Like Wow, Wipeout!

The classic Australian rock group Hoodoo Guru’s song from the mid 80’s pretty much captures the nature of the current financial crisis. As a result of this mayhem there is now little doubt that we are about to enter a major down turn. How far down, no one really knows. But what we do know is that there is always a bottom. And as sure as winter is followed by spring, there is an up. So the question arises how to survive winter?

There are some key drivers that management teams should adhere to during what will be a trying period.

Keep your customer close. How well do you know your customer? Pretty well? Well think again. Customers will be redefining ‘value’, redefining what they see as ’service’ and totally changing what they believe is essential versus ‘good enough’. In recessionary periods, Companies who understand their customers and clearly understand how they define value will steal considerable market share from those who persist with delivering the same old thing.

Growing organically. That big M&A? Probably off the agenda. As is the IPO and the trade sale to the multinational. While there is a strong argument that companies will now be viewed as being priced at levels that reflect once in a generation opportunity, management teams will need to demonstrate their ability to grow in these new times. What we have just experienced firsthand is that anyone can do well on a rising tide, but true management ability and growth strategy shines in both ebb and falling tides. That requires not only organic growth experience - ie. sales and marketing nous - but the hard evidence to support the development of these new strategies.

The Disruptive business model. Knowing your customer is key. Knowing how to deliver what they want and only what they want could be the difference between success and failure. We suspect that this will result in many businesses taking a long hard look at their existing business models and costs structure to see where thing can be done better and more efficiently. However, this course of action requires clear evidence not gut feel, as one sure fire way to hasten any demise is to start cutting costs without understanding what your customer actually wants. Once again, the key is clearly understanding your customer and building a model around this knowledge.

It’s all about the channel. How good is your relationship with your channel? Well there’s a fair chance you are about to find out. Channel loyalty and efficiency is a critical part of a successful go-to-market strategy. No more so than in times when working capital is under pressure. Ensuring you have the ability to price, deliver and support your channel will be vital.

Product Portfolio Management. Is your product a luxury brand or a functional one? Now is a good time to assess the ‘real’ value that your products deliver. If they are weighted towards luxury then it could be time to readjust in favour of those that offer functionality and comfort as consumers seek value and product optimization rather than opulence and ‘one trick’ products. As this new market begins to be redefined by climate change and liquidity, value for money and increased functionality will be vital to driving revenue growth.

Evidence rules. Exactly how many downturns have we all lived through? How many like this? All that experience, intuition and gut feel. Well, that is all they are. When it comes to developing new strategies to grow and invest, in high risk, unknown markets, evidence will provide you with the confidence you need to proceed. Evidence and insight of what customers want will ultimately allow you to steer a steady and less risky course to growth.

Priced on Value. 24 months interest free? May want to look at your pricing strategy again as consumers re-evaluate price and pricing deals to gain a full understanding of the liability that comes with many pricing offers. One of the biggest winners potentially from the current crisis will be ‘transparent pricing’ models. Models that allow what consumers believe is realistic pricing to occur. As a result, expect to see an increase in EBay trade and also the growth of ‘true markets’ where producers meet sellers.

Cocooning. The Home is my castle once more. During periods of uncertainty, anything that can be seen to reinforce family values, security, is welcomed. Once again, how well do you know your customers? Enjoyment and happiness will come from friends and family not from material possessions and discretionary spending. Anything that helps your customers to connect and identify with their community and their friends will resonate.

What do you stand for? What is your company, your brand, your solution all about? Can it be articulated? Clearly? Is it relevant to the changing market? It is critical that when a market changes by this degree, that a company and the management team recognize the need to change as well. Assuming that your offer, mission and vision from the previous six months is still relevant to customers whose needs have now radically changed, is arrogant at best, fatal at worst.

Flexibility. Finally, no one knows for sure where this will all end up. But one thing is for sure. The world does go on. Markets, societies and economies change, sometimes radically. Just look at the change Russia has gone through in the last 20 years. Ensuring your organization and your people can recognize change, synthesize the implication of change and deal with it personally and organizationally is vital. There is a long list of those who failed to navigate this road successfully; however, there is an even more impressive list of companies who emerged out of previous periods of chaos to be household names today.