Marketing Expert's Corner
This article written in 2009
In economics class, you learn that fluctuations in business activity are inevitable. Growth is not continuous. The business cycle is something that no company can really predict, let alone control. The classic forecasting text, "Business Fluctuations," is still available on Amazon.
But the moment you get out of B-school, you are told to immediately forget about all that negative thinking. Sure, there might be seasonality to your sales, but the business cycle is for some other chump. Competitors might fall victim to it, but not your company.
In the micro-economic world your company operates in, the growth is supposed to be almost continuously up and to the right. Even if the market is hiccupping, the board and investors typically expect you to be taking market share to feed your ongoing growth.
But it's not just business school that tells us growth can't be uninterrupted. Reality steps in every once in a while, and you have to figure out the right marketing tactics for these all-too-real downturns.
Dr. Hans Selye first coined the word "stress" when evaluating human performance. Research showed that the highest performance of the human mind and body comes from having peaks and valleys of effort. Stress is the thing that leads to peak performance. Ironically, a continuous and predictable workload -- ideal for machines -- causes significant degradation in human performance, leading over time to ill health. Burnout comes from unending stress, not a big workload.
As with individuals, so with teams. The way to get the most out of groups is to have coherent, well-defined goals that are tough but achievable -- and have a clear end. Like a product release or a marketing campaign. Cool. But this "soft stuff" is a digression here.
If you follow the chaos math guys, there's a bigger issue than just human performance: the more complex the system (with feedback loops and "incentives" like, say, the stock market), the more likely the instability (or at least, sensitivity to exogenous shock). The high performance of complex systems (such as a competitive industry or a group of buyers) comes at the cost of pulsation that is sometimes severe.
In a world as complex and interlinked as ours, business levels must be marked with variation: you know it will occur, but can never know when (until, of course, it's too late to stop it). Hypergrowth happens, but it is temporary. In the words of Geoffrey Moore, the Tornado moves on.
But even a fairly commoditized industry (such as PC hardware) doesn't stay flat forever. Silicon valley started the shift from the mainframe in 1976, and even now mainframes aren't dead and PC growth isn't over yet. The $500 laptop might look like the end of the line, but it's just a way-station (you heard it here first, folks). Sometime soon, there's going to be a new form-factor for a PC that's a cross between a Netbook and an iPhone, using a microprojector display and an air keyboard to make an itty-bitty box as useful as a laptop. The only thing in the way of volume production is battery life.
At some point, the process of creative destruction (whether Schumpeter's or Shiva's) revitalizes every market: new vendors grow quickly and profitably in the shambles left by the winners of a previous generation. This can happen fast once it starts, but it is impossible to accelerate the infection point: the precursors have to be fully in place.
Playing to the rhythm
"OK, I get it. But what am I supposed to do about it?"
The first step is to understand where your company is, and develop a model about what the timing and depth of the downturn will mean to your revenues. If you're lucky, you sell to customers who will come out of the gate fast. Or you sell solutions that are completely obvious to anybody who's a winner. No matter what your revenue situation, you need to develop -- and bulletproof -- that model because it's going to be the basis for your business plan.
The next step is to review your financial model to make sure the cash flows -- now and into the recovery -- don't leave you starved for capital at a critical point. You're going to need to invest to make for future growth, so figure out where that money will be coming from. As access to short-term capital is at the core of many companies' problems, make sure you have ways to get payment streams or lines of credit at the right times.
You owe it to yourself to look at your entire business as the market will look at it a year from now. What will customers say about you? What parts of your business will be remarkable -- or unremarkable -- in the spring of 2010? If one of your product lines or services will really be a yawn in 12 months, figure out how soon you can shut it down or sell it off. Even if it's generating revenue now, the profitability of those revenues will disappear fast. Selling it before the profits are gone will get you a better price. It feels cruel to eat your babies, but they're going to be gone anyway and you're better off if you exert control rather than leaving it for your competitors to do.
At a tactical level, if you haven't read my articles on security, market timing, and constraint-based management, they offer a lot of constructive tips about what you should be doing in marketing during this cycle.
With all my highfalutin talk of strategy (and it's perfectly OK for you to talk to the VCs that way), now is not the time to be betting on market discontinuities. Most customers are pretty tired of paradigm shifts and game changers and overhyped buzz. Sure, use social media and viral techniques for visibility. But prospects are looking for credibility, which comes from solid ROI (hopefully biased to the revenue side), corporate solidity, and customer references. These are the staples of marketing that shine in flat markets, and provide the basis for solid growth as demand picks up.
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