Conventional wisdom would suggest that and economic depression (we're way beyond recession here, folks) is the worst time to start a business.
I, for one, would strongly disagree. And so would FedEx. And Burger King. And IBM. And about two dozen more "household names" that were all founded during economic downturns. I think that now is a terrific time to start a business (or expand the one you already have).
Why? Well, we're at a unique place in history.
Any "normal" economic downturn forces businesses and people to do one thing that they normally don't do: examine where they are going and stop doing the things that are stupid and waste time and money. They "get back to the basics" and focus on things that are important to them.
For individuals - it too often also means that they've grabbed their seat cushion because the "unlikely event of a water landing" has happened to them in terms of their career. They have to focus on the skills that they have that are not only "marketable" or "hireable" but that will actually add value to whomever will toss them money so they can live.
For businesses (the ones that are not stuck in an ostrich pose with their heads in the ground and asses in the air) - it also represents a prime opportunity for them to examine the same thing - where do they add value to THEIR customers? Do they? If not - then it's time to join the ranks of the deadpooled companies and stop doing whatever it is they're doing.
This renewed focus on adding value, and I would argue, just STOPPING all the "activity" that seems to consume our lives - can gently lead people to view things in different, radical, potentially life-changing ways. In the "downtime" of waiting in the unemployment line or waiting for the Dice.com site to load - there can be moments of clarity that can lead to great things - in terms of monetary success as well as lifestyle adjustments.
In this way - recessions, depressions, wars, and other catastrophic events are the same. They cause people and companies to focus.
But of course focus isn't enough. If you focus long enough, hard enough, and you put yourself in the place of others (either the poor schmoe who's out of work or the poor schmoe who is left to do 8 people's work and not get a raise for the next 3 years) - that's where the intersection of needs, wants, desires, opportunity and desperation collide into "the idea."
But, of course, the "idea" isn't enough in and of itself. There's that whole pesky implementation "thing." That's where the technological advances of the modern age really come into play.
Never before in history have we had the ability to start an international business where we don't have to stock product, don't have to have a shipping department, don't need to buy computers or software, and don't need to hire people to answer phones in order to make money selling stuff.
All we need is a credit card and the the unique knowledge that we possess on how to add value to someone, somewhere.
All the other functions of what it would take to start a "real" business can be purchased, rented, and consumed via a single computer, a browser, and Internet access.
The barriers to entry in the "new" business world - the "utility" parts needed to run a business - have already been virtualized (or are getting there). You can rent hardware, software, have companies handle your phones, faxes, shipping, warehousing, product creation, order processing, payment processing, order fulfillment, customer service, technical support, marketing, promotions and advertising.
The thing that hasn't (and can't) be virtualized - is the VALUE that you bring to the table and the RELATIONSHIPS you have with friends, customers, colleagues and fellow business owners. Everyone is in the same boat in these times. Everyone has a certain skill set, business process knowledge and/or a set of experiences that are unique to them.
There's never been a better time to figure out the value you can add - and then come up with a plan on how to share that value with the people that need it. People will pay you for the value you add - even in a down economy.
The key is to get focused... and get started!
Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Friday, March 06, 2009
Tuesday, February 24, 2009
Demonstrate Value - Or Die
The level of panic in companies is getting almost palpable. They are cutting, cutting, cutting - and a lot of the time not THINKING about the ramifications of those cuts.
Some companies are cutting valuable IT staff, killing business-enabling (and enhancing) projects, and doing other stupid things like cutting benefits, reducing work hours and making the overworked people who are "fortunate" enough to be left behind after massive layoffs the most de-motivated group of people on the planet.
Yes, these are uncertain economic times.
Yes, in many cases, cuts do have to be made.
Yes, not every single project should be continued (or even started in the first place).
Yes, dead wood needs to be trimmed.
Yes, business does need to keep a careful eye on expenses and especially cash flow.
If you find yourself one of these "fortunate" few who survived (so far) - then here's a little tip to help ensure you make the next round of cuts: help your company to measure the contribution of your role/project/salary in terms of cash flow, tangible benefits and consequences if they kill it/fire you/lay you off.
At the end of the day no one knows your project/role like you do. And if you're working on a high-profile project or you're making a decent, livable salary - there's no doubt that you're in the sights for future "cost savings."
The time to act is now.
Step 1: Take a good look at your project/role and make a quick spreadsheet that lists all of the costs in one column and hard-dollar revenues (and when they'll occur) that you/your project influence. If the costs exceed the hard dollar revenue (or hard dollar cost savings) - then it's time to go to Step 2.
If your costs are lower than your hard dollar revenues (or savings) - then jump right to Step 3.
Step 2: Double check your assumptions and figures. If you're still coming up short - then figure out how much it will cost in time, money and resources to make the + side greater than the revenue side. If you're able to pull it out - then go on to Step 3. If you can't - then you should either be getting your resume polished up or make friends with someone whose calculations ARE in the black - and get re-assigned to that project and/or make yourself invaluable to the other person in their role.
Step 3: Share your work. Don't wait for bad news to "hit you" - you should take a proactive approach and share the information you've discovered with your boss (or executive committee or whomever you report to). Talk them through the numbers and show them how your project/role is adding value to the company.
It's not so much about cover your ass - as it is about being perceived as someone who cares about the company and cares enough to take the time to quantify it. I can guarantee you this - if there are 20 people/projects on the potential chopping block and you can cost-justify your project/role - then there will only be 19 projects/people on the chopping block and you will NOT be one of them.
On the other hand - if you can't wait to get out of where ever it is you're working - it might be a good time to keep your numbers to yourself. There might be a possibility for you to work with your current employer on a consulting basis - in which everyone wins.
Your company will reduce taxes, overhead, benefits, and conserve cash flow - while you gain flexibility, a solid project to start with, and an in-depth knowledge of the process and people involved in order to help ensure the project is successful.
Regardless of which way you go in the end - it's still a good practice to cost-justify what you're working on and what value you bring to the company. If you don't do it - chances are good that someone else (usually a bean counter) will - and other decisions will be made that are outside of your influence/control.
Change is inevitable. You can either make it happen - or have it happen to you.
Some companies are cutting valuable IT staff, killing business-enabling (and enhancing) projects, and doing other stupid things like cutting benefits, reducing work hours and making the overworked people who are "fortunate" enough to be left behind after massive layoffs the most de-motivated group of people on the planet.
Yes, these are uncertain economic times.
Yes, in many cases, cuts do have to be made.
Yes, not every single project should be continued (or even started in the first place).
Yes, dead wood needs to be trimmed.
Yes, business does need to keep a careful eye on expenses and especially cash flow.
If you find yourself one of these "fortunate" few who survived (so far) - then here's a little tip to help ensure you make the next round of cuts: help your company to measure the contribution of your role/project/salary in terms of cash flow, tangible benefits and consequences if they kill it/fire you/lay you off.
At the end of the day no one knows your project/role like you do. And if you're working on a high-profile project or you're making a decent, livable salary - there's no doubt that you're in the sights for future "cost savings."
The time to act is now.
Step 1: Take a good look at your project/role and make a quick spreadsheet that lists all of the costs in one column and hard-dollar revenues (and when they'll occur) that you/your project influence. If the costs exceed the hard dollar revenue (or hard dollar cost savings) - then it's time to go to Step 2.
If your costs are lower than your hard dollar revenues (or savings) - then jump right to Step 3.
