Thriving in a Down Economy
By Michael Q. Pink
One evening I asked the manager of an upscale, casual steakhouse how business was going. While acknowledging their industry was being hammered with revenues down about 15%, he had been able to maintain revenues similar to the same period last year. While that’s pretty good news, it was the next thing that really got my attention. He said profits were up $12,000 over the same month last year, which was about a 40% increase! Growing profits rapidly in a strongly declining market is no small thing. Would you like to know how he did that? There were three major rainforest principles at play here.
The first was the Kapok Strategy. The Kapok tree is an emergent rainforest tree that towers above the canopy. During dry season the Kapok tree, starved for precious water, will shed most or even all its leaves to preserve its resources.
Leaves on a tree are the workers. They absorb light and combine it with water and CO2 to produce things like wood, fruit, nuts, etc. But when provision of a vital resource like water is in a period of recession, the Kapok tree, like many other rainforest trees, will drop its leaves and produce flowers. Flowers are for marketing. Trees will let go of their workforce of leaves so they can invest their limited resources into producing flowers, which in turn market to new customers like birds, bats, bees, monkeys, etc., that in turn pollinate them, giving the tree a new lease on life.
The first part of this strategy, the releasing of leaves, is a human resource management strategy. In times of economic drought, most companies can’t afford to sustain employees who aren’t producing a profit or at least contributing in a way that facilitates the production of profit. The steakhouse manager said that they either cut staff or cut their hours and the remaining staff sometimes did more than one job. The end result was a newly invigorated, highly productive, slimmed down team that operated efficiently and profitably. Now is the Time to Take Up the Slack in Your Business… There are two ways to do that: Either redeploy employees into other productive activities or release them back into the marketplace. Many of you may find this harsh. The Kapok tree has no emotional issues about letting the leaves fall. God designed it that way because if it tried to nourish all the leaves during the drought, the whole tree would die and there would be no future for any of them with that tree. Managing human resources wisely during times of drought will often mean the difference between survival or failure.
The second rainforest strategy they employed was what we call Fungigation. It’s where underutilized assets are reconfigured and/or redeployed more profitably. This is done by identifying the core components of each asset and recombining them to produce something new. In Ohio, when a leaf falls to the ground in October, it will still be there a year later; but in the rainforest when a leaf falls to the ground, fungus will break it down to its core components and feed it back into the tree within 30 days. There is zero waste.
So here’s one way the restaurant fungigated. When their filet mignon comes to the restaurant, it comes in large cuts weighing several pounds from which the restaurant will slice off single serving portions. Their food cost for a steak dinner was about 40% and there was always waste because the original large cut of meat would always have some left over after cutting off the customer portions.
To minimize waste, they created a new dish with a new name using the same ingredients but in different proportions than previously offered and for less than $15. They modified several of their product offerings reducing their food cost from 40% to 32%, while simultaneously enhancing the customer experience and saving them money! What products can you repackage or recombine with other products or services you offer to create something new that meets the current needs of your prospects or customers?
Redefine Your Marketing Message… As a third strategy, the restaurant kicked in the Orchid Element. The production of flowers in the rainforest is all about marketing and this restaurant began advertising aggressively. But what did they lead with? Was it how tasty their food was or how much fun it was to dine there? No… They redefined their marketing message to fit the current drought. They began promoting the fact that they had fifteen meals for under $15. They led with price to let consumers know that they could come and enjoy some wonderful meals in their favorite steakhouse for less than $15! The net result is that their customer count is actually up. Their revenue per meal is down, but their profit percentage per meal is much better. Advertising in Drought Creates Explosive Growth… You may be hesitant to spend money on advertising. With so many companies that is one of the first expenses to cut, but did you know about the McGraw-Hill research done on companies who maintained or increased their advertising throughout the 1981-82 recession? Those companies experienced an average sales growth of 275% over the next five years! But those companies who cut their marketing saw paltry sales growth of 19% over the next five years, if they were even still in business.
While many companies are in panic mode or hunker down mode, there is tremendous opportunity abounding. This is your chance to gain market share but you must control your expenses. Then repackage, recombine and reposition your company and your products in the mind of the consumer. Redefine your message in terms that are relevant to the times and increase your visibility. When your competitors are going underground or completely out of business, you can step up to the plate and take dominion over that market space.
Thoughts on Successful People by Chris Widener
I was hired to do some training for a sales team from one of the largest companies in America. There were 16 people on this team. This year their sales (for the 16 of them) will be $250 million—that’s right, a quarter of a billion dollars! Needless to say, it was an excellent and fascinating time. I decided to learn a little bit myself so I watched them closely to see what kind of people they were and to see what common denominators they shared. Below is what I found. I think you will find the elements applicable to your own life.
The first thing I noticed about this successful sales team was that they had a sense of humor! They simply weren’t a terribly serious bunch of people. Instead, they saw that life was to be enjoyed and that means they were able to laugh a little bit. Sure, there were varying levels in this but they all had a sense of humor. They were able to laugh at circumstances, and they were able to laugh at themselves. It was quite refreshing and a core element of their success, I’m sure.
The second thing I found out about this group was that they did not achieve their success through pedigree, but through hard work. They didn’t come from families that gave them a free pass into the upper echelon of the corporate world and they didn’t get a head start from upper-crust universities. What got them to where they are now? Hard work! That’s right, another example that if you put your mind to it, work hard and get in the right situation, you can achieve great things! These folks work long hours and are disciplined in the work they do. And it is paying off.
The third thing I noticed about this team is that they are learners. They were always engaged in the learning process. During my sessions they were engaged and listening. You could see their minds processing the information. They were asking questions and applying the material to their work and their lives. They wanted to improve in any way that they could. It was also interesting to watch them in their team meetings led by their sales manager. They were very interactive and were learning from one another. None of them was above learning from a peer.
What did I see in these successful people? The same things that can make you a success as you apply the principles to your own life: A sense of humor, hard work, and a desire to learn at every turn.
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