Grandpa, what were you doing during the Great Recession of 2007-2016?

Were you a winner, a victim, or a bystander?

By David P. Mead

Flash forward to the year 2030...most of us will be playing with grandkids. I remember asking my two grandfathers what they did during the Great Depression – how they provided for their families, took on extra work where they could find it. While this current period in is no way a direct comparison to the depression, I do think we may reflect back on these times in much the same manner.

While many find themselves in unfortunate circumstances that may be somewhat beyond their control, there are many who can affect their outcome.

In a recent Wall St. Journal survey of economists over 50% of those surveyed do not expect that the output gap in the U.S. economy would be filled until 2016 or later.  For the past few years ago I have been concerned about what I saw as an economic malaise in the U.S. It now appears that we may be in for another several years of a long slow economic slog.

Victims and bystanders: Hope is not a strategy. Now my concern is more focused on a management cultural malaise that I believe has descended on a number of companies. Hunkering down has become a management skill. Many companies have rewarded tight cash management, not taking risks, expense reduction, and retaining customers at the expense of not reinvesting in R&D, new products, new markets, new ideas, and new business models. Staying the course and hoping for the best has become the strategy. Frankly, “hope is not a strategy.”

If you’re not going to grow, get out now. Some investment bankers are advising baby boomer owners with flat companies to sell now. If you are a business owner in your late 50’s or early 60’s and not planning to be creative to increase demand, then it might be wise to get realistic about your company’s value and get out now if you can. Business life will likely not get appreciably better for the next 3 - 5 years - and could get worse - for those companies that are standing still.

No, I am not pessimistic. To the contrary, I see lots of positives:

·        There has never been a time of greater opportunity

·        There is plenty of capital for growth and investment in good opportunities with good management

·        There are new ideas, new technologies, new business models that can change our lives

·        Technology is being applied in mature industries in transformational ways

Winners: Business innovators. We are seeing more disruptive and transformational business innovation than ever before. While these companies may not YET be enjoying great volume, they are proving out new models. We may well be looking at irreversible shifts in fundamental market dynamics – buyers now know more than sellers,  mobile devices are putting more power in hands of consumers, consumer advocacy can spring up overnight, real-time customer feedback is helping design new products in real time, dramatic reductions in friction are occurring in marketplaces. ; Industries, like many in distribution, that exist because of fragmented customers or disorganized or inefficient supply chains may now be at risk. The friction-less immediate and free flow of information is transforming and enabling lower cost, faster, customized business models.

Some of these companies are in your backyard. Companies such as the company with LED commercial lighting systems that have a 10+-year life with lower energy consumption, and the business that provides market research (unbiased consumer feedback with real people using real products in real environments)at greatly reduced cost, and the organization that provides cost effective online marketing to SMBs using crowdsourcing, are transforming their industries.

Winners: Business transformers. Transformation is occurring with some older businesses as well. One catalogue distribution business has employed new data manipulation techniques to better understand how, what, where, and why customers buy. The results have changed the way they go to market, the product/inventory mix, and the way products are supplied and delivered to customers. 

Many companies have suddenly found themselves in the “irrelevant middle”- they don’t offer highly differentiated value-added products and they aren’t the lowest cost provider of the commoditized products. Some of these companies have created new models to profitably serve customers at either end – very low cost, “no frills” providers of commodity products on one end, or highly customer-focused, value-added solution providers at the other end. Companies in industries ranging from metals distribution to medical devices to selling carbon credits are all wrestling with the same issue of transforming away from the “irrelevant middle.”

A better story for the grandkids. Want to create a better story to tell your grandkids? Stop being a bystander and take matters into your own hands. The old ways of ‘waiting for the economy to come back” are clearly not going to work this time. 

Is this overly harsh or do you agree with this assessment? What do you think?