Step 2: Double check your assumptions and figures. If you're still coming up short - then figure out how much it will cost in time, money and resources to make the + side greater than the revenue side. If you're able to pull it out - then go on to Step 3. If you can't - then you should either be getting your resume polished up or make friends with someone whose calculations ARE in the black - and get re-assigned to that project and/or make yourself invaluable to the other person in their role.
Step 3: Share your work. Don't wait for bad news to "hit you" - you should take a proactive approach and share the information you've discovered with your boss (or executive committee or whomever you report to). Talk them through the numbers and show them how your project/role is adding value to the company.
It's not so much about cover your ass - as it is about being perceived as someone who cares about the company and cares enough to take the time to quantify it. I can guarantee you this - if there are 20 people/projects on the potential chopping block and you can cost-justify your project/role - then there will only be 19 projects/people on the chopping block and you will NOT be one of them.
On the other hand - if you can't wait to get out of where ever it is you're working - it might be a good time to keep your numbers to yourself. There might be a possibility for you to work with your current employer on a consulting basis - in which everyone wins.
Your company will reduce taxes, overhead, benefits, and conserve cash flow - while you gain flexibility, a solid project to start with, and an in-depth knowledge of the process and people involved in order to help ensure the project is successful.
Regardless of which way you go in the end - it's still a good practice to cost-justify what you're working on and what value you bring to the company. If you don't do it - chances are good that someone else (usually a bean counter) will - and other decisions will be made that are outside of your influence/control.
Change is inevitable. You can either make it happen - or have it happen to you.
Thursday, February 19, 2009
Now That We Own Some Banks...
This whole bailout "thing" has got me a bit pissed off. Never mind the fact that the presses are working overtime to print money we don't have to give it to companies that have such inept (and greedy) management that they "managed" their companies into the ground and took the economy with it... no, the real thing that gets my goat is the fact that NO ONE seems to know where this money is going.
A perfect example is the $42 BILLION we gave to Bank of America and Citibank. Just handed them the cash - and walked away - "trusting" they would do "the right thing" with the money.
What the ??
We didn't even insist they fire the management. There were "no strings" attached to the money whatsoever. So, now, let me get this straight: we (the taxpayers) have given $42 BILLION to 2 banks... oh and guaranteed another $412 BILLION to cover their losses... and we got squat in return?
For just the $42 BILLION we could have bought ALL the common shares of Bank of America and Citibank about 4 times over. ALL of it.
Instead - we hand over the money - and allow them to keep the same idiots running the place that got them into this mess in the fist place?
Yeah! Great plan!
At the very least we (as taxpayers - and the government as our representatives) should INSIST that the Board of Directors be removed - if not the entire management team. "But... but... but... it will shake things up if we do that - they know how the system works..." - yeah, my ass!
They know how to play the system, cover up losses, hide questionable loans, all for the sake of their stock options and bonus pay. THAT's what they know how to do. There are PLENTY of other very smart, very capable, very responsible, very knowledgeable people in the world that can run those banks.
And just where the hell are they putting all the money? Good question. NO ONE KNOWS. There is ZERO accountability for using OUR (taxpayer) money. They could be buying back stock or stuffing it all in a mattress for all we know.
Since we (unofficially) "own" those banks - it's time they come clean on where the money is going. They should be forced to have 100% transparency on where every dime of that money goes. They should be forced to remove their management and/or boards - and they should be held accountable for their own damn losses.
Now the Obama money-printing-factory wants to print up ANOTHER $75 BILLION to keep people from going into foreclosure. That's a good idea. Make SURE that their debts are 100% forgiven - and let the people keep their homes.
DO NOT just hand banks money and not demand anything in return! Does no one in Washington understand how business actually works?
Oh and by the way - how about MY bailout? Where's MY no-strings-attached money? Screw the banks and the car companies and give every American who PAYS taxes a Visa card with $100,000 on it - and make it good only for 90 days. They can't get cash with it, they can't use it to pay off debts - they have to spend it or lose it.
You want people to spend money to get the economy going - that's the way to do it - NOT giving BILLIONS to huge companies who don't care and who, left to their own devices, will be back with their hands out in another 6 months.
A perfect example is the $42 BILLION we gave to Bank of America and Citibank. Just handed them the cash - and walked away - "trusting" they would do "the right thing" with the money.
What the ??
We didn't even insist they fire the management. There were "no strings" attached to the money whatsoever. So, now, let me get this straight: we (the taxpayers) have given $42 BILLION to 2 banks... oh and guaranteed another $412 BILLION to cover their losses... and we got squat in return?
For just the $42 BILLION we could have bought ALL the common shares of Bank of America and Citibank about 4 times over. ALL of it.
Instead - we hand over the money - and allow them to keep the same idiots running the place that got them into this mess in the fist place?
Yeah! Great plan!
At the very least we (as taxpayers - and the government as our representatives) should INSIST that the Board of Directors be removed - if not the entire management team. "But... but... but... it will shake things up if we do that - they know how the system works..." - yeah, my ass!
They know how to play the system, cover up losses, hide questionable loans, all for the sake of their stock options and bonus pay. THAT's what they know how to do. There are PLENTY of other very smart, very capable, very responsible, very knowledgeable people in the world that can run those banks.
And just where the hell are they putting all the money? Good question. NO ONE KNOWS. There is ZERO accountability for using OUR (taxpayer) money. They could be buying back stock or stuffing it all in a mattress for all we know.
Since we (unofficially) "own" those banks - it's time they come clean on where the money is going. They should be forced to have 100% transparency on where every dime of that money goes. They should be forced to remove their management and/or boards - and they should be held accountable for their own damn losses.
Now the Obama money-printing-factory wants to print up ANOTHER $75 BILLION to keep people from going into foreclosure. That's a good idea. Make SURE that their debts are 100% forgiven - and let the people keep their homes.
DO NOT just hand banks money and not demand anything in return! Does no one in Washington understand how business actually works?
Oh and by the way - how about MY bailout? Where's MY no-strings-attached money? Screw the banks and the car companies and give every American who PAYS taxes a Visa card with $100,000 on it - and make it good only for 90 days. They can't get cash with it, they can't use it to pay off debts - they have to spend it or lose it.
You want people to spend money to get the economy going - that's the way to do it - NOT giving BILLIONS to huge companies who don't care and who, left to their own devices, will be back with their hands out in another 6 months.
Monday, February 02, 2009
Becoming Indispensible
If you just look at raw numbers - more than 100,000 people got the boot from their jobs - just this past week. That really sucks! If you're one of the lucky (or unlucky) folks that managed to avoid the boot - you can take one of two strategies: a) either "pull back" and just try to keep the lights on, or b) innovate and excel.
The typical knee-jerk reaction is to pull back and just try to "survive." Personally, I think that a bunch of crap and a cop-out to boot.
Sure, people are scared for their jobs regardless of their position, but managers and IT folks are are feeling particularly vulnerable (at least from the people I talk to). Here's the thing - people who don't add any value (or save any time or money) are always looked at as expendable. The key - don't be so afraid of your job that you just sit there in fear - take some ACTION that will help raise your value to the organization.
I can just hear you saying "Well, Mr. Know-It-All - got any suggestions?" As a matter of fact I do... for only $29.95 plus shipping and handling... (hey, it's my first day out on my own - I need revenue, people!)...
