How Companies Are Forming Up, Two Years After The Recession Began

By | September 16, 2010

We thought this was an opportune time to look at the current market-place, two years after Lehman Brothers collapsed and we entered near economic meltdown.

The businesses that are still here have grouped around three different realities.

Group 1 – The Going Gangbusters Group
These companies (and there are more than you might think) are doing great business and making more profit than ever before. They have found a particular sweet spot, sometimes by circumstance sometimes by making some very clever decisions. In working with some of these businesses the reasons for their success are down to one or more of the following:

  • Competitors have either gone bust or exited the market, creating a demand bubble.
  • They are selling something that is distinctive and compelling and great value for money, which lots of consumers/businesses want to buy.
  • They have gone deep rather than wide, really specialising in a particular field, which competitors can’t easily replicate.
  • They are lucky to be selling into overseas markets that are in growth mode.
  • Their strong relationships with a small group of customers have strengthened during the recession and as those customer markets have picked up so their preferred suppliers have benefited.
  • They are unburdened with debt or/and have access to growth capital.
  • They have a visionary leadership team who have been prepared to call the market and make some brave decisions.

Group 2 – The Buried Talents Group
These companies are basically waiting. They are waiting for the market to come back so their customers can ‘get going’ again. Their profits are at best flat or at worst none existent. Instead of using their resources and intellectual capital, like the lazy servant from the parable, they have taken the ‘risk free’ option. Except this is where the analogy breaks down. Waiting decreases their competitive advantage. The business environment is dynamic; it changes, adapts, reforms and moves on. Going defensive for the first six months of the recession was probably OK, but given the occluded horizon, there are no clear signals of recovery, only businesses that either do something or have something (see above), and those that don’t.

Group 3 – The Deeply Conflicted Group
These companies are doing OK, not great, but OK. Things look fine, however when you get behind reception and into the Boardroom you find something different; a battle for the future direction of the company. Sometimes it’s between individuals; sometimes it’s going on privately in the mind of the CEO, his/her directors perhaps being part of the problem/challenge. It is an argument, constructive or otherwise, about risk, investment, diversifying, their offering, the strategic direction of the company. And because of the lack of clear market signals (see Group 2) it’s tempting to procrastinate, to postpone, to rationalise and to justify (to themselves) why now is not the right time.

Which group is your company a member of?

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