -You cannot sack people uniformly from departments like research, marketing, sales, production, or finance. In some departments, every member could play a pivotal role in changing the organization’s fortunes. A centralized way of laying off employees would not achieve any productive results. For example, a company leader announced a 60% cut across all divisions. One of the departments had only five employees. If you sack three employees, the department could not perform the company’s critical function.
Moreover, uniform layoffs without any forethought would make it expensive to rehire and retrain people when the economy picks up shortly. It would also leave a negative impression of the company to the outside world. People would hate to join those organizations that lay off employees in difficult times.
Layoffs may quickly save costs, but recovery is going to be painful.
Uniform layoffs also hurt employee morale, which would affect the company’s productivity. It would severely weaken the company’s competitive advantage in the market.
Companies that survived recession had not opted for the uniform sacking of employees. They also didn’t implement identical pay cuts or hiring freezes as that would have created the same problems. Instead, companies relied on improving operational efficiency aligned with market expectations to layoff or hire employees. They also introduced a reduction of working hours, leaves, performance pay to save the cash. It didn’t affect the employee’s morale. People didn’t need to worry about job security.
12. FOCUS ON CORE ACTIVITIES AND THE STRATEGIC FIT
A business has to perform several direct/indirect activities to deliver value to a customer through its product/service. Example -For Starbucks, the activities are Sourcing of quality coffee beans, Roasting, Customer Education, Baristas training, Consumer Research, R&D, Hiring, Procurement, Testing, Real Estate, Packaging, and Branding.
A brand chooses an activity based on the degree it can enhance the proposed value proposition.
The Strategic Fit -For a business to establish a sustainable competitive advantage, the chosen activities should interact, complement, enhance, and reinforce one another. It is called ‘Strategic Fit’ among activities. The ‘fit’ determines the brand’s success. As we saw earlier, the fit creates a chain-like structure & it is as strong as its weakest link.
During the recession, it was time to review those activities and their fit. Explore ways to optimize and improve the relationship between the activities.
Analyze every core and support activity -It could be one of the accounting systems, fulfillment systems, distribution systems, inventory systems, HR systems, Customer relationship management, or other systems.
Start with core activities that dealt with the outside world, beginning with customers. Follow SCAMPER or any other technique.
- S -See if you can substitute any of the activities with an efficient one that saves time, effort, and money.
- C -Can you combine some of the activities so that resources could be shared?
- A -Can you Adapt any of the activities to the changing environment? Can you adopt some of the good things from another activity?
- M -Can you modify part of an activity to meet the changing scenario?
- P -Can we put some of the activities to another use? -Can we use all those activities to make a product/service for a different market?
- E -Can we eliminate the activities that don’t add much value to the customer in the long run? Can we eliminate redundant activities? Can we eliminate activities that don’t fit well with other activities or core activities? Can we eliminate activity that cannot be modified to meet the post-recession conditions?
- R -Can we repeat or reuse some of the activities in other areas of the value chain?
Reviewing and optimizing the activities would improve the strategic fit. The fit drives competitive advantage and sustainability of the business.
Improve Operational Efficiency -Now, start focusing on each activity or function, individually. Optimize it. It is called operational efficiency.
The improved strategic fit and operational efficiency would help a company to manufacture and deliver a product at a lower cost. It would also lower working capital requirements, freeing up cash for other investments.
When good times turn, the improved strategic fit and operational efficiency will continue to keep the production costs low, allowing the company to garner a bigger market share.
A Few More Thoughts -It is also time to review your partners, vendors, materials, and other things.
It is also the time to shed unproductive assets like real estate, patents, software, inventory, manufacturing plants, processing facilities, and other things.
Divest non-core businesses that don’t add value to your core market -Sell brands that don’t have any strategic fit or organizational fit with your company’s systems and activities. You may feel that selling businesses during the recession would not fetch much money, but the more you delay, it would get worse.
Shedding noncore businesses/operations will free your resources to focus on generating higher value for your customers.
Note: Recession is also the right time to acquire assets or businesses that can enhance your customer value proposition -or that can provide you long term value. It would be cheaper to buy.
13. INVEST IN NEW TECHNOLOGY
One of the ways to optimize operational efficiency is to invest in new technology. A company that invests strategically in the right technology is more likely to survive the recession and also would come out ahead when the market bounces back.
The right technology would help a company to provide an enhanced value proposition to the customer. It could save time, cost, and effort in serving the customers. In other words, technology could improve internal efficiencies.
Moreover, at the time of recession, due to the lower demand, our systems would be only partially occupied. So, we could install new technologies which would not be possible during regular times. Technology adoption costs would also be less during a downturn.
Technology investments will make companies more nimble and enable them to adapt quickly to the changing environment.
14. RE-EXAMINE THE BUSINESS MODEL
The past examples show that some companies survived the recession by changing their business models. They had become disruptors and created a new marketplace where they had no competition.
To overcome the customer’s resistance to purchase, companies have tweaked their business model by -
- Shifting from selling the product to rental or subscription or results-based pricing structure
- Shifting from selling the products to offering services
- Transforming the way of distributing the products/services -change the distribution channel.
