Apologies for not writing during the past week. I started a posting but this week was a long one. I had wanted to mention a compelling article that I have been carrying back and forth in my work bag and now is a better time than ever. No surprise but it came from The Economist and the topic was about how some companies thrive in the worst of times. Despite the challenging days and months we’ve all been through, crises give birth to opportunities and this is surely one of those times when new companies rise or established ones leap frog ahead of competitors, reputation-wise. We can all read the tea leaves on how certain companies within particular industries are facing major shake-ups as to who is on first, second and third base.
The Economist article noted a few key points that I want to commit to memory (which is why I am writing it down):
- “Recessions shake things up rather than slowing them down. They reward strengths and expose weaknesses, create new opportunities and kill old habits, release pent-up energy and destroy old business models.” Is that what is happening with Wal-Mart and Amazon fighting over $10 best-sellers? Interesting turf wars.
- Several companies thrived or arrived during the Depression — P&G, Revlon, HP, Polaroid and Pepperidge Farms. FedEx, CNN and Microsoft first breathed life during earlier recessions.
- Bain management consultants reported that twice as many companies made the jump from laggards to leaders in their industries in the early 1990s recession AND the vast majority (70%) kept that momentum going in subsequent years. Pity the 30% who did not.
- Nothing wrong with being big (although conventional wisdom seems to think that big companies are bad and too big to fail. Why does no one remember that the largest companies employ the most people? And as follows, they manage through adversity fairly well.) “The most obvious winners are established giants: market leaders that entered the recession with cash in their pockets and sound management systems under their belts. These companies are reaping rewards from investors who are skittish about shakier rivals. They are also using their corporate muscle to squeeze their costs (for example, by negotiating cheap rates for advertising) and so win market share from their competitors. BCG, another consultancy, notes that 58% of companies that were among the top three in their industry had rising profits in 2008 and only 30% saw their profits decline. In contrast, only 21% of companies outside the top three had rising profits, and 61% had falling profits.” Makes sense then to make it hold on for dear life if you are at the top of your industry. The same goes for reputation. Being highly regarded and among the top three most admired in an industry gives companies a second and sometimes third chance. Stakeholders are willing to look the other way and continue buying your products and services. I am not so sure about a third chance however. Reputation erosion almost always sets in if the third chance is wasted.
- Challenging recessionary times also are good for repositioning a company, according to this article. Cisco is repositioning itself as the Human Network, IBM as a Smarter Planet and according to Fast Company’s recent article about Intel, they too are pushing boundaries with their new Atom mobile chip.
- The last line of the article got me: “Indeed, business is more likely to take advantage of this ‘serious crisis’ than the world’s politicians.” Let’s hope not.