But I digress... of course I have some suggestions:
Do a process review
There is nothing better to quench the cries of "do more with less", and "time is money" than to look at the way you're doing things - and then figure out a way to do them better, faster and/or cheaper. This can be anything from a full, top-down business review (but it can take a while and is a ton of work) - but it doesn't have to be. No matter what your position is from receptionist to IT manager to coding jockey to CEO - there are processes that you do in your normal every day life that are broken.
Identify those areas and come up with ways to fix them. Then, write it down and quantify how much time/money it will save and how much time/money your fix will cost. Remember - DO show your work. There is nothing a manager or business owner would LOVE than for an employee to come up with ways form them to be more productive. Even if they don't implement your suggestion(s) - just the fact that you're making an effort to become more efficient instantly raises your value to the organization.
Look at virtualization
If you're an IT wonk - then it's a no-brainer. Look into virtualizing servers to consolidate hardware, save on cooling and electricity costs and reducing complexity. If you're a small business owner - see you can virtualize your phone system or customer support or receptionist or anything that is a sticking point in your daily process.
There are literally tons of SaaS software tools out there that can help you run large and small aspects of your business - and many of them either give you a free trial or cost under $50 per month. In other words - the barrier to entry - the cost to try something new to gain efficiency - is extremely low and well worth the efforts if it will endear you to your organization and/or improve your bottom line.
Do some professional development
Yeah, I know that travel & entertainment budgets were the first to do - and that budgets for conferences and seminars are also prime targets for cost-cutting. However, you don't have to spend a lot of money in order to develop your personal skill set. Focus on things that will help you to help the organization. If you're a manager - learn how to read (and write) financial statements, get better at your telephone skill, or your people skills or your management skills. Buy a book, download some free podcasts from iTunes from name-brand learning institutions, take an online course, watch some online videos, etc.
Keep in mind - who is harder to replace - someone who "just" answers the phone - or someone that figured out how to save the company $8,000 per year by changing the way a form is laid out? A person who "just" codes Java - or a person who increases end user productivity by suggesting features no one knew were possible?
You get the idea... now DO something to become someone that's difficult to replace.
The typical knee-jerk reaction is to pull back and just try to "survive." Personally, I think that a bunch of crap and a cop-out to boot.
Sure, people are scared for their jobs regardless of their position, but managers and IT folks are are feeling particularly vulnerable (at least from the people I talk to). Here's the thing - people who don't add any value (or save any time or money) are always looked at as expendable. The key - don't be so afraid of your job that you just sit there in fear - take some ACTION that will help raise your value to the organization.
I can just hear you saying "Well, Mr. Know-It-All - got any suggestions?" As a matter of fact I do... for only $29.95 plus shipping and handling... (hey, it's my first day out on my own - I need revenue, people!)...
But I digress... of course I have some suggestions:
Do a process review
There is nothing better to quench the cries of "do more with less", and "time is money" than to look at the way you're doing things - and then figure out a way to do them better, faster and/or cheaper. This can be anything from a full, top-down business review (but it can take a while and is a ton of work) - but it doesn't have to be. No matter what your position is from receptionist to IT manager to coding jockey to CEO - there are processes that you do in your normal every day life that are broken.
Identify those areas and come up with ways to fix them. Then, write it down and quantify how much time/money it will save and how much time/money your fix will cost. Remember - DO show your work. There is nothing a manager or business owner would LOVE than for an employee to come up with ways form them to be more productive. Even if they don't implement your suggestion(s) - just the fact that you're making an effort to become more efficient instantly raises your value to the organization.
Look at virtualization
If you're an IT wonk - then it's a no-brainer. Look into virtualizing servers to consolidate hardware, save on cooling and electricity costs and reducing complexity. If you're a small business owner - see you can virtualize your phone system or customer support or receptionist or anything that is a sticking point in your daily process.
There are literally tons of SaaS software tools out there that can help you run large and small aspects of your business - and many of them either give you a free trial or cost under $50 per month. In other words - the barrier to entry - the cost to try something new to gain efficiency - is extremely low and well worth the efforts if it will endear you to your organization and/or improve your bottom line.
Do some professional development
Yeah, I know that travel & entertainment budgets were the first to do - and that budgets for conferences and seminars are also prime targets for cost-cutting. However, you don't have to spend a lot of money in order to develop your personal skill set. Focus on things that will help you to help the organization. If you're a manager - learn how to read (and write) financial statements, get better at your telephone skill, or your people skills or your management skills. Buy a book, download some free podcasts from iTunes from name-brand learning institutions, take an online course, watch some online videos, etc.
Keep in mind - who is harder to replace - someone who "just" answers the phone - or someone that figured out how to save the company $8,000 per year by changing the way a form is laid out? A person who "just" codes Java - or a person who increases end user productivity by suggesting features no one knew were possible?
You get the idea... now DO something to become someone that's difficult to replace.
Thursday, November 20, 2008
A Billion For Your Thoughts
I'm so damn sick of the auto makers begging Congress for a $25 billion freebie - that I actually threw up a little in my mouth when I saw GM's ads on Yahoo Finance this morning.
Here's a couple of screen shots:
Now THAT'S an absolutely brilliant way to spend whatever's left of the money you threaten will "run out by the end of the year." Talk about holding a gun to America's head - that's one of the most outrageous, fear-mongering pieces of bulls**t I've ever seen.
Correction: that's the second biggest piece of crap I've seen - THIS GM site takes the cake.
GM (and Chrysler and Ford for that matter) deserve to go out of business. That's the way business works. Here's some business 101 tips for car company executives:
According to TheTruthAboutCars.com - GM has a market cap less than toy maker Mattel - and there are rumors floating around that the Chinese government may be interested in buying GM - AND Chrysler. And, in my personal opinion, they should. GM should be treated fairly like every other business in the world - if you fail, your assets get broken up and sold off.
Period.
No hand-outs. No bail outs. No loans that don't need to be repaid. Not now - not ever.
The government SHOULD help the displaced workers and maybe tie it into the conditions of the bailout of the financial industry (give those laid off people a break on their mortgage payments for 6-9 months).
Spend the money re-training life-long assembly line workers for new tasks. Stimulate local economies by suspending state and federal taxes for 6 months. Create business incubators that give workers the chance to start their own business.
What about all the suppliers and the "trickle-down" theory? Yeah, sure, there will be single-source suppliers that go belly-up (especially given the tight credit market). But, they can also start supplying whatever they supply to OTHER car makers here in the US. They can look to similar industries or - hey - I know - find out what people ARE buying that they can manufacture - and sell THAT.
This is not something that has taken place in the last quarter, the last year, the last 3 years - or even the last 5 years. It's been 50 years in the making. Remember the 1970's when gas got "expensive" and people stopped buying gas-guzzling cars and bought smaller, more fuel-efficient cars? That's how Honda got started in the car business.
Did they really think that things would change? How short-sighted do you have to be? Really. I mean you're running a multi-billion dollar, worldwide conglomerate. You're not Joe The Plumber. Did you ever once get out of your "fat cat" mentality and take a look even 2 years down the line and think to yourselves "Hmmmm... customer tastes seem to be changing. Let's really get behind good-looking, high-quality, affordable products that are also fuel-efficient?"
Of course not! You just assumed that everything would be status quo, and as long as the gasoline was flowing (regardless of the price) - what could happen?
