The Economic Downturn

Of course, the economy is on everyone's mind these days. There's been much talk about the, now infamous, slide presentation from Sequoia over the past weeks. This presentation is fine, to me, until Doug Leon's slides start at slide number 39. The first part of the presentation is all data, which is (of course) sobering and painfully obvious to anyone who's been critically watching the economy for the past few years.

However, Doug Leon launches into ungrounded assessments with his prescriptions and they feel tired and expected (cut, cut, cut... don't think about why or where, focus on features, not on customer relationship). Whether he meant this or not, that's how his advice sounds and it's the same old story that businesses have told forever when times get rough.

Notice how none of his timelines have times or dates on them? That's because they're loose predictions based on opinion and not data. It's pure theory masquerading as fact. Yes, companies need to focus on cashflow but this is ALWAYS what companies should be doing. For those who are suddenly worried about cashflow, their eyes have already been off the ball. If a company hasn't been lean, by all means, it should reassess what it truly needs but, again, this is something that every company should have been doing continuously all along. Suddenly, we expect businesses to get serious about their businesses? That would be the problem all along.

I suspect that a lot of good businesses will die along with the bad ones just like during the bust in 2000-2004. However, those who focus on customer-led innovation and delivering true value in customers' eyes are the ones that will have the best chance not only of survival but of growth. The same goes for sustainability.

Hunter Lovins said a really smart thing last weekend at Presidio:

"In a stable economy, sustainability is the competitive advantage strategy. (Refer to all the aspects of the Integrated Bottom Line.)

In a down economy, sustainability is the turnaround strategy. (See the recent Florida Climate Report: $26 billion savings from achieving 50% reduction in CO2 emissions from now, 33% reduction below 1999 levels. Or the Colorado numbers: consciously unleashing the new energy economy has led to net jobs growth, and relative economic health, even in a down economy.)

"In a collapse, sustainability is a survival strategy. (Look at Braddock, Pennsylvania. It went from 20,000 population to 2,000, from an oil and manufacturing center to a rust belt. The mayor is now using the vacant land to grow biofuels, has enlisted a 100 year old, 3rd generation oil company to produce it, and is growing organic vegetables, and attracting green companies to town.)"

We need to be a lot smarter about the value we deliver to customers and the market than simply cutting aimlessly. Most companies actually need to invest more in development and innovate even harder (that includes the entire automobile and electronics industries). They need new, better, more valuable offerings, not merely selling-through what they already have.

And this brings us to the problem with most US businesses. Try as they might, most companies can't successfully innovate. It's sad but true. Their focus has been on features, performance, and price, not on delivering value or developing deep customer relationships. That's why we've created this program: to help businesses better innovate in meaningful, sustainable ways.