Feeling the pinch
by Doug Ramsdale
OPI reveals a 5-point plan for keeping your business fit in a recession
Many readers of OPI are probably asking themselves how bad can it get and how long will it last? The legendary Jack Miller once said "Trees don’t grow to the sky" and of course recessions don’t last for ever.
If we can get some oil back into the machinery of the credit system, the fundamentals are there for a strong recovery.
I’ve heard people say that now is the time for "hunkering down" to weather the storm but I would suggest that if that’s all you do, you’ll be freezing cold with a sore back when the sun begins to shine again.
Sure, it’s always tempting to look inwards, as if somehow you’re to blame for the recession, and you are probably justified in making adjustments to your purchasing plans and your operational spending. But a recession is an external change.
You have to look outward first and draw the right conclusions so you can position your business for the rebound.
1. Question your fundamental strategy. Is it taking your business where you want it to go? Do you see the downturn as a pause in the progress of your business, or is something simply never going to work? We are seeing ‘mega’ changes that hit us like hammers. Is your business ready for the world of nosebleed energy costs, a weak dollar, or a China no longer enthusiastic to be the sweatshop of the world? Just as important, what are your customers, suppliers and competitors doing that’s different? You don’t function in a vacuum. How the other players change is going to impact you. More reason to keep your attention focused on the outside.
2. Be painfully honest about the power of your brand. If the consumer insists on your product, and you can command a premium, you have a brand. Otherwise, it’s a product line. There are so few true brands in our industry, that’s probably the case. And here’s the kicker – every dollar you spend on pushing a product into a brand reduces your bottom line and starves the other opportunities you have to grow your business. Most importantly, if you can identify assets or costs that are not contributing, it’s not an accounting exercise; you have to get them out of the door!
Of course, if you do have a brand, don’t be tempted to turn down the spigot. You need to feed the goose that lays the golden eggs in bad times too.
3. Quality, quality, quality! Don’t be tempted to get one more year out of that outdated press; don’t persevere with an error prone supplier because he’s got the lowest price. Fix the annoying packaging that’s hard to open. In our world, perfection is not only possible, it’s expected.
It’s not just product. Look at your processes. Ask your customers, internal as well as external. Apply metrics that mean something in terms of the value you want so that the changes you make deliver.
4. Profit from the pain of others. It’s hardly a noble sentiment, but like a forest fire, recessions weed out the weak. Prowl the competitive jungle and exercise your predatory instincts. Recessions are tough on marginal players, and being pro-active can pay big dividends. Avoid the wait-and-see approach. If a competitor dies on you, the chances are the market – and your customers – have already got it covered.
5. Be courageous enough to make big decisions. Don’t wait it out. I applaud Smead’s decision to get out of Europe. It’s been a struggle and a cash drain and who knows what could have been accomplished without that distraction. Kudos to them for a decision that is good for their business. There’s a lot of truth in the saying that you don’t strengthen the weak by weakening the strong.
On the other hand, drawing in your horns can also be a big mistake. America is going to have to succeed internationally to pay its bills, and that means developing and supplying products and services with global appeal. It may be right for some to focus on the issues at home, but it’s more likely that global opportunities for American companies will be greater, not less.
Doug Ramsdale is a Partner at OP Resource (OPR), a professional services firm specialising in the office products industry. Prior to founding OPR, he was CEO of Chicago-based storage and organisation products manufacturer Home Products International. His career highlights include 20 years at Fellowes where he ultimately led the company’s international business, followed by several years as Executive Vice President – Europe for Office Depot.