Short answer: THIS.
So long GM (and Chrysler and Ford) - I wish you wouldn't have totally screwed the pooch and destroyed companies that have survived for 100+ years... but, "Oh well." My new car is a Toyota anyway...
Here's a couple of screen shots:
Now THAT'S an absolutely brilliant way to spend whatever's left of the money you threaten will "run out by the end of the year." Talk about holding a gun to America's head - that's one of the most outrageous, fear-mongering pieces of bulls**t I've ever seen.
Correction: that's the second biggest piece of crap I've seen - THIS GM site takes the cake.
GM (and Chrysler and Ford for that matter) deserve to go out of business. That's the way business works. Here's some business 101 tips for car company executives:
- Don't build shitty cars
- Don't stop building fuel-efficient cars because gas prices are low
- Don't go to Congress to beg for more money in your private jets (this REALLY happened!)
- Try not to lose $6.9 BILLION per quarter
- If you DO lose $6.9 BILLION - try to cut costs and come up with a plan to NOT lose $6.9 BILLION the following quarter that doesn't include getting free money from the American taxpayer
- Do not try to get free money from the American taxpayers using scare tactics
- Stop kissing the ass of the UAW (United Autoworker's Union) - and fire them all and hire non-union folks (like Toyota and BMW have)
- The corporation is not your personal piggy bank
- Try some humility - admit your mistakes and tell people exactly how you would spend the money rather than just ("Re-tool for more fuel-efficient cars")
- A "hybrid" Escalade - yeah, great idea!
According to TheTruthAboutCars.com - GM has a market cap less than toy maker Mattel - and there are rumors floating around that the Chinese government may be interested in buying GM - AND Chrysler. And, in my personal opinion, they should. GM should be treated fairly like every other business in the world - if you fail, your assets get broken up and sold off.
Period.
No hand-outs. No bail outs. No loans that don't need to be repaid. Not now - not ever.
The government SHOULD help the displaced workers and maybe tie it into the conditions of the bailout of the financial industry (give those laid off people a break on their mortgage payments for 6-9 months).
Spend the money re-training life-long assembly line workers for new tasks. Stimulate local economies by suspending state and federal taxes for 6 months. Create business incubators that give workers the chance to start their own business.
What about all the suppliers and the "trickle-down" theory? Yeah, sure, there will be single-source suppliers that go belly-up (especially given the tight credit market). But, they can also start supplying whatever they supply to OTHER car makers here in the US. They can look to similar industries or - hey - I know - find out what people ARE buying that they can manufacture - and sell THAT.
This is not something that has taken place in the last quarter, the last year, the last 3 years - or even the last 5 years. It's been 50 years in the making. Remember the 1970's when gas got "expensive" and people stopped buying gas-guzzling cars and bought smaller, more fuel-efficient cars? That's how Honda got started in the car business.
Did they really think that things would change? How short-sighted do you have to be? Really. I mean you're running a multi-billion dollar, worldwide conglomerate. You're not Joe The Plumber. Did you ever once get out of your "fat cat" mentality and take a look even 2 years down the line and think to yourselves "Hmmmm... customer tastes seem to be changing. Let's really get behind good-looking, high-quality, affordable products that are also fuel-efficient?"
Of course not! You just assumed that everything would be status quo, and as long as the gasoline was flowing (regardless of the price) - what could happen?
Short answer: THIS.
So long GM (and Chrysler and Ford) - I wish you wouldn't have totally screwed the pooch and destroyed companies that have survived for 100+ years... but, "Oh well." My new car is a Toyota anyway...
Wednesday, November 19, 2008
Downturn Déjà vu
I came across some tidbits from a study by former Gartner analyst Theresa Lanowitz that talks about the need for us all to remember the lessons learned during the last economic downturn: Resist the urge to slash IT.
I couldn't find any more than some dribs and drabs - and I haven't yet signed up for a free membership to read the entire study - but there were some interesting tidbits that are as full of wisdom today as they were in the last financial meltdown in 2000:
The phrase "software runs the business" has never been more true. The "downturn" will turn into an "upturn" at some point in time - so don't be so short-sighted that you lose the people that will be instrumental in your future growth, and who are likely the ones that will help sustain your operations during the downturn as well.
Lanowitz is a way better writer than I am - and she put it very succinctly:
I couldn't find any more than some dribs and drabs - and I haven't yet signed up for a free membership to read the entire study - but there were some interesting tidbits that are as full of wisdom today as they were in the last financial meltdown in 2000:
Well, I'm old enough to vividly remember the last downturn, and I'd be a crack-smoking idiot if I thought that IT should be immune from cuts - BUT you don't need to just throw out the people that are making a huge difference in your IT organization, just because their salary level is higher than the repetitive-stress injury-just-got-out-of-college-and-was-hired-because-my-dad-works-here junior staffer.
- Outsourcing to cut cost: Outsourcing was viewed as a panacea, however, many IT organizations spent more money because of poorly planned and implemented outsourcing schemes.
- Lack of innovation on the vendor side: This led to lack of innovation and education on the IT side. IT organizations were in turmoil because spending was dramatically reduced, and software vendors stalled new products and focused only on necessary items. IT did not have the leverage with either the line of business or vendors to demand new technology to support very real issues.
- Poor quality: The reduction of IT spending saw the demise or vast reductions in QA organizations. Many IT managers and even consulting organizations viewed “quality” as extraneous and something anyone could do.
- CFOs made business and technology decisions: Technology decisions were simply made on the basis of initial purchase prices with no regard to how the decision would ultimately affect the business. The CFO-led purchasing power elevated a person in the organization who had no technology awareness to a level of ultimate and final decision maker. The impact from CFO-led purchasing decisions was far reaching and long lasting.
The phrase "software runs the business" has never been more true. The "downturn" will turn into an "upturn" at some point in time - so don't be so short-sighted that you lose the people that will be instrumental in your future growth, and who are likely the ones that will help sustain your operations during the downturn as well.
Lanowitz is a way better writer than I am - and she put it very succinctly:
All too often in a time of economic downturn, people are seen as disposable, and most often, the more expensive a head is, the easier the justification for reduction. For businesses to remain competitive and grow during this economic downturn, retain key people. DO NOT just keep the less expensive heads… The IT organization of the future is less about those who can perform repetitive, manual tasks than it is about those who have skills to manage projects, act as a conduit of information, and view IT as a strategic enabler to the line of business.Amen to that, sister!
Wednesday, October 15, 2008
Don't Throw The Baby Out
Most executives in most companies are really freaked out right now. It sucks to be the leader of a company right now - and it sucks to be the head of departments - because the buck's gotta' stop somewhere. In this case, crap flow UP hill.
The economy is in full meltdown mode, and lots of people are losing lots of sleep - and are self-medicating with booze (at least someone is making money in the downturn!).
It's easy to get caught up in the general panic and malaise - and therefore lots of people are reacting to what others are reacting to - not the realities of the day. The herd mentality is ruling the average business person rather than the facts - and it's kind of pissing me off.
I'm all for cutting costs and watching expenses. I'm all for trimming the "dead wood" of non-producers out of the workforce. I'm all for delaying "luxury" purchases until the smoke clears out a bit. I'm all about watching travel and entertainment expenses and cutting marketing programs that don't produce tangible results.
