Now Is The Perfect Time To Invest In Growth
A couple of years ago I wrote an article persuading
you that in
times of boom cost cutting is essential
The opposite is also true. In periods of economic
decline investment in future growth is essential
to drive the longer-term success of your business
I do not say this to be glib or to try and gloss
over the pressures on current business performance.
I am acutely aware that selling extremely challenging
for most organisations.
However investing for longer-term growth is
a vital component of any successful business
and this is particularly true in a downturn.
Here are five compelling reasons to invest in
the leader you don't need to move forward
too much when everyone else is retreating.
There are many studies that make this
point. Here's just two examples:
McGraw Hill Research found that companies
that maintained or increased advertising
in the recession of the early 1980s
had, by 1985, experienced over three
times the sales growth of those that
had cut their advertising budgets.
- A study by McKinsey of 1,000 companies
that performed best following the recession
of the early 1990s clearly demonstrated,
during the recession, a greater appetite
for acquisitions, a willingness to use
their cash reserves and to invest in marketing,
selling and R&D.
remains the key driver of profit growth.
The latest Business Week Top 50, which ranks
companies by their return on capital and
their sales growth (by sector), highlights
that it is those companies who focus on
innovation that perform best. For example,
Nucor, operating in the highly cost competitive
steel industry, has maintained profitability
and growth by investing in new technologies
that give it a quality, speed and cost advantage.
- You can
build greater customer loyalty. Helping
your customers today will create a bond
of loyalty that will be repaid in the future.
And loyal customers are cheaper and easier
to sell to both in good times and bad. Bain
& Co estimate that companies with loyal
customers achieve over twice the growth
of average companies. Building customer
loyalty is not about knee-jerk price reductions,
but about getting closer to them to understand
and meet their needs better and to deliver
a great experience for your target customers
where it matters most.
is cheaper. The advertising giant
Publicis is predicting a 7% fall in advertising
expenditure in 2009. Great advertising deals
will be everywhere. Unsurprisingly AG Lafley,
the CEO of P&G, has said that the company
will take advantage of these conditions
to grow the company's advertising 'volume'
As with advertising there are also likely
to be M&A bargains. KKR, the private equity
giant, estimate that $300 billion of private
equity funds are awaiting the purchase of
'distressed' companies in the next few years.
about focus, time and being innovative,
not just money. Here is a small example
of a big point. A couple of weeks ago I
played my first gig, playing guitar with
a group of relative strangers. Six weeks
earlier Colin, the owner of Guitar
Base, had brought us together. Colin
attracted 25 or so mainly men who were mainly
in their 40s and most of whom were playing
in front of a crowd (rather than a mirror!)
for the first time. He also marketed the
event, which attracted a crowd of 150-200,
provided the PA and organised the practice
sessions. I am so energised by the experience
that I now want a new guitar and amp. Where
will I go to buy them? Of course, there
is only one person I will seek out and that
is Colin, who, incidentally, will be opening
his second shop this month.
The bottom line
The winner of the Tour de France doesn't
build a lead going downhill. All the cyclists
go equally fast at that point. Instead, the
winner typically chooses one of the toughest
climbs to make his move. Similarly, in these
difficult times prudent and focused investment
in growth remains the best way to create a
successful business. What areas of growth
are you focusing on at the moment?