BREAKING THE WALLS

GROWING WHEN EVERYONE ELSE IS RUNNING FOR COVER

Beating the Bear

I learnt my trade in a wonderful company that took me from university to VP in 13 fantastic years. I had wonderful mentors and learned a lot about getting onto the front foot and driving growth in whatever role I played. But it’s easy in corporate, they vet your ideas and by doing that they assume responsibility for the outcome.

I wanted more, not more money, not more notches on my CV and not more accolades – I wanted the challenge of building a company.

So after 13 years I needed to make a decision, do I spend the rest of my career in this corporate environment or do I take the risk, overcome the fear and see just how far my capabilities stretched.

I took the risk and with a couple of very capable colleagues – who faced the same fears as I did, broke away and started our own business.

 A lot more specialized due to our restraints of trade but that worked in our favor. We could entered a small market space with a high cost of entry and with the right value proposition we could grow our revenue above the ‘Red Ocean’ market players.

We started the business in June 2008 and with a significant fixed operating cost we were turning a very decent ROI after just four months. Then came the test that all companies faced but was magnified on start  -ups with high fixed costs. No one could predict it and everyone saw it as a couple of months of survival.

The meltdown hit in September 2008 and our volumes just disappeared and we needed to do something to stay alive. We changed our operating strategy to focus on pipeline revenue that allowed us to use the smaller volumes but maintain our revenue.

However, this article is not about our strategy but it demonstrates the need for change. After September 2008 I was fascinated with the approach that companies took to what they believed would be a survival strategy and was obsessed with researching the companies that didn’t simply want to survive but wanted to use the economic circumstances to grow their business.

This got me spending late nights reading about what those companies did that separated them from the pack and ensured that they grew against the market trend.

In simple terms it comes down to company culture, leadership and the appetite for change.

So let’s look at companies that did extremely well during the recession.  Given the severity of the downturn and how sharply both consumers and businesses pulled back their spending, these were expansions seemingly without explanation.

The companies on this list shared several characteristics that enabled them to expand during a downturn.  Among the characteristic that these resilient companies shared was a highly regarded brand built over many years..  Another is that the company has services which are very inexpensive or even free, Facebook falls into this category, as does Redbox, the DVD rental kiosk. Also, almost all the companies on the list entered the recession during a cycle of significant growth. These aren’t the ones we are interested in.

What really interested me were the companies that didn’t rely on brand, didn’t have deep pockets but had the courage to change.

"Progress is impossible without change, and those who cannot change their minds cannot change anything."

George Bernard Shaw
 

What changes did you make when the downturn came and the pressure was on ?Did you look at payroll first, did you look at reducing production, did you look at reducing margin to price accordingly, did you do the unthinkable and reduce your growth projections and change your balance sheet and income statement    accordingly ( a cardinal sin), did you bury your head in the sand and hope things would change or did you look at the market circumstances and identify where you can gain benefit from them?

Here are examples of companies that moved outside of their comfort zone.

1. Amazon It all started in a garage, like so many large corporations we know today. Amazon's founder Jeff Bezos believed the internet could meet consumers' needs in a unique way, and began shipping books to customers worldwide in 1995. His vision proved to be profitable, as Amazon has grown to the place to go for online shopping; the company grew sales by 28% in 2009, a tough year of deep dips in sales for most businesses.

The company's secret? Focus on the long term: Amazon looks to innovate with products like its new Kindle 3, and strives to expand market share, forever anticipating the next change.

1. Ford Just years ago, Ford was in deep financial trouble, along with the entire American car industry. The turnaround – a complete overhaul, eliminating models from its line, cutting costs and revamping its image got Ford back into the game at a time when recovery is toughest.
2. Domino's Domino's Pizza overhauled its recipe, proving that change is good for business. Under the new campaign and new recipe, profit more than doubled in the fourth quarter of 2009, increasing sales for that quarter by $23.6 million.

The secret to Domino's turnaround was novelty: changing the self-proclaimed cardboard crust and ketchup sauce to a new, improved pizza brought people in the door.

3.     Snuggie The Snuggie was undoubtedly last Christmas' hit. This blanket with sleeves was snagged up by 20 million people during 2009, and while exact sales numbers are hard to come by, this novelty has turned out to be a recession hit.

Why? The one thing we all did a lot in 2009 to save money was stay home, curled up on the couch. The Snuggie is proof that novelty, the right price point and timing can translate into big bucks.

4.    Lego Last year was a tough year for toy companies - except for Lego. During 2009, when most companies were holding tight to ride out the recession storm, Lego's profits soared 63%. Exploration of the global market was the key to this company's recession-bucking success.

And the secret is?

"I am the greatest - no one will ever take that away from me "

Change is the one constant throughout all these success stories (and there are many more) and it takes courage and brave decisions

Companies that have not only survived the crash but grown,  all have the courage to change. Some examples are:

• A complete redirection of the company (Amazon),
• revamping its image through an overhaul of its products,
• creating novelty,
• understanding behavioral change and creating a market that envelops that change (Snuggies / onesies)
• Taking the Bull by the horns and expanding into new markets.

There are heaps of other success stories but the common factor is that they all took a brave step forward.

Our business Model is based on finding the gaps - with our experience and innovative culture we always find the gap.