However, I'm totally against just cutting for cutting sake. Some companies are just going absolutely nuts - cutting 20% to 50% of their staff; stopping all marketing; etc. They are "cutting to the bone" in order to go into "survival mode."
In fact, Sequoia capital came out early and hard - as documented in the Om Malik blog basically telling all of their portfolio companies that "Cutting deeper is the formula to survive, and this is an era of survival of the quickest."
As a result, a bunch of their companies shed anywhere from 30% to 50% of their staff - even though they were (are) cash-rich. Maybe in those cases it was a case of hiring some "fluff" people or just the giddy feeling for an upstart entrepreneur that you don't have to do everything absolutely by yourself anymore... I don't know.
In any case - you have to carefully weight the "costs" associated with cuts in terms of your current sales, current customers - as well as what it will do to your chances of thriving when (not if!) the economy returns to its "full glory."
In the spirit of not throwing the baby out with the bath water - here's some questions for you to ponder if you're thinking about massive cuts in your company:
Hopefully, the "sliver lining" in this economic mess is that we'll have stronger, smarter, healthier companies come out as a result of these difficult decisions and (sometimes brutal) cost cutting.
The economy is in full meltdown mode, and lots of people are losing lots of sleep - and are self-medicating with booze (at least someone is making money in the downturn!).
It's easy to get caught up in the general panic and malaise - and therefore lots of people are reacting to what others are reacting to - not the realities of the day. The herd mentality is ruling the average business person rather than the facts - and it's kind of pissing me off.
I'm all for cutting costs and watching expenses. I'm all for trimming the "dead wood" of non-producers out of the workforce. I'm all for delaying "luxury" purchases until the smoke clears out a bit. I'm all about watching travel and entertainment expenses and cutting marketing programs that don't produce tangible results.
However, I'm totally against just cutting for cutting sake. Some companies are just going absolutely nuts - cutting 20% to 50% of their staff; stopping all marketing; etc. They are "cutting to the bone" in order to go into "survival mode."
In fact, Sequoia capital came out early and hard - as documented in the Om Malik blog basically telling all of their portfolio companies that "Cutting deeper is the formula to survive, and this is an era of survival of the quickest."
As a result, a bunch of their companies shed anywhere from 30% to 50% of their staff - even though they were (are) cash-rich. Maybe in those cases it was a case of hiring some "fluff" people or just the giddy feeling for an upstart entrepreneur that you don't have to do everything absolutely by yourself anymore... I don't know.
In any case - you have to carefully weight the "costs" associated with cuts in terms of your current sales, current customers - as well as what it will do to your chances of thriving when (not if!) the economy returns to its "full glory."
In the spirit of not throwing the baby out with the bath water - here's some questions for you to ponder if you're thinking about massive cuts in your company:
- If you just up and layoff a bunch of people - what will that signal to your current customers?
- What about people that are evaluating your product for possible purchase - how will they view massive cuts?
- How long will it take you to replace that person/function when things get going again?
- Can you really afford to stop all your marketing? What will happen in 6 months when the current flow of leads dries up?
- How will you continue to make enough money to keep even your "reduced" company going?
- How will you mitigate the inevitable drop in productivity and morale with the people you don't cut?
Hopefully, the "sliver lining" in this economic mess is that we'll have stronger, smarter, healthier companies come out as a result of these difficult decisions and (sometimes brutal) cost cutting.
Monday, October 13, 2008
It's All About Productivity
Over the weekend I was continuing my thoughts about how companies are going to face the "interesting" economic times ahead. For sure they're going to reduce expenses and try to maintain or even boost sales - that much is obvious.
The other part of the equation, of course, is keeping on keeping on doing what they do. That takes an orchestrated effort of getting the most out of their people and processes. In order to do that - it will require that folks take a look at what they're doing - and being able to do it better and with more efficiency.
If you sum it all up into a single term - that means that everyone will want/need to be more productive. More productive, and therefore more efficient, in all aspects of their business. This means that the salespeople need to do better - but it also means that product development, customer service, support, marketing and all the other moving parts be enabled to do what they do - better, smarter and faster.
Then I came across an article in CIO Insight that talked about Business Process Improvement (BPI) - and it just confirmed my thoughts and gut instincts:
The other part of the equation, of course, is keeping on keeping on doing what they do. That takes an orchestrated effort of getting the most out of their people and processes. In order to do that - it will require that folks take a look at what they're doing - and being able to do it better and with more efficiency.
If you sum it all up into a single term - that means that everyone will want/need to be more productive. More productive, and therefore more efficient, in all aspects of their business. This means that the salespeople need to do better - but it also means that product development, customer service, support, marketing and all the other moving parts be enabled to do what they do - better, smarter and faster.
Then I came across an article in CIO Insight that talked about Business Process Improvement (BPI) - and it just confirmed my thoughts and gut instincts:
The top drivers for improving processes were quite similar during good times and bad, but IT executives signaled more urgency during more trying climates. For example, during good times, respondents cited productivity boosts as a top overall goal for business process improvement: 34 percent for companies with less than $500 million in annual revenue; 24 percent for companies making $500 million or more.
During a downturn, however, that number skyrocketed to 73 percent across all companies. Similar spikes were seen in other drivers, such as reducing costs, increasing revenue and keeping up with competitors.
So - that's all good and everything - but what the heck are you supposed to do about it? The answer is: technology.
When you're forced to more with less the only way to do it - is with smarter, better, more flexible technology - because at the end of the day - there's still only 40 hours in a work week.
That means that NOW is the time to "fix" those processes that are "broken." If you have internal or customer-facing systems that aren't up to snuff - it's time to take a look at where you can get the most "bang for the buck" - and change/enhance those systems.
Those changes can be small, or be large, depending on where you want to go with your business. It might mean additional reports to give managers more real time information into how the business is functioning - or it might mean adding a SaaS (Software as a Service) offering to your customers who want to "rent" rather than "buy" your application.
Either way - you need software tools that are flexible, fast, scalable and allow you to take advantage of multiple delivery methods (native client, browser, mobile) - with as little re-coding as possible. The last thing in the world you want - especially now - are tools that are complex, hard to debug and slow to roll out.
The key is to get these improvements in place quickly. It's not going to do you any good to start building stuff that can't be in the field within 2-6 weeks. Granted, if you're re-writing your core application to add SaaS capabilities - it's not going to get done in that time frame, but for other, internal applications those are the time targets you need to strive for.
If you are going to add a SaaS offering - try to offer a "lite" version of your current main application. This will allow you to potentially add to the top line growth by getting new customers into your ecospace. It will also allow your smaller customers the ability to stay with your software rather than jumping ship to a competitor who offers a more slimmed-down version of the same basic functionality and meets 80% of their needs at a much lower cost.
It's time to have a sit-down with your folks and discuss where things are "broken" - and to come up with ways to maximize their productivity (and hopefully make their jobs easier). The last thing you need in a down economy is unhappy, overworked, frustrated people on your team. Now and for the foreseeable future - it's all about productivity.
Tuesday, October 07, 2008
Recession Pricing
Let's face it - times are getting tougher. If we're not in a full-blown recession now - we're on the brink of another nuclear winter - much like the dot com meltdown of 2000.
With credit being tight - and billions in market cap being wiped out by the minute - everyone immediately turns to the place where they perceive they can make the "easiest" cut - their prices. But this is a lazy, knee-jerk reaction at best - and at worst it could kill your business.
