Friday, July 17

Changing A Down Economy: It's Psychology


At least once a week in this market, someone tells me their company is holding off on advertising, marketing, or social media until the government can fix the economy and the market improves. And every week, I give them the same advice to think about.

The economy is not your company's problem, it is your company's psychology that is a problem.

As part of what our company does every day, we research specific industries in order to find strengths and weaknesses within specific niches. We do this for many reasons, ranging from our own market intelligence purposes to specific research, forecasting, and communication recommendations for an assortment of clients in this market and elsewhere.

One cursory research study we recently completed tells the story aptly enough. According to research, this particular niche outperforms in a down economy. And, sure enough, in most markets across the country, this particular niche does excel. Except in this market. In this market, 15 percent of businesses operating in that niche have closed. Why?

Localized, national, and global markets behave differently, but with similar psychologies.

Jeanne M. Liedtka, faculty member at the University of Virginia's Darden School of Business, knows. Writing for The Washington Post's leadership blog, she suggests that many businesses have adopted the same strategy as Goldman Sachs — "hunker down, cut costs, batten down the hatches, play it safe, and wait for the economy to turn around."

Her advice? Change your psychology, followed with four solid tips for businesses on any playing field (paraphrased below).

• Conduct some research to help you understand your company and its place within the market.
• Do something, even if it is small, to demonstrate the value of an idea that can propel the company forward.
• If your company has to lay people off, resist any temptation to cut across the board and focus on keeping performers.
• Learn to embrace uncertainty rather than allowing it to immobilize your company with fear.

The economy is not your company's problem, it is your company's psychology that is a problem.

There was some cautionary advice left in the comments of Liedtka's post too. Several stood out, but one worth mentioning came from Giancarlo Newsome, who works with Clockwork Solutions.

"The advice is reasonably sound but there are some significant mines in this field of approach that have been laid that must be exposed... the HOW is critical," wrote Newsome. Hmmm ... how indeed.

While it's always prudent to ensure that internal ideas have not descended into what Kurt Vonnegut once described as badges of friendship or enmity — Their content did not matter. Friends agreed with friends, in order to express friendliness. Enemies disagreed with enemies, in order to express enmity — the how is useful as long as it doesn't immobilize the do.

Sometimes the how needs to come from the first bullet rather than an internal vote on the individual popularity of various people and badges of friendship or enmity (or worse: entitlement, rank, and position) within the organization. If it doesn't, then the organization stands to go the way of Goldman Sachs' thinking.

For that one niche that ought to be over performing in this economy (mentioned earlier), 15 percent have already proven the outcome of that thinking. As the old saying goes, one definition of insanity is someone who does the same thing over and over, and expects a different outcome. It's time to change your organizational psychology. Or has it changed already?

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