Managing in a downturn

My daughter asked me about a class she was considering in graduate school on how to manage a growing company. “Pass” I said. It may be a little interesting, but any reasonable manager can manage a company through a growth stage. The real challenge is managing a company through a downturn.

Racing in the rain.

In my almost 30 years (damn, that hurts), as a technology analyst I’ve met hundreds of CEOs. From solid professionals to egotistical children, quick to tell me about the valuation of their productless company. A few turned out to be winners, but most did not. I have more coffee mugs from companies that have gone out of business than from those that are still in business.

On a side note, as a technology analyst I hate two things: people who talk about company valuations before they talk about their product and anyone who presents themselves as a “serial” entrepreneur. You either are or are not an entrepreneur. The word “serial” just tells me you’re a jerk.

We’re in an economic downturn now, but it’s not unlike 2001 or 2008. The folks that lost during those periods forged ahead without changing plans. Like racing in the rain, if you don’t change your racing line you are going to end up in the wall. If I think about the winners during those times, they recognized the drops of rain on the windshield and made appropriate adjustments.

Now my point of view is skewed toward value. During those downturns, and now into this one, we see two changes in the way vendors present their solutions.

First, they maintain a tight marketing message and product positioning. Rather than be all things to all people, we saw, and see now, technology vendors simplifying their message so it’s easy to comprehend and position. If we think about the past we see it clearly with Salesforce and CRM and with Ultimate (now UKG) and HCM. You knew what these organizations did and why you would purchase their products.

Second, they increased their focus on a value message. If a prospect perceives a positive ROI from a purchase, they’re more willing to drive themselves through the funnel. Think how clear Salesforce’s software as a service message of eliminating CAPEX in favor of OPEX drove dramatic sales through the 2008 downturn. That simple message of reducing costs catapulted that organization to the dominant position they enjoy now. By showing the prospect they could reduce costs they made it easy for organizations to select Salesforce.

We’ll see a lot of fallout in tech through 2024. There are just too many people with dubious ideas and funding from the “money is free” days. The real CEO’s have already adjusted, and they are the most likely to guide their organizations to success.