Congratulations, you cut costs! Now what?
Have you ever been punched in the face? It hurts—a lot. It is just natural human instinct when hit like that to cover up or turn away. That’s why I am always amazed when watching a boxing match. Even while being hit, good fighters have an incredible ability to resist instinct and clearly assess the next opportunity to gain a competitive advantage. They don’t freeze when they get hit, and they definitely don’t waste time trying to figure out how to have a smaller face to get punched in. It’s a shame we don’t do the same in business. Lately it seems like figuring out the most efficient way to have less face to get punched in has become accepted as the best strategic response to the pummeling that is now our economic environment. It’s called cost cutting.
Just like flinching from a punch, cost cutting may be instinctual, but it is highly reactive and extremely passive. It is not going to help you win any of the fights you are in, and it is not going to stop the pummeling. Unless your costs are wildly out of control, cost cutting should not be your focus. To continue the analogy, yes, you have to be in good shape to get in the ring, but being in shape is not a strategy. It’s a prerequisite.
So what should you do? Well, let’s go back to the ring and look at a boxing fundamental called “stick and move.” That’s when a boxer combines well-timed and well-placed jabs with long punches, moving forward and back to engage and evade his opponent. All fighters learn this, but great fighters are the ones who do it best. They constantly assess the rhythm of the fight, in perpetual motion in real time, to find their opponent’s weak spots and missteps for opportunities to win. In the world of business, we call this repositioning.
Traditionally, repositioning has been seen as a dramatic, large-scale shift to recapture relevance in the marketplace. And while that kind of reactive repositioning certainly still has its place, the kind of repositioning I am talking about involves a brand’s need to consistently and proactively assess its role. It is about regularly making small, strategic adjustments in order to stay engaged with consumers and maintain competitive advantage. In today’s economic climate, intensified by the incredible velocity of communication and innovation, this type of repositioning is critical.
Successful repositioning almost always begins with an external focus and three basic questions:
- What are we offering?
- Why is it better than the other choices out there?
- How are we going to make money from it?
These are high-stakes times for brands.
We have all seen cases of brand equity evaporating rapidly. Overnight, what may have been a competitive advantage could no longer be relevant, thanks to the stunning rate of innovation, competition and general market conditions. Companies that are focused internally on cutting costs expose themselves to incredible risk.
Change happens quickly, and the only thing that can keep a brand prepared for it is a relentless focus on creating value. A company that focuses externally, on consumers and on the marketplace, will keep and maintain advantage. Other than a possible lower cost structure, does anybody really think that internal cost cutting has any effect on consumers’ relationship to a brand?
If you aren’t thinking about consumers’ relationship to your brand, you are in trouble. Not only are we in a time of great economic correction, we are also working with a consumer base that is more savvy and more frugal than ever before. With less discretionary spending power, less credit and plummeting consumer confidence, today’s consumers are shell shocked, but they have also been spoiled by a decade of awe-inspiring technological innovation.
Blame Steve Jobs.