Thriving in a Downturn

By?Geoffrey Moore

Author –?The Infinite Staircase: What the Universe Tells Us About Life, Ethics, and Mortality

There are two kinds of company that benefit from a downturn: established enterprises that have healthy installed bases and VC-backed start-ups that are crossing the chasm.?By contrast, there are two other kinds of company that are more likely to perish: aging enterprises that have been milking their installed bases and VC-backed start-ups that are still burning cash.?We can learn from both pairs

The reason why start-ups crossing the chasm and have a competitive advantage in a downturn is that their entire annual plan is focused on marketing a single, highly compelling use case, one that is unlikely to be vetoed by the CFO even in times of budget tightening.?By contrast, established enterprises that are organized around a territory coverage model are designed to pursue anyone who has a budget for their offers—but these are the “every budgets” that get cut back in a downturn, exposing the team to long sales cycles that get chopped right at the end.?Often the reaction to such shortfalls is to push for more stretch goals, but this is just wrong.?When you are underperforming, you need to shore up your power, not spend it more profligately.

To shore up their power in a downturn, established enterprises in search of new logos would be wiser to take a lesson from the start-up’s chasm-crossing playbook.?Without implementing any actual reorg, reorient the annual plan around compelling use cases specific to particular market segments and refocus the bulk of the go-to-market budget on a relatively small set of high-value targets that are predisposed to prioritizing this purchase.?Use discretionary sales compensation to send a sharp wake-up call to the sales force that for the foreseeable future we are playing a different game.?In parallel, send a comparable message to the product side of the house to reorient its roadmap to prioritize and accelerate features that reinforce the target market initiatives.?In a downturn, winning new logos is always a challenge, but it still should be part of the plan.?You just have to be careful not to waste resources chasing fruitless efforts.

New logos aside, the core of the established enterprise’s playbook in a downturn should be to get more deeply engaged with its installed base.?This is a time to focus on wallet share rather than market share.?Leveraging whatever customer success relationships you have in place, learn more about what the downturn is doing to their business and what you might be able to do to help mitigate those challenges, especially if you can leverage add-ons you can upsell and cross-sell.?These do get through the budget filter when they create immediate paybacks, even modest ones.

At the same time, this is a great time to take out those legacy competitors who have been milking their installed base relationships.?Customers in a downturn are looking for “consolidate to cost reduce” opportunities.?To capitalize, you must bring to the table modules attachable to your platform that can substitute for those legacy products.?Most likely the latter will still have a feature advantage, but your relationship advantage can often trump it as customers in a downturn are willing to make modest sacrifices to save operating expenses.

One final point about not wasting resources in a downturn: act fast!?Time is the one resource that can never be replaced.?Whatever the tough decisions on your plate, every day you put off making them is a day wasted, a day you spent scarce resources in an unprofitable way, a day you could have used to get ahead of the challenges you will be facing for some time to come.?Keep in mind, in a downturn cash flow is king, and the sooner you get control of that spigot, the better.

That’s what I think.?What do you think?

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