Be fearful when others are greedy. Be greedy when others are fearful."
Every board meeting I’ve attended in the last several months has been dominated by discussions about preserving cash, getting to break-even and how crappy business will be in 2009. I struggle with such discussions. It’s not that I don’t believe that there’s a bumpy ride ahead for many companies or that talking about the situation can’t help, I just don’t agree with the conclusions that are often drawn from these talks. The knee-jerk reaction is often to overcompensate, tightening down the business too much and in too many ways so it becomes ineffective and unable to move.
While I certainly believe in battening down the hatches when rough seas are ahead, I’m generally a glass-is-half-full kinda guy and I fully believe that successful companies move fast, always play offense, adapt quickly and continually innovate. Yes, even when times are tough. Contrary to several common VC themes these days, that means avoiding a defensive posture in terms of spending and headcount and to, instead, maintain a warily aggressive stance to your market and overall business.
"What?" You say, "that’s insane. I run the risk of running out of cash." No, I’m not saying that companies shouldn’t examine cost-saving measures and reduce unnecessary headcount, but I am saying that you can’t save yourself to success. Cutting deeply into muscle will not only be difficult to recover from later, but it will make you less competitive now, ultimately making it even harder for you to survive, let alone succeed.
If you’re not getting better, you’re getting worse."
So, how does one reconcile the anal-retentive need to hoard cash and protect assets? How does a CEO convince his/her board that being cautiously aggressive is a better path than cowering in the corner until the dark clouds of uncertainty blow over? You do it by making sure you respond instead of react, you never panic (check out Brad Feld’s excellent post on The Difference Between Panic and Urgency), but mostly, you make sure that every move you make is calculated and thought through. No randomness and little experimentation. Simply put, it’s back to the basics.
To be aggressive, you need to be lighter on your feet – able to recognize the changes required and to implement them very quickly. You need to be smarter, do more homework and move quickly. The way to achieve this business momentum is by acquiring more customer and market intelligence than you used to have. More real data gives you the opportunity to speed up while being on the path most likely to lead to success. You have to assume that nothing is coming to you – people, business or new ideas – you have to aggressively go out and hunt down everything that will move your company forward.
It’s easy to get lost in the myriad of dire predictions about your market or even the overall worldwide economic situation. Randomly cutting costs and waiting until the news gets better is hardly a solution, though. Before you do anything, think. Do you know everything you need to know to give you a fundamental advantage over your competition? Do you know what you don’t know? Do you have a plan for finding out? Sure, you’re going to have to make a few guesses, but make them educated ones.
Only when you’ve gathered all the necessary knowledge and wisdom should you be making the appropriate cuts to projects and staff. And, only then will you be ready to move forward aggressively. Of course, keeping on top of your customers and your markets doesn’t end there. The diligence you used to set yourself up must be continued during the implementation of your new plan. The more you know and the more energy you put into making informed decisions – especially staying very close to your customers – the harder and faster you can drive sales.
Or, you can stick your head in the sand . . . there’s always that.