"An ostrich with its head in the sand is just as blind to opportunity as to
disaster"
Anonymous
The Treasury Secretary has stated that the US economy has slowed materially in
recent weeks. The Federal Reserve cut the short-term
interest rate by 3/4 of a
percent.
The price of gold is up about 20% since last January, which is usually
a good indication that inflation is rising; and all indications are
that wholesale inflation is at
its
highest in at least a generation. The price of oil hit $100/barrel for the first time ever.
While these may be ominous signs of a down economy--and we don't
disagree with that viewpoint--we also look at this as an opportunity for
organizations to make positive, substantive changes to better their
positions. To that end, we recommend organizations start planning for a market recession, even if it doesn't come. Why? If--worst case--the
economy is down, the
organization is prepared. If the economy is stronger than expected, then the organization is not only
prepared
for a future down turn--it is cyclical; it's a matter of when, not
if--AND is in a much more competitive position during healthy
markets.
Most organizations
will instinctively react to market conditions, usually when conditions are proven to be bad, and will be trying to regain lost revenue
through controlling the traditional 4 Ps of marketing (product,
placement, price, and promotion). Some companies will find success with
this, but most will not see an appreciable increase in revenue
through these means because, as the saying goes, there's no getting
blood from a turnip.
However, organizations that look to solve more substantive issues
will likely have more substantive results. In many instances, the
specific solution in many instances is to improve the value network (some call it the
value chain). The value network is usually taken for granted (at best)
or flat-out neglected--and changes here can result in profitable,
innovative solutions for both the organization and its customers.
A company's value network is the collection of business functions,
systems, and processes that are designed to deliver value to the
customer. The value network, as a critical mechanism for innovation,
also becomes a key part of the business strategy because it creates
systems that will:
- Create a natural barrier to entry for competitors
- Make the business more competitive in the marketplace
- Ensure profits in good economies
- Insulate the company from losses in a bad economy
As I mentioned earlier, many companies will look to marketing's
traditional 4 Ps to navigate their way through hard times. While the 4
Ps are a useful tool, it frequently does not go far enough. Creating a
value network will serve much the same basic function as the 4 Ps, but
takes it several steps further. The 4 Ps can be fairly easy to
replicate, however replicating systems and processes are much more
complex. As such, the value network becomes intertwined with the
overall corporate strategy.
Strategy is a combination of all the things that you do. For
example, for Wal-Mart or Southwest Airlines to compete on price, all of
their processes need to work together. All the little details must
exist to support their driving goal, which is to provide the lowest
prices for their customers. The features of these companies, part of
their 4 Ps--the warehouses, the airplanes, etc.--are fairly easy to
replicate. Yet, the way their processes, capabilities, and personnel
are integrated and executed is what makes each of these companies
unique and successful, even in the worst of economic environments.
With the external environment adversely affecting the business, and
by looking inward and reusing existing resources, organizations have a
much better chance at implementing a profitable, innovative value
network. Why? Because the external environment provides the necessary
motivation to change. It also provides a well-defined boundary of what
the problem area is, which is important, since innovation cannot happen
without a well-defined problem space. Furthermore, innovation isn't
just about creating "new things." More than that, it is about creating
new value. For me, the best example of an innovative solution is sliced
bread: two existing resources (bread and slicing) combined to create
new value. We describe this as resourceful
innovation.
So take this economic news as a signal for opportunity, not despair.
These types of opportunities do not happen all the time, and the ones
that are able to take advantage of the situation are the ones that are
going to have the more profitable, long-term success.
Discover your marketing elements.
