Knowing When to Go on the Offensive

In studies done subsequent to previous recessions, long-term profitability, for both large corporations and small firms, was greater for those organizations that moved quickly to take advantage of more prosperous times. In a recent survey completed by Information Strategies, Inc., 720 respondents indicated that they were taking steps to meet anticipated greater demand in late 2009 through 2010.
Interestingly, a majority of these company leaders had experienced other economic downturns. In a focus group of 12 veteran managers, all indicated that they had learned from their first experiences that moving quickly to meet rising demand was a key component of longer-term prosperity.

As one participant said, “The first time I went through this cycle, I stayed hunkered down until the upward cycle was well under way. When I got into the market, I found competitors already there with competing products and the ability to fill orders,” he added. “I didn’t make that mistake again and won’t this time around.”

Knowing when to begin an offensive is the crucial call. Too early, and the result is stagnant inventory. Too late, and orders are already filled. In recent months, reports indicate that manufacturing, a harbinger of economic activity, is growing.
When interviewed, one manager of a consumer package company said that he looked to restaurant sales as an indicator of when to step up his marketing efforts. “I don’t look at the high end restaurants, but rather at the neighborhood gathering places.  When families go out for dinner, they are feeling more secure,” she said.

Another manager said that she talked with her local UPS driver and then looked at that company’s volume to get a sense of renewed activity. In mid-August 2009, both UPS and FedEx have negative outlooks for the remainder of 2009 but were hopeful for 2010.

What should you do to get actionable information upon which to make a decision?  Go on the offensive.

The focus group managers assembled across the nation to discuss this issue offered the following guideposts:

• If you are a direct seller, review the trends over the last three months and compare with a similar period in a previous recessionary era.  If no data are available, try to talk with other industry managers who have gone through the cycle.
• Keep an eye on industry shipment numbers and see if other comparable firms are starting to produce and send out product.
• Review your own customer service and sales requests and try to discern trends.  Often times, internal data will tip a manager off to what is happening in the field.  Customer service and sales personnel often have a keen insight into what is happening.
• Poll your current and past clients as to what is happening and pool their responses into a meaningful pattern. (One focus group manager said he moved quickly to a more expansive model when his largest and smallest clients both ordered goods on the same day.)
• Look backward at your supply chain and see if stockpiles are shrinking, indicating greater demand.  Make sure this is not because of reduced activity on the part of suppliers but because of increased demand.
• Attend business and professional meetings and see what others are saying. (One focus group manager said he got tipped that activity was heating up when the number of attendees at his local trade group started to dip.  Calling a few of the non-attendees told him that they were busy.
• Talking to employees often provides another window into how the economy is progressing.  (A focus group participant said she walked the employee parking lot and looked at the new cars. “In the last recession, the cars started to get old but they started to get newer as the economy got stronger,” she said.

In this deep recession, many companies cut back staff.  Experienced managers warn against moving quickly to hire new people. “I offered overtime and hired new staff only when the workload started to severely strain my current employees,” he reported.

Another respondent said that he was careful not to get too far ahead of the rising economy.  “I didn’t build inventory until the third quarter of the recovery but I did increase production to meet demand on a monthly basis,” he said. Investing in personal touches to reach customers who haven’t purchased for some time is also a way of building momentum ahead of the upturn.

Office Depot has been aggressive in going after customers with a telephone program designed to talk with and sell customers who have not been buyers for significant time periods.

For service providers, this recession has been particularly difficult. As companies drew in their efforts, changing service providers became a non-starter for many firms. They have the more difficult task of overcoming inertia as well as limited resources. One manager said that she countered this obstacle by turning most of her staff into sales people. “When their jobs were on the line, it’s amazing how resourceful my people became,” she said.  An added benefit was that the company’s employees all became closer to the customer.

In summing up their experiences, respondents and focus group participant urged:
 
Don’t wait for everyone to say the recession is over.
Don’t be overly aggressive in moving forward.
Do start thinking offensively at an early stage.
Look around you and time your moves to fit your client’s mood.
Stay ahead of the curve by using every bit of information available.
Don’t be afraid to act but keep a watch on the bottom-line.

To quote President Franklin D. Roosevelt, “they only thing we have to fear is fear itself.”