The Silver Lining: What are the possibilities in harsh economic climates?

[Eric Garland]

Well, we've all likely had our fill of bad news. Not to say there won't be more dire predictions on the way, but we're all a bit tired of hearing the sky is falling. Aren't great fortunes made, or at least begun, in the fertile soil of chaos?

Scott Anthony just published a great article on innovative companies that profited from the fact that bad ideas weren't well funded, credit tightened, talent became available, and so on.

So what defines the winners and the losers? Are there characteristics of both? How should CI be tracking these issues in a period of disruption?

I don't know the answers, but I love the questions. It would be great to hear from the experts here.

And if you want, we'll be discussing this live at the Connecticut SCIP chapter meeting next week, Jan. 21. If it interests you, come out for some face time!

[Alli Marshall]

That is a great article -- thanks for sharing Eric.

Wasn't it March that was supposed to come in like a lion...? As January 2009 has been making its presence known I've been getting inspired by this question of what CI can do to add value. I share your thinking that now is a time of great opportunity for both CI and for smart businesses.

I think it's an important time for CI because many organizations are struggling with one or both of the following conditions a) they don't really know what's going on around them and/or b) they don't know how to respond to their business environment with the right decisions. Since CI is all about a) & b) we're away to the races, right?!

I know that promotion and education is an ongoing challenge for CI so I've been working on some newsletters for my clients to speak to the power of CI to guide businesses during challenging times. In the first one, I outline macro-environment trends in 2009 that create opportunities for smart businesses in Alberta -- everything from the opportunities to invest in early-stage technologies at preferential terms, to the chance to re-engage Boomers who will need to stay in the work force longer, to government spending, to the changing face of capitalism... The second newsletter deals with the opportunities created by great CI around industry participants with a focus on customers and competitors.

[Unfortunately I don't have the newsletters set up on my blog yet, but if you'd like to receive the newsletters just fill out the contact form and I'll add you to the distribution list]

Eric, I think your expertise in Future Intelligence is particularly relevant this year -- now, more than ever, companies need to consider different tools to support decision-making in the face of so much uncertainty. Maybe you will come to Alberta and share your thoughts with us in 2009?

Here are some articles that I've enjoyed reading to get inspired around what's needed in 2009:
Mark Chussil's essay "It was a Dark and Stormy Night" -- Mark speaks to the need for war gaming instead of knee jerk reactions or one-size-fits-all strategies.

Ken Sawka's CI Magazine article: "CI in a down economy" -- Ken advocated that CI has to be the bearer of good news in hard times. I think he's very right -- the damage control party is already overcapacity.

Darrell Rigby's HBR Article "Moving Upward in a Downturn" from 2001 -- This is a formulaic approach to handling hard times; it includes some case studies.

[Mark Chussil]

Thanks, Alli. I appreciate your comments about "It Was a Dark and Stormy Night."

To Eric's question about what separates the winners from the losers, I'd recommend my brief essay post "The Good, the Bad, and the Lucky." In it I suggest that business and strategic fundamentals -- market share, positive differentiation, loyal customers, and so on -- are what drives long-term performance. I see no reason why those fundamentals are any less meaningful in today's environment than in others. Extensive research at the PIMS Program showed that over time business performance tends to approach that which would be expected based on those fundamentals; in other words, that the fundamentals are better predictors of performance than current results. My own research on the PIMS data base showed that something like 94 or 95% (it was a long time ago, and memory fades :)) of variation of profitability occurs within industries, not between industries, which means that industry averages aren't very good predictors.either. Think about Porsche versus Chrysler, for instance, or Alitalia versus Singapore Airlines.

One thing I might add to the list of valuable fundamentals is management that notices where the herd is stampeding and asks whether there's opportunity in the other direction. Then again, I suppose that that too is a virtue not only in the current environment.

[Craig S. Fleisher]

Hi Eric: Great thread. I've long thought that busts or recessions offer as many opportunities to astute businesses as the so-called boom times do. First of all, "down" times actually cull away the weaker businesses that we might be competing with. Those unsustainable businesses are the ones who were most likely to cut prices as a desperation tactic and reduce everybody's profitability (as well as customer satisfaction because they purchased goods or services with the expectation that the provider would be around in the future). When these weaker rivals go under, dissatisfied customers will still need to find other, more stable providers to purchase from.

Second, recessions can be a great catalyst for innovation and innovativeness. Companies that had already moved to the ends of their efficiency frontiers (meaning they had pushed their efficiency levels as high as they could get using existing technologies) will need to find new processes, products and means for attracting and delighting their clients/customers. Economic studies of innovation over economic life cycles have consistently shown that some of the biggest innovations over decades have come as a result of investments made during the down times. Additionally, companies who benefited during the boom times and wisely saved/invested their resources are in a position to acquire desirable assets at lower (and in some cases, bargain basement or fire sale) cost.

All of these contexts should benefit from CI effort. Companies with enough foresight (literally and figuratively) to strategically use their CI professionals to exploit these times should come out far ahead of those who can only respond to the difficulty by "battening down the hatches" or "cutting to the bones." Many successful billionaires have been the ones to exploit the bottom of recessionary curves by making investments and coming out of these periods far better when things turn around than those folks who tried to "hunker down" their way to success. CI should be an activity that helps "light the way" out of this recessionary darkness. Professionals who can go "on the offensive" and identify recession-derived opportunities can demonstrate their value in a hurry! Cheers, Craig