-Blog entry from Rotarian Franklin Rivera, Rotary Club of Naperville
It is no secret that the year 2020 has been a trying one for many businesses, large and small. COVID-19 has forced a lot of businesses to rethink their strategies, often strategies built from years of operational practices that have worked.
Now, with national shut-down mandates and general fear of contracting COVID-19, businesses have had to revisit these strategies. Fortunately for them, a study has already been conducted that provides the roadmap for pivoting during these difficult times.
In 2010, the Harvard Business Review published a study titled “Roaring Out of a Recession,” that outlined what strategies were the most effective in helping business survive an economic recession. They studied approximately 4700 companies between the recessions of 1980, 1990 and the 2000 bust to see what made some fail and others survive. The results were startling and very contradictory to what most would believe.
The study found out that only 9% of the companies had flourished after the recession, “outperforming their competitors by at least 10% in sales and profit growth” (HBR, March 2010). The study concluded that those successful companies had employed a combination of both offensive and defensive tactics. They referenced Target as being one of those companies that had succeeded.
Most companies during times of economic strain will first move to downsize their workforce or divest of certain business interests in efforts to cut costs and remain profitable. While one of these defensive tactics was deemed successful, divesting of certain business offerings, it was not entirely inclusive. They found that business that merely reduced their workforce size were not successful. As a matter of fact, it was counterproductive, cutting into their ability to grow. Another tactic that we often see a lot of is cutting marketing. For myself, being a marketer, I see it all the time. Usually in times of economic stress, marketing is the first to go. However, this study concluded that those companies that increased their marketing spend during these times fared much better than their competitors who chose to cut or reduce marketing spend.
So, what did these companies do exactly that caused them to outperform their competitors? These companies implemented a delicately balanced combination of increasing operational efficiencies (defensive tactic) and increasing marketing spend greater than pre-recession (offensive tactic). If you really think about it, this actually makes sense. Operational efficiencies are a way of doing more with less. How can you cut the fat and focus on those processes that will actually reduce costs while increasing production? With regards to marketing, that is your window to the world. Why reduce visibility when everybody else is doing it. You increase your visibility while everybody else is reducing theirs by increasing your marketing spend. This increase would be based on factors determined through the optimization of your operations.
I thought that this subject matter was eye-opening and important enough to share with the masses, given the state of today’s economy. Seeing many of our dear businesses struggle and do what is, at least on the surface, the right thing to do has become unbearable. I have always stood by my mantra of D.R.E.A.M., meaning Data Rules Everything Around Me. This study is so revealing, and backed by data, and so contradictory that it needed to be shared. That is why there is also a video discussion between myself, a Digital Marketer, and Kevin Harris, an authority in Organizational Development that accompanies this blog post.
Hopefully, this article will cause a few to rethink their strategies moving forward. And it is my hope that by doing so, more will flourish long after COVID-19 has passed.
About the author:
Franklin Rivera is a graduate of West Point and an Army Captain Gulf War Veteran. He holds an MBA from Benedictine University and is the CEO and Founder of the V2M2 Group, a digital business solutions agency located in Naperville, IL. He has been a professor of Digital Marketing, Social Media Marketing, Consumer Behavior and the graduate level Entrepreneurial Management. Franklin also serves on the Marketing Advisory Board of Rasmussen University, and is the Chair of the Naperville Area Chamber of Commerce’s Small Business Owner Committee. He regularly speaks on Marketing, Business and Personal and Professional Development and delivered the 2015 Commencement speech for Rasmussen University.