We are in the second year of an economic slowdown. Major industries, such as airlines, are having to shrink, and telecommunication companies are going bankrupt. Most people when faced with these challenges try to cut expenses and wait out the slowdown.
But, the companies that just try to wait things out are going to be surprised when they come out of hibernation—the world will have changed. We are not in a short term slowdown but a long term realignment of nations and generations. Thus, the companies which try to wait things out will find that they really can't wait that long.
A recent Accenture survey showed that many customers were not willing to spend money on most items out there. "Consumers don't think the product out there is very innovative", said Brian Johnson. Sixty-eight percent of the respondents in the survey said that they would be willing to spend more if they could find better products and services.*
In many ways, we are looking at an economic environment similar to that of the 1930's. Then, as now, there were economic upheavals, there was excess capacity (but in the wrong industries), and there was money to be made. But, back then, the products and services that sold were innovative—not stagnant. Just look at which automobiles sold during that time: either the very inexpensive or the ones with new styling and features.
Now, as then, the answer is to experiment with either new business products and services or with new business models. That which made lots of money in the 90's will not be the way to make money in the 00's.
American Airlines made a lot of money in the 90's. Now, they are redesigning their whole business to keep from going under. They are rethinking how they schedule, what planes they are flying, what routes they fly, and all the other parts of their business.
The danger is to think that cost cutting is the way to survive. But, the companies which look to new business models are most likely not only to survive but to thrive. It is during these tough times that business innovation makes the most difference to a company's future.
So if your company is having trouble, cutting expenses is just a short term patch. Many people will cut the new product lines or research and certainly don't want to change the corporate structure. Yet, the history of economic tough times show that those are the wrong expenses to cut.
The future of the company relies on getting new products, services, or ways to deliver those products and services to the customer. Without constant change, we will not be ready for the world when the good times come back because the good times will never be the same as the last time.
* The Dallas Morning News,
Thursday November 7, 2002 Page 5D.
Maria Halkias, Staff Writer
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