Strategy: 4Cs For Surviving In Crisis Times

In the September 15 – 21 2011 issue of the BRW magazine, one of my favourite columnists John C. Lyons summarised the key priorities for thriving through economic downturns as 4 Cs: Cash, Customers, Costs and Creativity.

I think his article is absolutely right on the mark and worthy food for thought for all businesses. Here’s what he said – with some of my own thoughts added.

CASH: Apart from cash being vital for business survival, Lyon points out that cash is needed for value-creation activities (marketing, innovation, etc) and capitalising on opportunities such as acquisitions. Apart from maximising cash flow from your operations, he suggests that you may wish to consider raising equity or arranging additional financing facilities.

So, are there parts of your business that are tying up excessive amounts of cash? Are you playing “banker” to your debtors? Is there stock sitting around that’s just tying up real estate and cash resources? If it wasn’t selling before and doesn’t look like it’s going to be a “hot” seller in the future, get rid of it even if you have to discount it.

CUSTOMERS: Lyons makes two oft-repeated yet oft-forgotten in practice points. Firstly, it’s cheaper to keep and nurture existing customers than acquire new ones. So look after your existing customers and gain greater share of their wallet. Secondly, difficult times are when you should be stepping up your marketing activities, not cutting them back as so many businesses do. Marketing at a time when your competitors are axing their promotional activities could potentially enable you to pick up their customers and thereby build market share. Obviously, you need to have well-thought through marketing strategies!

COSTS: Lyons notes that whilst you should get rid of “organisational dead wood” at this time, you do need to be judicious in this pruning exercise. Cut fat but not muscle. Ensure that you focus resources on vital value creating activities such as customer acquisition and essential functional but non-value creating activities such as accounting are done in the most cost efficient way possible.

CREATIVITY: Lyons points to the rise and rise of Apple from near death in 1997 to recession defying growth through the Global Financial Crisis as an example of how creativity in the form of “adjacent innovation” can keep a business thriving even through the most difficult times.

If you look back through history, some of the biggest names in business were born during the Great Depression. Just Google the phrase “innovation in the Great Depression” and you will see countless examples of how innovation helped companies survive and thrive through the most difficult economic times in history.

There is talk in the markets today about the potential for whether Great Depression version 2.0 will soon be upon. You have a choice: freeze in fear of gloomy uncertainty or turn on the creative juices and innovate your way to greater prosperity.

Note innovation isn’t just about a “big bang” new technology or other invention. It can be about a more creative application of existing technologies (termed “adjacent innovation”) as in the case of what Steve Jobs did with Apple. [The fact that Apple is a supreme marketing organisation obviously plays a key role as well. If you don't have the marketing skills in-house, outsource them. It's importance in value creating cannot be sufficiently emphasised.]

A great book to read about innovation is “Where Good Ideas Come From: the natural history of innovation” by Steven Johnson (published by Allen Lane, an imprint of Penguin Books).