- Changing the place where a customer could experience the product/service
- Bundling/Unbundling of services/products
- Transforming the way a customer could interact with a brand to make a purchase
- Lowering the product cost by encouraging customers to share the product/service with other customers -a shared economy model
- Targeting the convenience rather than on the product’s functionality
- Giving the product for free and collecting revenue from the third party brands who could use the same product for different applications
- Lowering the product cost by selling partly finished product and encouraging customers to complete the product after they purchase
- Making it possible for customers to perform part of service activities themselves
- By shifting the focus from the product to customer experience
Changing business models had unlocked new ways to generate revenue and profits for the companies, helping them to reach new heights after the downturn.
15. IMPROVE CUSTOMER ENGAGEMENT
Companies needed to stay closely connected to customer needs during a recession, as consumer behavior undergoes rapid change. It will help businesses respond quickly to new demands. The customer’s need should drive almost all business decisions.
It was essential to motivate executives to interact with customers at every possible opportunity and build a relationship with them. For that to happen, the customer-facing employees, designers, marketers, sales, need to spend time with their customers, observe, and listen. The more time they spend with customers, they would learn the shifts in user attitudes and understand their changing needs -that could help in re-inventing the product. The customer experience for the given price would improve, resulting in brand promotion through word of mouth. Highly engaged customers buy more, promote more, and demonstrate more loyalty.
Encouraging employees to engage with customers should be a top priority for businesses.
16. CROWDSOURCING IDEAS FROM INSIDE THE COMPANY
During the recession, new ideas should be implemented and executed as quickly as possible -Should be done like on a war footing. For that to happen efficiently, it would be better if the ideas/solutions come from inside the company. When the concepts come from outside(through external consultants or directly from top management), there would be passive resistance within the company in executing the idea. Employee’s motivational levels would be lower. If the idea came from inside the company, it would be easy to make the employees buy the plan. The employees would further work wholeheartedly in implementing the same.
17. ESTABLISH PARTNERSHIPS
It is a great time to establish partnerships with companies of complementary products or companies that could enhance the value proposition. In that way, you could share the resources with your partnering company/brand & the customers would gain a better product at a much lower cost. It would be a mutual benefit for everyone involved in the transaction. It would also enhance product differentiation.
News from Businesswire.com -07 May 2020: Liberty Global and Telefonica to Merge Their U.K. Operations.
Mike Fries, Chief Executive Officer of Liberty Global, said, “Virgin Media has redefined broadband and entertainment in the U.K. with lightning fast speeds and the most innovative video platform. And O2 is widely recognized as the most reliable and admired mobile operator in the U.K., always putting the customer first. With Virgin Media and O2 together, the future of convergence is here today. We’ve seen the benefit of FMC first-hand in Belgium and the Netherlands. When the power of 5G meets 1 gig broadband, U.K. consumers and businesses will never look back. We’re committed to this market and are right behind the Government’s digital and connectivity goals.”
18. EXPANDING TO NEW MARKETS
Next Generation Customers -Clayton Christensen says, “Best firms succeeded because they listened responsibly to customers, invested aggressively in technology, manufacturing abilities, designed wonderful products to meet the next generation needs. The same best firms failed after some time, because they listened to the SAME customers, invested again, designed again to meet NEXT GENERATION needs”.
Clayton Christensen advises us to modify your product to target next-generation customers. Can you transform your product/service to meet their needs, desires, and wants?
Customer and Their Jobs To Be Done -Clayton Christensen also says that customers hire products to get a job done. A user might use the same product differently in various circumstances to perform a different function.
Can we customize our product for those contexts to improve the customer experience? Can we also modify our product slightly to help customer to perform additional jobs? It could open a new market.
Non-Customers and Uncontested Marketplace -W. Chan Kim and Renée Mauborgne say that focusing on ‘Non-customers’ would help in generating ‘Radical Value Innovations’ -It would open up new uncontested markets.
Focusing on existing customers will break the existing market into finer segments, forcing us to tailor the offerings further, and reducing the market further. To break away from this, the first step is to shift your focus from “Customers” to “Non-Customers”.
Blue Ocean Strategy mentions three tiers of non-customers
- First Tier — “Soon-to-be” non-customers who are on the edge of your market,
- The second tier — “Refusing” customers who consciously ignore your market
- The third type — unexplored non-customers who are in markets distant from others.
Observe your non-customers, understand their needs, desires, and customize your product to meet their needs.
Less Affluent People -Clayton Christensen also proposes an example for a type of non-customers to target -Less affluent people in the respective field. He gives two conditions to meet -
01) Can the product or service be provided to less affluent people in a more convenient context, something that historically was available only to more skilled or more affluent people? Less affluent people and a more convenient context(A critical parameter).
02) Is there a large population available?
If there is a target market that meets the above conditions, then customize your product to match their needs.
19. FIND OUT THE NEXT DISRUPTIVE TECHNOLOGY
One of the ways to enter a new market is to exploit the arrival of new disruptive technology.