A couple of weeks ago Brenda Duncan wrote an interesting article about Pricing In A Recession. She makes my point exactly:
It's really not rocket science - but it IS a critical issue to every business owner (and consumer) out there. How you handle your pricing and the demonstration of the value that you provide are critical in times like these.
Now is not the time to be shy. If you have success stories (and you should), articles in the press (and you should), customer quotes (and you should) - now is the time to put them front and center in your marketing materials, email signatures and website.
You want to remind people of the value that you're providing - and the fact that your pricing justifies the value you provide. Then you have people who are also verifying that - and you have a much better case when it comes to the "...I love your product (or service) now if we could only do something about the price..." portion of the sales process.
Do yourself and your business a favor - and take a look at your pricing model(s) - and just verify that you're offering the best possible value for the money. If you are - you have a much better chance of survival. If you just keep going on a "business as usual" track - you may not be around to make adjustments later.
With credit being tight - and billions in market cap being wiped out by the minute - everyone immediately turns to the place where they perceive they can make the "easiest" cut - their prices. But this is a lazy, knee-jerk reaction at best - and at worst it could kill your business.
A couple of weeks ago Brenda Duncan wrote an interesting article about Pricing In A Recession. She makes my point exactly:
Pricing theory (and in real life!) states that the price of a good or service sends a message to the consumer - about the quality or value or a product. Think about it - do you want to be a “cheap date” or a good date?Personally, I'd rather be a good date, than a cheap one - and I think my customers would, too (ok, so SOME of them may prefer a cheap date - but that's a subject for another posting). The key to pricing in a recession (or depression - depending on your bullsh*t meter) is the same as it is in good times - those that provide VALUE to the customer will get their business and their dollars. Those that don't, won't.
It's really not rocket science - but it IS a critical issue to every business owner (and consumer) out there. How you handle your pricing and the demonstration of the value that you provide are critical in times like these.
Now is not the time to be shy. If you have success stories (and you should), articles in the press (and you should), customer quotes (and you should) - now is the time to put them front and center in your marketing materials, email signatures and website.
You want to remind people of the value that you're providing - and the fact that your pricing justifies the value you provide. Then you have people who are also verifying that - and you have a much better case when it comes to the "...I love your product (or service) now if we could only do something about the price..." portion of the sales process.
Do yourself and your business a favor - and take a look at your pricing model(s) - and just verify that you're offering the best possible value for the money. If you are - you have a much better chance of survival. If you just keep going on a "business as usual" track - you may not be around to make adjustments later.
Monday, October 06, 2008
10 Ways To Just "Do It"
If ever there was a time to take the Nike slogan to heart - it's now. As I write this - the DOW tanked below 10,000 (9,525.32) for the first time since October 24, 2003 when it hit 9,497.72. That's AFTER a last-minute rally brought it back from another 800 point drop earlier in the day.
Needless to say - the financial markets are going to hell in a hand basket. And not just ours - now it looks like the Europeans are getting into the act as well. French BNP Paribas is going to buy 75% of Belgium's troubled Fortis after a Belgian government buyout didn't do anything to quell investor fears. In Germany (Europe's second largest economy) just struck a $69 billion deal yesterday for commercial lender Hypo Real Estate AG
So, what does that mean for the average Joe Sixpack ISV or Corporate Workgroup?
GET BUSY... NOW! As the budgets tighten and threats of losing customers and potentially weaker sales loom - what can you do today to ensure you're around tomorrow?
I've been thinking about it - and here's 10 things that I think business owners need to take a look at:
1) Reduce non-essential expenses.
OK, OK, so I get the"duh" award for this one - but it's the easiest place to cut expenses. Do you really NEED that new laptop right now? Do you HAVE to travel business class rather than coach on a 5 hour flight? Will your current phone system survive another 6 months?
2) Enhance your own revenue
Again, this falls under the "duh" column - but as the general economy gets tighter - think about how you can position your product or service in such a way that your value proposition is irresistible to your potential customers? Remember - everyone is in the same boat!
3) Enhance your customer's revenue
Are there ways that you can help your customers' bottom line? Can you implement a new system that makes them more efficient - or help them realize hard-cost savings? If you can help them either reduce their costs by making them more efficient - or you can help them add revenue to their top line - you will not only save a customer - but chances are you'll have a customer for life.
4) Help your customers who are in financial trouble
If you're in a position where you get timed payments from your customers - perhaps you can work with them to ensure you will actually get paid when their invoice comes due. Typically, people won't pay the "big ticket" invoices for as long as possible - trying to conserve their cash. However, if you contact those customers and work out a monthly payment schedule or some other way of creative financing - you'll help to boost your own cash flow - and help ensure that you keep a customer - long after this temporarily bad situation shakes out.
5) Do more with less
You need to ramp up your own productivity - and those of your employees. One of the easiest ways of doing this is to prioritize your activities - as I pointed out in Thursday's entry. Have a simple goal - either reducing expenses or raising revenue - and allow that to become the filter for your daily activities. Before you jump into 2 hours of answering emails - ask yourself what you could be doing to lower expenses or raise revenue. It will help you focus on the important issues and allow the "busy work" to take a back seat.
6) Do NOT cut advertising and marketing budgets
This is one of the classic "knee jerk" reactions in a tight market (ok, ok, a recession). The reason that cutting that nice, juicy advertising and marketing budget is a tempting target is because you're not tracking the results of your advertising. If you're tracking the results of your marketing efforts - then you don't have any idea on what is actually making you money and what is just costing you money. The key is not to cut out advertising and marketing - but cutting out the wasteful stuff that doesn't return any value to the company.
7) Take stock of your available resources
Are you making the most of what you've got? Are your team members all aligned on a single goal - or do they just care about their own department's metrics - and nothing else. When times get tight - employees can get jittery about their jobs. This makes them want to do either one of two things - either kick some serious ass and get results - or hide their head in the sand. As a business owner - take stock of all the human assets you have and make sure you're not wasting them. Give them a challenge and you'll be surprised to see how much they can accomplish - without you having to micro-manage. People are smart. They want to work. Give them a chance to shine.
8) Do NOT "slack" on your payments to vendors
This is the second biggest temptation after cutting the advertising and marketing budget. If you know you have some big, timed payments coming due - see if you can work with your vendors (in advance - not after the bill is due) - to see if you can apply some creative financing to what you owe. They will be glad to get in the cash flow - and you won't be faced with paying a huge amount all at once. Everyone will win - and this will allow them to pay their vendors in a timely way, and so on and so on.
9) Project where you want to be
Beyond just doing a triage on your business - this a terrific time to take stock and project in your mind and business plan where you want to be when the economy turns around (and it will turn around eventually). Try to get past the "hang on by our fingernails" portion of the program, and be mindful on how you can add value - and set yourself up for success. The way you conduct your business in down times really says a lot about a business. Make sure that what you say about your business will allow to come out of the other side even stronger and better than you are now.
10) Take action
Failing to take action - is taking action. Don't be a victim - take control of the situation the best you can and kick some butt. Unless your business is less than 4 years old - you've been through some tough economic times before. If you just sit there and do things "business as usual" - you might be around when the smoke clears. Have a plan, adjust it often based on what works, and keep moving. It's always hardest to hit a moving target...
Put on some rain gear, lash yourself to the main mast - and get ready to ride out the storm. The good news is - like all storms - this one will also pass. What shape will you and your business be in when it does? Will you be poised for greater success or will you still be playing catch-up?
