Tuesday, August 4, 2009

Cornering a Business Downturn

Have you ever attended a car racing school? I had the opportunity a couple of years back and I learned some very good lessons that apply to life as well as the roadway. One of the first lessons you learn is about cornering or negotiating a turn. The basic method goes like this: you slow down before coming to the turn by letting go of the gas and, this is key, AVOID using the brakes. Then as you reach the half-way point on the turn, you start accelerating to insure your placement out of the turn.

Before I explain the extension of this lesson to business, let's consider the three points above more closely. As you're speeding down a straightway, you are accelerating. You continue pressing the gas until the very last moment before the turn starts. Then you let go of the gas so that you don't lose control and hit the wall or spin out of control. Now, you have an option. You can press the brake down gently to slow you down more, but that creates two compromises: you give up the momentum you just built up on the straightaway and you might risk spinning out of control. Both of these mean you loose your position on that turn.

Once you reach the half-way point in the turn, you slowly press down the gas. Why? Because you want to create a sling-shot effect and come out of that turn hard enough to push you ahead on the race. You press it down as quickly as you can, but not too fast to break traction. You want to push the limit, but not loose control. You want to give it so much gas that once you round the corner, when you're out of the turn, the car's momentum takes you within a few inches of the edge of the road or the cement barrier. All of this is to insure you get an edge on your competitor.

Now let's see how this idea applies to business. Think of the turn in the road as any reason your business has to slow its pace like the start of our current recession. The gasoline that feeds the engine is the dollars you spend that run your business. These are dollars for your facilities, supplies, R&D, sales efforts, acquiring, training and retaining staff. The acceleration then is the speed and direction of your business growth. Lastly, the positioning on the track is similar to that of your business with respect to your competitors.

During a slow economy, as you approach that turn, your organization has to take measures to reduce its momentum. That may mean reducing office expenses, work hours, or even staff. However, you don't want to unload too much, nor eliminate your R&D dollars and training investment in your staff. To do so would be like hitting the brakes and loosing all the competitive momentum you've built up over the years.

By continuing your R&D efforts, retaining and training your staff, while making strong sales strides, you'll insure your company doesn't loose its competitive position in the downturn. However, just as in negotiating a corner, you still need a little something else to help you pass your competitors in coming out of the downturn.

This is where acceleration comes in. By acceleration I mean the increase in your company spending on R&D dollars, staff acquisition and related training. So, when do you do it? I admit, It's easier to know when you've reached the half-way point on a corner then the half-way point in a business downturn. Nevertheless, you can look at the reliability and strength of your sales pipeline data to determine how much and how quickly the clients will buy. Though this method may provide only a coarse guideline, it can still be reliable.

What I've described here focuses on a company, but the same analogy applies to an individual contractor or employee in search of the next opportunity. Simply focusing all efforts on finding the next client or employer is not enough. You must also invest in yourself through training, certification, education or whatever else you'd like to call it.

You must extend efforts in personal "R&D" where you're acquiring and practicing a new knowledge set. This may mean attending conferences, classes, or acquiring a new certification to demonstrate your expertise. Once you've acquired the new knowledge set, you can then volunteer your services to gain the experience on applying and speaking more intelligibly to it.

Naturally you're asking whether we're at that half-way point in the recession. Should we increase our spending now? I think the answer is yes if you believe the Chapman University Economic Forecast team's predictions.

So, are you poised to gain the advantage over your competitors?