Today, I spoke with Rita McGrath, who is an Associate Professor at Columbia Business School, and one of the world’s leading experts on strategic business growth in highly uncertain environments. Her new book is called Discovery-Driven Growth. In this interview, Rita talks about how already established brands and startups can grow in this economy, as well as how to grow your personal brand, mistakes that companies are currently making and the role of social media in business growth.
How does a small business grow during this recession? What about an already established brand (Pepsi/P&G)?
The best route for a small business to grow in a recession is to be absolutely indispensable to customers in ways competitors can’t or won’t match, or to offer a service that creates real value in a way that is highly differentiated. Consider, for instance, upstart Coinstar, a coin-conversion business with which you are probably familiar. From a tiny upstart in 1991 it has grown to become a substantial presence in many retail shops, on the basis of conveniently dealing with one of Americans’ pervasive irritations, the conversion of loose change to spending money.
When times get tight, you can expect them to do even better. Ten-year old Rackspace has totaled fantastic growth by offering what it calls “fanatical service” to its buyers of hosted computing capacity. By giving customers flexibility, support and making their costs variable Rackspace should do well in a down economy. I would also, as a generic category, expect companies that can help other companies figure out how to do business with governments to do well, given the increasing role that government is likely to play in our economy for some time to come.
For established brands, this is a time to reinforce the brand values and even more closely try to fit your brand to customers’ lifestyle needs. At PepsiCo, for instance, the company is using incredibly clever timing of offers to squeeze a little better margin out of its customers. Recognizing that many of its customers live paycheck-to-paycheck, the company has started to offer different stock and promotions in the beginning of the month than they do at months’ end. For instance, larger sizes, somewhat higher end goods and fancier displays will be placed early in the month, to be replaced by small sizes, economy packs and ‘value’ promotions later in the month. The key here is to recognize how different customer segments behave rather than rely on traditional segmentation. Innovation doesn’t hurt either, particularly if it improves the customers’ experience or renders an offer more cost-effective.
As an individual brand, how do we survive this recession? Is it possible to get promoted?
You mean as people? Well although there is a lot of pain in the land, it’s good to remember that most people do still have jobs and that most companies still do have a future which means they will eventually need to develop and promote their future leaders. As individuals, there are a few basic things that we sometimes forget that can help a lot. Maintaining active networks is one that I find people sometimes get too busy (or lazy) to remember. Those networks can be invaluable if you ever need a new position – a classic study reported that 65% of all jobs offered in an entire region went to people who were referred personally.
Really doing a good job matters more now than ever.
“I particularly encourage pro-activity – the people who have to be told what to do all the time are going to be less valuable than the ones that put the energy into figuring it out and taking initiative.”
I think it’s also really important to develop your skills, through training, new assignments, participation in a task force, and those kinds of opportunities. You may not have lifetime employment, but boy you should strive for lifetime employability. And of course it’s possible to get promoted – in fact, if your company has been through layoffs or restructuring one effect is often to lessen the internal competition for the next job (squeamish though some may be to think of it this way!).
What are the steps to getting your brand on track right now?
You mean personally? Or as a business? Well, personally, in addition to the ideas above, I would definitely try to get a feel for what you do better than others, and then get the word out. Create some kind of Internet presence – a web page or just membership in social networking sites if that seems like overkill. Try to practice a little opening line that is interesting, in response to the question “What do you do?”. “I help companies that are struggling with retention issues keep their best people” is a much better answer than “I work in HR”. This is a great time to think about what you really excel at and why a listener would care. If you want steps:
- Step 1: Do an inventory of those things that are special, unique, or important about yourself
- Step 2: Figure out to whom these would be relevant (in other words, who are the stakeholders or customers you would appeal to with this ‘brand’)
- Step 3: Identify your goals – is it to get a new job? Build your profile? Get recommendations? Get new projects? Be specific.
- Step 4: Identify the vehicles through which you will communicate with these stakeholders: meeting, email, newsletter, in-person communication, networking events, whatever
- Step 5: Develop your opening lines and backup material
- Step 6: Start getting the word out
What mistakes do you think a lot of companies will make right now?
- The obvious: short-changing investments in future projects and people because of near-term pressures; clumsily handling people issues, leaving a demoralized workforce; cut things like customer service and order fulfillment which enrages customers; cut IT.
- The not-so-obvious: Get involved in big risky projects out of a sense of desperation; destroy the company culture by bringing in a “take charge” chainsaw type leader; hollow out R&D in death by a thousand cuts approaches; create bad blood between Divisions by failing to address issues of fairness and due process when downsizing.
What role does social media play right now?
It’s becoming more important as a way in which people get information and share ideas. I think it is also increasing in importance as a vehicle for creating and destroying trust and for giving power to individuals in ways that never could occur before. For instance, I posted a negative review of a DVD on Amazon.com (because the supposedly “new” 2009 DVD was a rehash of one I already owned from 2007) and not only did a whole bunch of people thank me for it, but many said it had prevented them from buying it. I even got an email from the publisher apologizing profusely and offering me free DVD’s from their collection.
Similar things are playing out all over on the big social networking sites but also on sites such as Yelp and Angie’s list in which missteps can be magnified. When everyone is connected to everyone, a bad experience or negative review can spread like wildfire. And this is even more important for younger consumers.
Rita McGrath, an Associate Professor at Columbia Business School in New York, is one of the world’s leading experts on strategic business growth in highly uncertain environments. She works with both Global 1,000 icons and smaller, fast-growing organizations. Her clients include Air Products and Chemicals, Inc., Nokia, Microsoft, AXA Equitable, Novartis, Swiss Re, Glanbia, and ON2 Technologies. She is a popular speaker and works extensively with senior leadership teams. McGrath has appeared on television and radio and has been interviewed by numerous publications including The Wall Street Journal, New York Times, Financial Times, Businessweek, Inc., and Entrepreneur. She writes actively about strategic growth on her “Dynamic Strategies” blog on HarvardBusiness.org.