Having Hard Times? Well What’s Your Survival Guide?
I was looking through some ‘sage’ advice from McKinsey on managing in a crisis, in really hard times, and one really got me thinking, so I thought I’d share this.
“Use the hard times to concentrate on and strengthen your competitive advantage. If you are confused about this concept, hard times will clarify it.
Competitive advantage has two branches, both growing from the same root. You have a competitive advantage when you take business away from another company at a profit and when your cash costs of doing business are low enough that you survive in hard times.”
This challenged my thinking of competitive advantage but then again hard times certainly do questions all our thinking. I always felt it was the uniqueness within, in what you offered, that separates you from your competition. This alters that perspecitve.
It seems this piece of advice boils down to the hard dollar gained by showing advantage within the market place- where it really counts, in fighting for every sale by being able to make a profit or simply cover your costs to simply keep going.
Isn’t innovation simply stripped away here-lost, forgotten, ignored, abandoned? Just thrown overboard along with any branding and this seems so stark or am I missing something here? What happens when markets come back? Maybe you have survived and you pick up the pieces. Do you agree this is where competitive advantage lies?
Perhaps this is ‘creative destruction’ and ‘innovation productivity’ in its rawest form? See my previous article ‘the darker side of innovation’ on this.
Image Credit: Sister Brook Kenmore
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Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.
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Easy to say about sharpening your competitive advantage but harder to do when the realities of business are there like paying bills and getting wages out. The reality is that any business positioning itself well at the moment and doing well in hard times will absolutely shine when the bad economy does turn. Batten down the hatches 🙂
Hi Paul, this is why smart companies fight like mad for market share during hard times. They believe, usually correctly, that they will maintain that share when the market recovers and become more profitable as a result. Fighting for share can mean communicating existing advantages more effectively, or more broadly; and/or launching new innovations.
The point about cash advantage is probably only relevant if things become extreme. After all if people are going out of business and you only survive because your costs are lower, it doesn’t sound like you’re competing in an attractive market!
Yes, most are battening down the hatches at present Niall but they can be screwed on far too tight! I’m not really saying sharpen it even further, make sure you know what it is and use it to the maximium you can, within the constraints you have.
I think more companies are entering the ‘extremes’ Kevin and to cover your costs is a perfectly good strategy, even if your shareholders don’t like it, it is better than going out of business and they lose their investment.
I was always taught ‘cash is king’ in tight economic times and operating smaller companies you are far more willing to barter and trade, to be nimble and ‘snuggle up’ to your customers as best as you can. The bigger guys always have so much slack in their system. There are lots of ‘attractive’ markets around that feed into other parts of a business that can alter the total mix if you exited them.