Recognizing Opportunities, as the Economy Begins its Slow Recovery

If in fact, the bottom has been hit, the question is, how do we move forward now? Are there opportunities, and if so, what might they be? Is it in fact time to get a bit more aggressive and carefully plan a stronger & better future than before?

We should move forward thoughtfully. Here's a poignant example from the Great Depression: Kellogg & Post. The New Yorker Magazine wrote of it last week. In the beginning, both were involved in the packaged cereal market with no clear leader. When the Depression hit, no one knew what would happen to consumer demand. Post did what many companies recently have done, reducing costs, cutting budgets & advertising. Kellogg, on the other hand, doubled its budget, moved aggressively into radio advertising, and introduced Rice Krispies. In the four years it took the economy to bottom out, Kellogg raised profits 30%, & became the market leader in the process.

You'd think, that with stories like this, companies now would want to do the same, but what we've seen is most behaving like Post. They hunker down in a survival mode, cut spending, & make fewer acquisitions even though the costs to do so are down. They preserve instead of grow; they just want to get it over with.

There are studies proving companies that maintain spending during down times do significantly better than those who don't. A 1927 study by Roland Vaile showed organizations that kept advertising steady or higher saw significantly better sales than those who didn't. During the 1981-82 recession, firms increasing advertising
saw a "precipitous rise" in the next 3 years following. And in a McKinsey study of the 1990-91 recession, it was found that companies who remained market leaders, or became serious challengers during the downturn, had increased their acquisition, R.& D., and ad budgets, while companies at the bottom had reduced them.

Wow! The message is clear: the future winners will be those of us who act now. Yes it takes courage, but it must be done. Please look at the data; let's not repeat the mistakes of the past.

We may think that only the strong can afford to be aggressive, but the fact of the matter is that recessions create more opportunity for challengers, not less. Note that when advertising is reduced during down times, the challengers have more opportunity to stand out, and the investment is more effective. In the 1990-91 recession, Bain & Company found that twice as many companies leaped from the bottom of their industries to the top, as did so in the years before & after. What wouldn't we all give to move from the bottom to the top?

Here's the clincher. Two gentlemen from academia, Peter Dickinson & Joseph Giglierano have stated that companies now a days are worrying about two kinds of failure: "sinking the boat" (destroying the company by making an aggressive decision) or "missing the boat" (letting a great opportunity pass). Today, most companies are far more worried about sinking the boat than missing it. That's why jumping from last to first, or becoming a Kellogg, is a possibility. That's also why it takes so much courage to do it.

Who are we?

Who will we become?