Turning Perils into a Champaign

…keep on hoping
Stiff, shocked and petrified are the natural human reactions to danger, threat or sudden change in social matters. All of the sudden, the “mucho” steam of the managers and corporate leaders is put on hold, while no one wants to stick his or her head out in times when a bunch of beheaded cue in front of the job centres. Opening new horizons and innovating is deemed to be insane or, even worse, (socially) irresponsible. It is cutting back time, and not the honing and let’s try it all from scrap alarm.
Even though one might perceive a defensive strategy as a common sense solution to the recent perils, trying to downsize for a while and wait for better times to come sets businesses up for even more trouble. Downscaling existing models via cutting costs is like jumping on the brakes with the hope that car stops just in time in order to avoid hitting a wall. Hoping thereby that 30% off my recent spending will make it all work out. But will it?
If you scan the media for strategic suggestions on recent times, it is clear that defend your core business weeds out the other views, in turn giving R&D guys several months (or years?) off. However, let me just shout out “And yet it moves…”

Silence settling around
Promotion costs are one of the first areas where companies are at the ready to cut. Cutting marketing costs does not harm anybody in the company (or that is how it appears) and thus is an ideal candidate for the savings mode. Messages, billboards and TV spots disappear and communication gears down. And that’s the time to pump up your ride! The combined effect of far cheaper prices for promotion with the support of a lower communication burden on your clients makes the communication efforts more than twice as efficient as in good times. Therefore, were those truly the bad times or are they now on the stage?

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Identical begging hats
When everybody is sticking to their core business, markets slowly commoditise. “No frills, just core products” executed by everybody makes all the competitors stand in the same corner. With the same begging hats (for the customers passing by them). As is often the case in economics, self-reinforcement turns this trend into a spiral; customers jump into the game by carefully weighing the value for money. Companies fight back by cutting the margins. However, those who have the guts step out and focus on the non-monetary part of this value/price ratio and will quickly be ahead of the rest of the pack. Of course, innovative products and services have never been an easy way to walk, but in crises the carrots are much sweeter and larger. Still many business leaders preach that identical begging hats are the safe way out of this corner. And so does the homeless person who I have been passing on my way home for more than 7 years already…

Lonely innovation walk
Besides for having better carrots at stake for innovation in crises, the walk towards innovation is the considerably more deserted one. Executive boards hesitate to pursue new projects and those few that make it to real life have rarely any followers. The reason why I encourage managers to pursue the innovation walk is that tough times enable the company to milk the cows of new opportunity much longer than they ever dreamed of in the neck and neck race of the previous era. Therefore, value created by entrepreneurs during crises often becomes a long-term competitive advantage, as the solutions forged by the present sense of urgency are difficult to replicate even when the perils settle down.

As in any other change, this financial crisis is an opportunity solved in a challenging package. The leading dogs often bark at a nasty can. Eventually, however, they die of thirst. Go and embrace the opportunities out there, within the can, and you too can turn these perils into a champaign. After all, both are just made of liquid with bubbles…

Author: Filip Vítek, Strategy and Company development advisor

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