Needless to say - the financial markets are going to hell in a hand basket. And not just ours - now it looks like the Europeans are getting into the act as well. French BNP Paribas is going to buy 75% of Belgium's troubled Fortis after a Belgian government buyout didn't do anything to quell investor fears. In Germany (Europe's second largest economy) just struck a $69 billion deal yesterday for commercial lender Hypo Real Estate AG
So, what does that mean for the average Joe Sixpack ISV or Corporate Workgroup?
GET BUSY... NOW! As the budgets tighten and threats of losing customers and potentially weaker sales loom - what can you do today to ensure you're around tomorrow?
I've been thinking about it - and here's 10 things that I think business owners need to take a look at:
1) Reduce non-essential expenses.
OK, OK, so I get the"duh" award for this one - but it's the easiest place to cut expenses. Do you really NEED that new laptop right now? Do you HAVE to travel business class rather than coach on a 5 hour flight? Will your current phone system survive another 6 months?
2) Enhance your own revenue
Again, this falls under the "duh" column - but as the general economy gets tighter - think about how you can position your product or service in such a way that your value proposition is irresistible to your potential customers? Remember - everyone is in the same boat!
3) Enhance your customer's revenue
Are there ways that you can help your customers' bottom line? Can you implement a new system that makes them more efficient - or help them realize hard-cost savings? If you can help them either reduce their costs by making them more efficient - or you can help them add revenue to their top line - you will not only save a customer - but chances are you'll have a customer for life.
4) Help your customers who are in financial trouble
If you're in a position where you get timed payments from your customers - perhaps you can work with them to ensure you will actually get paid when their invoice comes due. Typically, people won't pay the "big ticket" invoices for as long as possible - trying to conserve their cash. However, if you contact those customers and work out a monthly payment schedule or some other way of creative financing - you'll help to boost your own cash flow - and help ensure that you keep a customer - long after this temporarily bad situation shakes out.
5) Do more with less
You need to ramp up your own productivity - and those of your employees. One of the easiest ways of doing this is to prioritize your activities - as I pointed out in Thursday's entry. Have a simple goal - either reducing expenses or raising revenue - and allow that to become the filter for your daily activities. Before you jump into 2 hours of answering emails - ask yourself what you could be doing to lower expenses or raise revenue. It will help you focus on the important issues and allow the "busy work" to take a back seat.
6) Do NOT cut advertising and marketing budgets
This is one of the classic "knee jerk" reactions in a tight market (ok, ok, a recession). The reason that cutting that nice, juicy advertising and marketing budget is a tempting target is because you're not tracking the results of your advertising. If you're tracking the results of your marketing efforts - then you don't have any idea on what is actually making you money and what is just costing you money. The key is not to cut out advertising and marketing - but cutting out the wasteful stuff that doesn't return any value to the company.
7) Take stock of your available resources
Are you making the most of what you've got? Are your team members all aligned on a single goal - or do they just care about their own department's metrics - and nothing else. When times get tight - employees can get jittery about their jobs. This makes them want to do either one of two things - either kick some serious ass and get results - or hide their head in the sand. As a business owner - take stock of all the human assets you have and make sure you're not wasting them. Give them a challenge and you'll be surprised to see how much they can accomplish - without you having to micro-manage. People are smart. They want to work. Give them a chance to shine.
8) Do NOT "slack" on your payments to vendors
This is the second biggest temptation after cutting the advertising and marketing budget. If you know you have some big, timed payments coming due - see if you can work with your vendors (in advance - not after the bill is due) - to see if you can apply some creative financing to what you owe. They will be glad to get in the cash flow - and you won't be faced with paying a huge amount all at once. Everyone will win - and this will allow them to pay their vendors in a timely way, and so on and so on.
9) Project where you want to be
Beyond just doing a triage on your business - this a terrific time to take stock and project in your mind and business plan where you want to be when the economy turns around (and it will turn around eventually). Try to get past the "hang on by our fingernails" portion of the program, and be mindful on how you can add value - and set yourself up for success. The way you conduct your business in down times really says a lot about a business. Make sure that what you say about your business will allow to come out of the other side even stronger and better than you are now.
10) Take action
Failing to take action - is taking action. Don't be a victim - take control of the situation the best you can and kick some butt. Unless your business is less than 4 years old - you've been through some tough economic times before. If you just sit there and do things "business as usual" - you might be around when the smoke clears. Have a plan, adjust it often based on what works, and keep moving. It's always hardest to hit a moving target...
Put on some rain gear, lash yourself to the main mast - and get ready to ride out the storm. The good news is - like all storms - this one will also pass. What shape will you and your business be in when it does? Will you be poised for greater success or will you still be playing catch-up?
Tuesday, September 30, 2008
Value For Money
Given the... ehem... "interesting developments" in the stock market yesterday - I was thinking about one of my favorite movies "Trading Places" starring Eddie Murphy, Dan Aykroyd and (a very young) Jamie Lee Curtis. If you've never seen this 1983 classic - it's well worth the rental.
I'm not going to totally bore you with the details - but the basic plot is that Dan Aykroyd (a successful commodities broker) is set up by the two elderly owners of the brokerage house to see what happens if he loses all his money. At the same time - they take "common scum" (Eddie Murphy) and teach him to become a successful broker - all for a $1 bet.
At the end - Dan Aykroyd and Eddie Murphy meet each other and figure out that their lives were turned upside down for a bet and they set out a plan for revenge (full plot details here).
When they're trying to figure out how to best "solve" the situation they come upon a universal truth:
Murphy: [watches Louis clean his shotgun] You know, you can't just go around and shoot people in the kneecaps with a double-barreled shotgun 'cause you pissed at 'em.
Aykroyd: Why not?
Murphy: 'Cause it's called assault with a deadly weapon, you get 20 years for that sh*t.
Aykroyd: Listen, do you have any better ideas?
Murphy: Yeah. You know, it occurs to me that the best way you hurt rich people is by turning them into poor people.
So they decide that the best way to get back at them is to wipe them out... by means of insider trading. Oops. Well, the whole insider trading scandals of the late 80's hadn't become public knowledge yet - so it was actually before it's time.
They basically "went short" on FOCJ (Frozen Concentrated Orange Juice) contracts. They started selling future contracts at market opening price ($40) and that lead to a frantic "buy" reaction by the other traders - which drove the price up to $145.
Then the commissioner came on TV to announce that the orange crop estimates would not be affected by the recent storms.
That lead to panic selling. So, the guys started buying shares (to cover the shares they had already sold) as people were unloading them and ever lower ad lower prices - eventually winding up at $26. So, they basically made the spread between what they sold it at ($40-145) and what they paid for it ($130-$26). And, they got rich.
The thing that struck me - was that the markets behave in a "herd" mentality. They just follow the next guy who follows the next guy, and so on. Consumers do the same thing - they hear "doom and gloom" and they respond. And then it just spirals from there.
It can really affect your business ("Gee - really, Bob - thanks for THAT great insight!"). What I mean is that when times are perceived as "tough" - business people start to panic as well. They start cutting prices and giving away services that they never would in a frenzied race to "get the sale" - no matter what.
This just leads them to be more overworked, and now UNDER PAID as well. This benefits no one. Pricing is another thing that goes to hell in a recession. Everyone has a "sale" or "special" or "one-time-only deals."
