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Mike on Strategy

Consider these facts:

  • In the last 100 years there have been 17 recessions 
  • Each of those recessions lasted approximately 12 months 
  • Of the firms in the top quartile in their industry 20% drop to the bottom quartile
  • 17% of firms go bankrupt 
  • The most common reaction to a recession is to cut marketing spending 

The other fact about a recession is that 24% of firms in the bottom quartile based on revenue and profits, rose to the top quartile during the recession and stayed there when the market came back. 1.    So why the difference and why do so many top firms drop to the bottom quartile or drop out all together when the going gets tough?

Love him or hate him, Mike Tyson wasn’t only a world champion boxer but also a part time philosopher.  He famously stated that “Everyone has a plan …… until they get hit”.  Of course he was talking about boxing but he could have easily been talking about business today.   In 2019, a lot of business plans were developed for 2020 and those plans have taken more than a few right hooks, upper cuts and body blows.  Interestingly, some businesses have managed to counter punch and fight above their weight class, finding a way to survive this COVID induced downturn and a select few have even prospered from it.

Almost anything “online” has done well during this pandemic but that only gives credence to what we already know, i.e. being in the right place at the right time is part of a great strategy.   Although true, that may simply be a matter of great luck.   But what about those who weren’t lucky?  What about those who weren’t positioned perfectly for the pandemic and have still survived or, in fact, thrived?  What’s different about them?

A lot of businesses give lip service to strategic planning but the reality is that, for many, such planning amounts to little more than an annual report and a collective pat on the back.  Those kinds of plans can’t take a Mike Tyson sized economic punch.   Businesses that flourish during times like these have done the real strategic planning, allocating (and reallocating as conditions change) scarce resources to market opportunities.  For these businesses, pivoting to new opportunities as markets evolve is second nature.  It’s part of their corporate DNA.   Darwin told us long ago it’s not the strongest, nor the most intelligent species that survives…. It’s the one that is the most adaptable to change.  The adaptable ones are those who have prepared –and that preparation is a strategic plan. 

While predicting a pandemic isn’t realistic, predicting another recession is part of prudent planning.   Knee jerk reactions like slashing marketing spending and employee lays offs aren’t necessarily a bad strategy in themselves depending on the situation but they are often a sign that there was no real strategy in the first place.

Business offers no guarantees of success and there is no shame in failure, but it is most unfortunate when failure comes from a lack of preparation. That’s where strategic planning comes in – it prepares us for multiple eventualities.   In times of great uncertainty there is a need for more, not less, strategic planning.   Strategic planners prepare for a variety of different market outcomes, always aligning resources (and prepared to re-align resources) with emerging opportunities.  When are you going to start your strategic planning?     Go here to learn how.

1.    Steve Diorio and Dave Reibstein https://www.revenueenablement.com/markets-in-motion/

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