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Accelerate When Everyone Else Is Slowing

19 November 2008 2 Comments

lomostreak-frcsyk1Like a marathon runner who sprints to a lead when going up a tough hill, companies that make aggressive moves when others are playing it safe gain a sizable advantage and then continue to build on it even more during easier times.

A recent study by Bain & Company found that twice as many companies made the leap from laggards to leaders during the last recession as during surrounding periods of economic calm. In fact, nearly a quarter of all companies with the highest or lowest industry rankings moved completely to the other extreme during a recession. Only half as many companies made such dramatic changes before or after the recession. The changes made at turning points tend to endure. Of the firms that made major gains in revenue or profitability during the last recession, more than 70% sustained those gains through the next boom cycle. The corollary was also true: fewer than 30% of those that lost ground were able to regain their positions.

In 1985 McGraw-Hill Research studied 600 business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession. Those firms averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. On average they grew their revenue over 3.5 times faster than those that reduced their advertising.

In six studies conducted by the research firm Meldrum & Fewsmith over the last 60 years researchers concluded that sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive posture, while others adopt the philosophy of cutting back.

A 1990 study by the Center for Research and Development showed similar results, with more aggressive firms gaining 4.5 times the market share of their less aggressive competitors. These companies use the flux in the market to solidify their customer base, take business away from less aggressive competitors, and position people for the future during recovery. These businesses enjoyed measurably higher net income gains during the recession and even two years after the recession.

These findings show that recessions are not so much slowdowns as the best time to accelerate. A recession creates a number of strategic opportunities to make deals or to take advantage of weaker players and make advances in a company’s competitive market position. You should cash in on the opportunity that rival companies are creating. If you are courageous enough to stay in the fight when everyone else is playing it safe you’ll come out ahead – and progress made during a recession accelerates when conditions improve.

Contact us if you need help with the specific tactics to fuel your company’s growth.

[EDIT December 5, 2008]

You can listen to more detail on this topic in a presentation made to CEO/Business owners here.

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