Instead, business folks should try harder than ever to reach out to both existing customers and new customers and make sure that their product or service is really filling the needs of their customers. I mean, who does that?
No one has called me up and said - "Hey, I know you may be feeling the pinch - how about if we re-structure your payments into a monthly rather than a quarterly basis to help you plan your cash flow better." OR "Are you guys doing OK now that credit is tighter? Is there any way we can help?"
Think about pricing your products and services like a restaurant. Bundle services and software into a "pick 2" menu of stuff they can buy - and then customize to what they want - much like a before dinner drink and a "complimentary" dessert.
It's easy to make sales in an 'up' economy, and if your organization is one that can reach out to customers when times are hard - and keep up and even enhance your value proposition to them (save them time, save them money, help them to get tangible results) - you'll have a customer for life.
I'm not going to totally bore you with the details - but the basic plot is that Dan Aykroyd (a successful commodities broker) is set up by the two elderly owners of the brokerage house to see what happens if he loses all his money. At the same time - they take "common scum" (Eddie Murphy) and teach him to become a successful broker - all for a $1 bet.
At the end - Dan Aykroyd and Eddie Murphy meet each other and figure out that their lives were turned upside down for a bet and they set out a plan for revenge (full plot details here).
When they're trying to figure out how to best "solve" the situation they come upon a universal truth:
Murphy: [watches Louis clean his shotgun] You know, you can't just go around and shoot people in the kneecaps with a double-barreled shotgun 'cause you pissed at 'em.
Aykroyd: Why not?
Murphy: 'Cause it's called assault with a deadly weapon, you get 20 years for that sh*t.
Aykroyd: Listen, do you have any better ideas?
Murphy: Yeah. You know, it occurs to me that the best way you hurt rich people is by turning them into poor people.
So they decide that the best way to get back at them is to wipe them out... by means of insider trading. Oops. Well, the whole insider trading scandals of the late 80's hadn't become public knowledge yet - so it was actually before it's time.
They basically "went short" on FOCJ (Frozen Concentrated Orange Juice) contracts. They started selling future contracts at market opening price ($40) and that lead to a frantic "buy" reaction by the other traders - which drove the price up to $145.
Then the commissioner came on TV to announce that the orange crop estimates would not be affected by the recent storms.
That lead to panic selling. So, the guys started buying shares (to cover the shares they had already sold) as people were unloading them and ever lower ad lower prices - eventually winding up at $26. So, they basically made the spread between what they sold it at ($40-145) and what they paid for it ($130-$26). And, they got rich.
The thing that struck me - was that the markets behave in a "herd" mentality. They just follow the next guy who follows the next guy, and so on. Consumers do the same thing - they hear "doom and gloom" and they respond. And then it just spirals from there.
It can really affect your business ("Gee - really, Bob - thanks for THAT great insight!"). What I mean is that when times are perceived as "tough" - business people start to panic as well. They start cutting prices and giving away services that they never would in a frenzied race to "get the sale" - no matter what.
This just leads them to be more overworked, and now UNDER PAID as well. This benefits no one. Pricing is another thing that goes to hell in a recession. Everyone has a "sale" or "special" or "one-time-only deals."
Instead, business folks should try harder than ever to reach out to both existing customers and new customers and make sure that their product or service is really filling the needs of their customers. I mean, who does that?
No one has called me up and said - "Hey, I know you may be feeling the pinch - how about if we re-structure your payments into a monthly rather than a quarterly basis to help you plan your cash flow better." OR "Are you guys doing OK now that credit is tighter? Is there any way we can help?"
Think about pricing your products and services like a restaurant. Bundle services and software into a "pick 2" menu of stuff they can buy - and then customize to what they want - much like a before dinner drink and a "complimentary" dessert.
It's easy to make sales in an 'up' economy, and if your organization is one that can reach out to customers when times are hard - and keep up and even enhance your value proposition to them (save them time, save them money, help them to get tangible results) - you'll have a customer for life.
Thursday, September 25, 2008
Hang Em' High!
The headlines in today's newspaper were really grim regarding the state of the economy. After Mr. Bush's speech last night - and using words like "...like the Great Depression..." were not, to say the least, comforting.
Everyone knows that the economy is in the toilet - and that the Fed by buying nearly three quarters of a TRILLION dollars worth of crap loans (and crap loan companies) is only a stop gap measure.
The thing that really pisses me off about all of this is the fact that almost a trillion dollars of bad loans were written (at least that we know of SO FAR) - and no one knew about it.
This really stinks to high heaven. This makes the Enron debacle almost seem like it was a high school prank. I mean, where in the hell do you "hide" that much red ink. Was NO ONE watching this?
Yeah, sure, when they were writing the loans they made loads of processing fees, commissions, and tons of money exchanged hands. Maybe it's a case of musical chairs and companies like Lehman and Merrill just got left holding the bag?
I don't think so.
I think there is a case for gross negligence and bad management on the case of all of these companies. You can't simply have a loss of that much money and use the excuse "we didn't realize it was that bad." That simply does not fly - and it's total and complete B.S.
So, while every single American gets to bail out private companies (to the tune of $8,000 for every man, woman and child) to prevent a run on the banks and the loss of homes and retirement accounts for millions of customers - the heads of these companies (and their boards) need to be held accountable for this mess.
Until (and if) that ever happens - this shameful state of affairs puts a tarnish on America and has a worldwide impact that has yet to be felt. Not to mention the fact that now, due to the weak dollar and abundance of questionable loans going up for sale - I predict that the level of foreign investment will skyrocket and whole chunks of the economy will be owned by non-American parties.
Being the capitalist I am - I say bravo for those foreign investors - and to hell with the idiots that ran 100+ year old institutions into the ground. What goes around - ALWAYS comes around.
Everyone knows that the economy is in the toilet - and that the Fed by buying nearly three quarters of a TRILLION dollars worth of crap loans (and crap loan companies) is only a stop gap measure.
The thing that really pisses me off about all of this is the fact that almost a trillion dollars of bad loans were written (at least that we know of SO FAR) - and no one knew about it.
This really stinks to high heaven. This makes the Enron debacle almost seem like it was a high school prank. I mean, where in the hell do you "hide" that much red ink. Was NO ONE watching this?
Yeah, sure, when they were writing the loans they made loads of processing fees, commissions, and tons of money exchanged hands. Maybe it's a case of musical chairs and companies like Lehman and Merrill just got left holding the bag?
I don't think so.
I think there is a case for gross negligence and bad management on the case of all of these companies. You can't simply have a loss of that much money and use the excuse "we didn't realize it was that bad." That simply does not fly - and it's total and complete B.S.
So, while every single American gets to bail out private companies (to the tune of $8,000 for every man, woman and child) to prevent a run on the banks and the loss of homes and retirement accounts for millions of customers - the heads of these companies (and their boards) need to be held accountable for this mess.
Until (and if) that ever happens - this shameful state of affairs puts a tarnish on America and has a worldwide impact that has yet to be felt. Not to mention the fact that now, due to the weak dollar and abundance of questionable loans going up for sale - I predict that the level of foreign investment will skyrocket and whole chunks of the economy will be owned by non-American parties.
Being the capitalist I am - I say bravo for those foreign investors - and to hell with the idiots that ran 100+ year old institutions into the ground. What goes around - ALWAYS comes around.
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