History shows that technology played a massive role in sinking some of the established business leaders. Many traditional industries failed to adopt new technology.
Brands that regularly adopt new technologies continued to remain relevant in the industry.
How to find out the next disruptive technology? -We need to search frequently for the availability of new technology. Research labs at major universities and public companies regularly work on new, exciting, and novel technologies and publish them in little-known journals and also present them at Academic Conferences.
Apple introduced the computer mouse in the 1980s, which revolutionized the PC industry. However, Doug Engelbart demonstrated the computer mouse way back in 1968.
Steve Mann demonstrated Google Glass in the year 1981. GPS existed as early as 1973 but was widely adopted only post-2000. Microwave technology was developed in the 1930s but was commercialized only in the early 1950s.
John Kolko writes, “Anything that will be a billion dollar industry in 10 years is already 10 years old. A business has to constantly read those tech journals and attend those highly esoteric tech conferences”.
20. KILL YOUR OWN BUSINESS
One of the ways to grow your existing market or enter a new market is to think about how to kill your own business. Find a way to disrupt your own business.
Jeff Bezos felt a shock when Apple disrupted Amazon’s music business. It was a massive blow. Instead of somebody else disrupting the market, he wanted Amazon to disrupt its market. Bezos set up a team to come with ideas to kill their own business. He chose ‘Books’ as the first category and asked the team to find ways to kill Amazon’s Book Business.
The ‘Kindle’ was born and transformed the publishing business.
21. WINNING ATTITUDE
Sun Tzu in his book ‘The Art of War’ writes, “Do not enter battles to participate. Fight battles to win.”
He adds, “Prolonged warfare provides no benefits -Weapons grow duller, too much money will be spent, prices increase, soldiers lose strength over some time and the economy weakens. If you Fight the battle to participate — you would be defensive, react to situations than being proactive. If you fight the battle to win, you won’t hesitate to make decisions and hard choices”.
Similarly, companies must go to the market to win and not to participate. Notably, this mindset is very critical during the recession. Participating in survival is a self-defeating attitude resulting in mediocrity. You would be defensive and fail to make hard choices.
GM introduced the brand “Saturn” to capture the newly emerging small car segment for youngsters. After a decade of a long battle, the company laid the brand to rest. The problem — GM wanted to participate in the competitive market, whereas Toyota and other brands aspired to win the market. GM fought a prolonged battle, losing money, energy, time, and brand value. The objective should be victory, not a lengthy campaign.
In 1957, to investigate the phenomenon of sudden death, Dr. Curt Richter devised an experiment. He immersed rats(domesticated and wild) in a jar of water and measured how long they lived. The research showed that almost all wild rodents sank within a few minutes, whereas domesticated rats could swim for hours before succumbing to death. Richter was surprised and felt that rats might have died due to loss of hope as domesticated rats survived for longer hours.
Richter then changed the modicum of the experiment -He took some wild rats -Instead of transferring them directly from cage to glass jar, he freed them for some time. Next, he immersed them in water for a few minutes and released them. In this way, the rats learned that the situation is not hopeless. Then, Richter dipped them in the jar for the final experiment. As expected, the wild rats showed no signs of giving up and continued to swim for more extended hours -Some swam longer than domesticated rats.
During a recession, you need to have abundant hope to inspire yourself and your team. The situations would be challenging. More than anything, hopelessness could kill your business. Never lose hope.
Companies that mastered the delicate balance between optimizing operational efficiency, strategic fit, investment, and cutting costs could survive and do well after the recession. Have a winning attitude & never lose hope. Inspire your employees. Importantly, care for your customers. They would care for you. All the best.
References: Roaring Out of Recession-HBR ARticle by Ranjan Gulati, Nitin Nohria, and Franz Wohlgezogen, How to Survive a Recession and Thrive Afterward-HBR Article by Walter Frick, Understanding the Postrecession Consumer by Paul Flatters and Michael Willmott, How to Market in a Downturn by John Quelch and Katherine E Jocz, Seize Advantage in a Downturn by David Rhodes and Daniel Stelter, Layoffs That Don’t Break Your Company-HBR Article by Sandra J.Sucher and Shalene Gupta, What Is Strategy-HBR Article by Michael E. Porter, Competitive Strategy-HBR ARticle by Michael E. Porter, Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne, The Innovator’s Solution by Clayton M. Christensen, Competing Against Luck by Clayton M. Christensen, The Everything Store by Brad Stone, The Art Of War by Sun Tzu, Good Strategy/Bad Strategy by Richard P. Rumelt, Well Designed by John Kolko, Stanford Interview-Carlos Ghosn, Who Says Elephants Can’t Dance by Louis V. Gerstner, Pour Your Heart Into It by Howard Schultz, Thinking Fast and Slow by Daniel Kahneman, Only The Paranoid Survive by Andrew S. Grove, WW2 Documentary in Color, WW2 and The Man of Steel-Documentary directed by Russell Barnes, The Paradox Of Choice by Barry Schwartz.