The signs are not good. Energy prices are rising, staff turnover is high with the ‘great resignation’, strikes abound and businesses are still trying to recover from lockdown. There are no certainties. We are in a VUCA world.
My first experience of the working world was joining the job market during the 1991 recession. We had high-interest rates, falling house prices, and people stopped investing. I’ve lived through the dot.com boom and bust, and the writing was on the wall for the over-valued tech companies. In many ways we are there again. So how does the CEO and the product leadership prepare for the coming storm and ride through it?
Companies need to balance survival and flexibility to grow
In 2010 Harvard Business Review did a study for 4700 companies across multiple recessions and found that the companies that cut costs faster and deeper than rivals actually had the lowest probability of pulling ahead of the competition. But companies who boldly invest aren’t guaranteed to win either.
There needs to be a balance across resilience and flexibility. For example during the 1991 and dot.com recession organisations like Accenture allowed staff to go on travels and sabbaticals, so when the market picked up, they had a loyal, trained workforce in place, just as rivals started to struggle to recruit to replace the people they had laid off.
Back at the start of the 2008 recession, I developed this four box model of balance for resilience and flexibility. After the recession, the study found that the odds of being successful with this approach are the highest compared to being based on prevention (resilience) , promotion (flexibility) or just a pragmatic (vs planned) approach of the two.
As a CEO or Product Manager these four boxes gives you four categories to assess your product portfolio, product roadmap and budget. The key point here is a conscious balance. Some companies go into scrambling for immediate revenue, and then discover that rivals have changed the market. Other cut all costs, and lay off the staff, only to discover they’ve lost the capability in the team, and have to pay for expensive replacements. For example, in the 2008 recession, Sony decided to cut jobs, drop R&D and delay investment. This gave short term profitability but Sony struggled to gain momentum after the recession.
1 Bring in the income
Don’t leave anything on the table. If customers are willing to pay, or willing to be customers, make it easy for them. Firstly take stock and make sure that you know what your customers want make sure they know you can provide this. You might find what you think is good about your products is not what they see as valuable. Make your solution indispensable even during a recession. Surprisingly, high end luxury goods often are resilient to recessions. It’s the middle that gets squeezed more.
- Are you meeting your customers needs at this moment?
- Are you reaching all your prospective customers?
- Are you losing potential customers in the pipeline?
- Is there anything that is turning them away?
- Are there simple added services that you can
- charge for?
- Are you making sure your customer is happy?
- Are you keeping them loyal and bringing them back?
2 Control Unnecessary Costs
One professional services partner I worked for put it thus, “Even in a strong wind, Turkeys will fly”. When times are tough the businesses with a poor balance sheet, poor product, poor business model or poor processes suffer. So stripping out unneccessary costs is key, and letting the teams know why. Companies like Blockbuster Video went to the wall because their business model know longer worked, and more importantly people could hire a video with a click on Netflix.
Remove products and features people no longer want
- Are there any products or features that are no longer necessary?
- Is it costing you to have an unnecessary features or services?
However, to do this successfully you need to know what your customers value – and don’t take those away. For example, I track all my financial spend with an old version of Microsoft Money. Tescobank switched of the ability to download statements. I couldn’t be bothered to manually update so many transactions, so I stopped buying from Tesco completely. I moved to Amex and BA for points instead, and Tesco lost my groceries, white goods, insurance and credit cards with me.
Automate to reduce cost to serve
- Can you automate more of your service?
- Can you make it easier for customers to serve themselves?
Reduce the cost to serve
- Can you do more remotely?
- Can you scale with temporary resources?
For example, it might be cheaper to source a highly experienced portfolio executive as HR Director, Finance Director or Product Officer, and have more junior permanent staff, than trying to fund a less experienced person full time.
When times are good, it can be easy to put in lots of extra steps and activities in the business. What took no time when small seems to take forever. What’s worse is that when companies want to ‘take better control’ during the recession, they may will be adding to the costs rather than controlling them. I am noticing many large corporates taking 4-6 month to sign-off a contract and purchase order, whetheras others can do this in weeks. The impact is the BENEFIT of any work is now 6 months late, together with extra costs in paperwork, chasing and contracts.
- Are you slowed down by processes and documents?
- Do you have simple processes to take ideas from initiation to launch in your processes?
- Are your launches on-time or regularly late?
Stay Relevant & Competitive
As the market changes, so do your competitors and how people see those competitors. For example, ADLI and LIDL might be seen as low-cost supermarkets, but they regularly compete with Waitrose for wine quality and eco-credentials, and the middle classes are moving more towards them. So it is worth re-checking who your competitors are, and what makes them attractive.
The key here is giving people to stay with you rather than locked into you. For example, I signed up to Adobe PDF for my business and then realised I had made a mistake with one module. It was a nightmare to try to cancel my subscription. I had paid for a year, and if I cancelled they would stop the subscription immediately with no refund rather than the end of the billing period. I thought this was a sharp practice, as they also made it quiet and difficult to cancel when the subscription is up for renewal. So, that’s it. I won’t buy ANY Adobe product. so help people to stay-in not be locked-in.
- Do you know what your competitors are doing now?
- Is your value proposition still good against them?
- Do you know what substitutes your customer might make for your product?
- Is there anything that is turning customers away?
- Are you making it easy for customers to stay?
- Are you helping customers realise what they will lose if they leave?
Build agility & pivot if needed
This is all about having a flexible business model, and designing for agility. For example, its like designing for multiple currencies right from the start, or knowing that there are different types of ZIP / Postal Codes. So when you build a feature, decide to solve the generic problem not many specific ones. An example of this, is making a product accessible for people with disabilities. If you design it right with personalisation everyone benefits. For example, Netflix has captions for most movies, and you can watch them on the metro. The second thing to consider is making sure you convert any unique solution into a repeatable product (or component) as quickly as possible. At Hassell Inclusion, they developed a number of assessment tools to see if an organisation has accessibility in their DNA, these could be brought together into a benchmarking service, and each new component for one client gets shaped into a sale slide, a costing model, and a toolkit so we can repeat this rapidly.
- Are you converting tailored solutions into flexible products?
- Do you know the essence of your product set?
- Can you direct them into other solutions, locations and industries?
- Can you easily serve new markets and locations from your base?
Bring this together
One immediate step you can take is to look at the product roadmap and product backlog and assess the list of changes against these four categories. Are they balanced, and have the team considered the changes that improve revenue, reduce costs, keep the product competitive, and allow flexibility. If you do need to shave costs in R&D and product development, is the resultant plan still balanced?
Another step is to take a product checkpoint and look at how your product portfolio & product capability together are set up for resilience and flexibility. Such a diagnostic would look at areas such as :
- The Product Portfolio
- Revenue model & product contribution
- The Value Propositions
- Product Backlog & mix of improvements
- Product Roadmap
- The team Mindset, and
- Delivery Capability
Lastly running a set of what-if scenarios across your product set can help crystalise what options give the strongest flexibility across a future that is VUCA.