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Improved Market Conditions or Double Dip Recession?

August 2002 Corporate

Variances in fortune telling continue to be told. On one hand, Forester reports an 2.3% increase on IT spending during 2002 over 2001 according to a Business Technographics North America Benchmark Study of 1001 Senior Business and Technology Managers. On the other hand, the Wall Street Journal reports declining prices for the semiconductor equipment industry, quoting Standards & Poor’s expectations in a further decline of 30% in the remaining portion of 2002. Meanwhile, the Economist warns of the frequency of double dip recessions going back to the bleak periods during `73-`75 and `81-’82. Where is the truth? More importantly, what should we do?

Anxiety is high during this late summer season for B2B sales and marketing people. To add to the problem, August a difficult time for conducting business with the high portion of business contacts on vacation and business decisions being put off until the fall. Even without the seasonality in business cycles, the hope of a long-draught in revenue ending in a welcomed the autumn shower of business is becoming a fleeting dream and frightening nightmare for several businesses. In light of these uncertainties, it is a normal psychological response to postpone decision making until the cognitive dissonance created through great uncertainty is resolved. Unfortunately, this is not at proactive approach and may be the tactically flawed.

At an abstract strategic level, a business person may approach this season and conduct a scenario planning session. A task force could be charged with creating three different scenarios for the next fiscal year: one of deepening or continued recession, one of stead-state or slightly improved economic conditions, and the third of the return to 2% to 5% annualized GDP growth. Next, this scenario task force could outlay specific business actions to take under each of the possible scenarios. These actions can then be tested for robustness to determine which set of actions produce the most positive outcome regardless of the economic conditions. Finally, business decision makers could select their tactical action path based upon the collective wisdom and expected future economic conditions.

This theoretical and abstract approach is used by many businesses in a variety of industries, such as Shell, Merrill Lynch, and Eli Lilly. But this intellectual approach fails for many smaller businesses and marketing managers. It fails not because it is unsound, but because (1) many small businesses and marketing managers lack the latitude in decision making that larger organizations possess and (2) it may not sufficiently motivate a team to improve the companies economic condition.

Business doesn’t improve on its own. The outcome of our choices is not solely dependent on the fates. Waiting for external factors to change our position is an unacceptable choice for small organizations. We are business people making decisions and taking actions to improve our own lot. Chicago is the “Town of Big Shoulders” (www.sobs.com) because we get work done and make things happen.

This is the time for leadership.

Leadership has been defined by many better authors than myself. One aspect all authors use in characterizing leaders is their unwillingness to accept the environment as a given. Leaders take specific actions to improve their condition and in doing so they change themselves, their followers, and the environment in which they exist. Successful leaders are not foolish with regards to their environmental conditions, but likewise they do not accept them as an unmovable force.

The economic uncertainties that we face are not an acceptable excuse hide in the office and wait for improvement. Our jobs as business people are based upon making decisions, driving actions, and improving our own conditions. So, utilize power that has been granted to you. If you have been considering a new sales and marketing program, a repositioning of your product, or the entry into a new vertical, don’t cower behind your desk and wait for the market to change as a sign of approval. Make the decision now and lead your team towards the successes from which everyone will benefit and enjoy.

Strategic action won’t guarantee success, but it is a great improvement over waiting for the economic indicators to give a clear picture.

The May Report, TECH BUSINESS BRIEFS, Sept. 4, 2002



About the author

Tim J. Smith, PhD is the Managing Principal of Wiglaf Pricing, and an Adjunct Professor at DePaul University of Marketing and Economics. His most recent book is Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures.

Tim J. Smith, PhD
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