In our last post, we wrote about innovation in the economic quagmire. This time we will focus on how the financial crisis and economic downturn impact the way we think about doing business.
It is safe to say that optimism has been replaced with caution. Costs are cut, investments cancelled, and innovation is viewed with skepticism by many managers. Product, sales and marketing departments face new challenges with what we call “the recession business mentality:”
• Risk aversion – everyone is afraid of making wrong decisions, both personally and for the business as a whole. When people are advised to wear white shirts to avoid sticking out in the next round of downsizing, finding someone willing to take large risks can be difficult.
• Demand for visible results – investments require visible return in the form of reduced risk, increased revenue and/or lower costs. Results need to be perceivable and quantifiable. Projects, services and products that fail to deliver visible results face tough times.
• Demand for quick results – cost cuts can quickly impact the bottom line. Now investments require quick results, often within a year or even within a quarter. Managers face strict requirements to cut costs and improve results within short time frames.
• Long decision-making processes - decisions that were up until recently made by empowered employees and single managers now drag on as more people become involved in decision-making processes. The larger the investment, the longer it takes.
• Budgets are slim – in many companies it is currently not room for large investments, or there is an investment freeze altogether. Expensive products and services are categorically refused, and price negotiations can be tough.
So, how can struggling companies adapt to the recession business mentality? To begin with, businesses should evaluate their product and service range to determine whether they fulfill the criteria almost required to do business during the recession. We have compiled a list of requirements, and the more criteria a product or service meets, the more likely we predict it is to succeed during the economic downturn.
The optimal product is one that:
• Entails low risk to the business and buyer
• Provides tangible value
• Provides quick return
• Can increase revenue and reduce costs
• Can circumvent inefficient decision-making processes
• And finally, it should be low cost
A low-cost product can entail low risk for the buyer and can circumvent long decision-making rounds and investment restrictions. If it is easy to provide tangible results, lower costs and increased revenue, it is easy to measure return on investment. Of course, many products or services don’t meet all these criteria, but the ones that do – or that can be adapted to do – have an edge when facing the recession business mentality.
