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Reflections on the Recession

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by Bob Brown

Opinion is moving towards the view that the worst of the recession is now behind us.  The vendors that we have seen and spoken with recently appear to be busy and cautiously optimistic about improving market conditions.  So, this is a good time to reflect upon how the last few years have changed things. 

 

Recessions tend to drive lasting changes to industry structure, business priorities and buying behaviour that are a key part of reshaping the markets in which we operate – just look at the changes to the automotive industry over the last 24 months.  The structural changes to the automotive industry are obvious, but the implications for vendors may take some time to evaluate.  Some of the changes brought about by this recession are less obvious and more subtle, but nonetheless fundamental.  A lot of these changes will only begin to be apparent now – as growth begins to return to the market and companies make the attempt to resume “normal operations.”   Now is the time to make sure the company’s mechanisms for sensing change in the market place are in perfect working order – whether that means anecdotal feedback from sales people, competitive analysis or reviewing the results of the most recent lead generation campaign. 

 

Making sure the company’s market intelligence function is working may be glaringly obvious but it may still prove difficult to execute.  Most participants in the market have taken the obvious steps to try to ensure survival – namely the imposition of tight, even draconian, control of costs and the reduction of headcount based on active workforce reduction programmes or, more passively, relying on natural wastage and hiring freezes.  While “cash has been king” all expenditures have come under close scrutiny and focus has shifted to near term opportunities.  As a result, a lot of stuff just hasn’t happened in recent months – travel freezes, reduced marketing and training budgets, fewer events and, in all probability, less sales development work.  In this environment, even minor purchases have required approval from more people and sign-off at higher levels of management. 

 

Given the immediate problem, this is the correct response.  Unfortunately, one aspect of many of these changes is that the company’s marketing “sensory equipment” and “analysis capability” may have been compromised – either because resources are no longer available or because tasks have been de-prioritised.  At the very least, the levels of churn in both customers and vendors will mean that many long-standing connections will have been broken.  We recognise symptoms of these sorts of problems in our recent conversations with vendors – the work load is picking up very quickly but the requisitions to hire new people have not been released. 

 

Most markets have been changed in both gross and subtle ways, highlighting a structural problem.  Some of the rules have changed – but we don’t necessarily know which ones or how they have changed – or are changing.  There are clearly going to be new opportunities and new threats – as well as newly exposed weaknesses and potentially unexploited strengths.  At this time, the “rules of thumb” market models or key performance indicators (KPIs) on which many of us have relied for the daily running of the business should be treated as suspect because the assumptions on which they were built, perhaps over many years, may no longer apply.  Reliance on an out-dated view of the industry we serve and the markets in which we operate will lead to bad decisions.  While we may know this to be true, experience makes it quite clear that most of us continue to work with the models and tools with which we are most familiar – even when they are no longer able to explain the observational data. That is when they should be discarded.  Sadly, it is much more usual to attempt to flex the model so that the observational data fits, which means building new assumptions into the model that cannot be verified. This is always a recipe for disaster. 

 

The reality is that the competitive landscape has almost certainly changed as well.  The fortunes of our competitors will need to be re-assessed in light of changed circumstances in the market.  As always, the companies who are quickest to recognise and respond to a new environment and altered customer priorities will be the companies with the best chance to take advantage of the opportunities that change brings. 

 

In your haste to get the business back on a strong growth trajectory, don’t make the mistake of thinking you can just pick up again where you left off a few months ago . . . it usually doesn’t work that way.