Today, I spoke to Steve McKee, who is a marketing expert, columnist and author of the new book, When Growth Stalls.  In this interview, Steve talks about how companies can sustain growth during the bad economy, and how people can develop their careers.  Steve shares research from his book and then talks about entrepreneurship.

Why is it so hard for a company to sustain growth?   What are the challenges that lead to instability?

The short answer is that we live in an imperfect, unpredictable world. As with the quarterback of a football team, we often ascribe to successful companies more credit than we should in the good times and more blame in the bad. But nobody can control every variable, anticipate every competitive move, or predict every outcome. It’s just not possible.

My research shows that at any given time some 15 percent of all companies are stalled, which we define as zero or negative year-over-year revenue growth. Of course, with what’s going on now that number is no doubt significantly higher. I’ve seen some estimates that over half of all companies may be flat or go backwards this year, and that wouldn’t surprise me a bit.  In When Growth Stalls, I spell out the three major factors that tend to sabotage growth: economic downturns (enough said), competitive moves and changing industry dynamics. No company is immune to any of the three, and sometimes they simply can’t be overcome in the short term. That’s when growth stalls.

How can companies survive in this economic environment?   What are your top 3 tips?

  • Since every company’s struggle is unique, the answers for each will be unique as well. Of course, the single most important thing is to preserve cash, because without it (as GM, Chrysler and Citibank have discovered) you’re sunk. Ford wisely (some would say fortuitously) mortgaged a number of its assets prior to the downturn, putting the company in a healthier cash position that may mean nothing less than its survival. The lesson here is to look around; while sales revenues are down, there may be other ways to generate cash. Do it.
  • Tip number two might seem contradictory, but that’s the art of business. It’s to keep investing in the things that matter. I give a number of examples in the book and on my blog about companies that have found ways to keep investing in marketing and R&D, knowing that they’re the lifeblood of future growth. As I’m fond of saying, you can cut your way to survival, but not to success. Wise companies find the balance.
  • Third, make sure the members of your team are all on the same page. We all cope with challenges in different ways, and right now people are not only worried about their corporate finances by their personal finances as well. That makes them all somewhat tinderbox-like on any given day—ready to burst out in flames at the slightest spark. It’s vital to maintain communication, trust, and a common purpose so that no matter what happens the company stays focused. In fact, this problem is the number one internal dynamic that I warn companies to watch out for in When Growth Stalls. It can be a silent, deadly killer.

As an individual working for a company, what are your  suggestions for career development during a recession?

It’s funny, but they’re not a lot different than what I would recommend for a company (just as you preach personal branding in a way that’s very similar to corporate branding). Of course you need to conserve cash (we all have to pay the rent), but don’t lose sight of your own “R&D”, if I can call it that. A recession is a great time to pick up new knowledge and skills or hone those which you already have.

Rather than sticking your head in the sand (or in front of the TV) in fruitless escapism, use this opportunity to get ahead of the competition by improving what you have to offer. As leader of a company myself, I’m working twice as hard for half as much through these difficult times. Any of my employees who demonstrate the same level of understanding and commitment are moving up in my appraisal. It won’t be long before they move up in the organization as well.

What research can you share that went into writing your book?   What was most intriguing?

The first and most comforting fact that came out of my research was the near-inevitability of stalled growth. The reason it was comforting was that my company was stalled at the time, which is why we embarked on the research in the first place. So instead of dwelling on what I might have done wrong, that knowledge freed me up to focus on solutions.

The second thing that struck me is how consistent the four destructive internal dynamics we identified are among stalled companies. Now whenever I speak to groups I see incredible head-nodding at the insights that I present.

People say it’s as if I’ve been sitting in their boardrooms, observing their management meetings when I tell them what might be going on within their companies. That, in fact, is why I wrote the book. When you discover something that’s hurting a lot of companies and of which they are probably unaware, there’s a tremendous opportunity to make a positive impact by sharing the information. That’s what I wanted to do.

What does it take to be an entrepreneur in the world today?

To be an entrepreneur takes all sorts of things, as you know, from guts to passion. But if I had to choose a single word—especially in today’s environment but essentially anytime—it’s perseverance. It’s getting out of bed, day after day, and putting one foot in front of another through thick and thin. I never felt as unimportant as they day I started my business and tried to get credit, customer service, or favors from those to whom I couldn’t immediately offer something in return.

I was a nobody, and they let me know it. The only things that kept discouragement from rendering me useless were a loving wife and four small kids who were depending on me to make it work. For the past dozen years my partners and I have been able to do that, but we face new obstacles every day. There is no other option in dealing with them but to persevere. I have a feeling that no matter how successful an entrepreneur or his/her company becomes, that never changes.

Steve McKee, agency founding partner and president, has held executive positions at NW Ayer Advertising, Della Femina Travisano & Partner, and Phillip-Ramsey, a division of McCann-Erickson Worldwide.  He has also been published or quoted in The New York Times, USA Today, Advertising Age, ADWeek, Investor’s Business Daily and The LA Times, among others.  He has appeared on CNBC, ESPN2, CNNfn and Bloomberg and writes a monthly advertising advice column in BusinessWeek Online.  Steve is the author of When Growth Stalls: How It Happens, Why You’re Stuck and What To Do About It.