You've Cut Costs, Now What?
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.
With incredible external focus, Jobs is able to offer consumers products they didn’t know they wanted, marketed in such a way that they debut as hits and stay hits year after year.
Thanks to the brilliance of Apple’s innovation and marketing, today’s consumers have come to expect that all brands be capable of producing products as cool and intuitive as iPods and iPhones, not to mention the vast iTunes and App stores to support them.
On top of that, there is Amazon and eBay, and a seemingly infinite galaxy of online shopping sites that have emerged over the past 10 years. There has never been a consumer base more able to demand low prices, ease of use and great selection, all delivered in ways they never even imagined possible.
Are you really going to tell me that your answer to this set of circumstances is just to cut costs?
It is impossible to answer those three questions, and take a visionary, holistic viewpoint, with an internal focus. Ignoring consumer needs, changes in the marketplace and the innovations of competition will almost always put you in a position of playing catch-up. And the more you do that, the more you risk becoming obsolete.
Welcome to the age of repositioning.
Adapt and innovate or take your chances. And while cost cutting does not equate innovation, innovation doesn’t have to cost a lot of money. It does require a new perspective, though. Just begin to shift your focus outward. Ask yourself, how can we bring different ideas, different thinking to a marketplace that is lacking and how can we offer something new and exciting that customers didn’t even know they need or want. Challenging questions, I know. But at least they are the right questions to be asking—questions that can lead to answers that will help your brand stay relevant and competitive. There’s no way a question like “Where else can we cut costs?” will do that.
Now more than ever, companies have to challenge the status quo and it can’t be done with an insular mentality. Even if you are making money, and your brand is not hurting, you need to constantly consider your positioning. Business, like a boxing match, can be won or lost in a single round, or with one good punch. If you are not consistently considering how to best reposition your brand, you could be in trouble faster than you know it, and faster than you can correct it. It is not just about having a competitive advantage, it is about assessing your ability to consistently gain and sustain that advantage. You may be winning now, but the fight isn’t over. Not by a long shot. If you don’t stick and move, your competitors will.
Anthony Viceroy is President, Global Business Operations, and Chief Financial Officer of Porter Novelli, a global PR firm.