Thursday, August 26, 2010

It’s the economy, stupid.

Here’s a tale I’ve heard all too often.

It’s a great business, respected in its category and suddenly your best client announces that all projects over $100k will go through an RFP process requiring six bidders. Now you’re facing serious competitors, and a shortage of work. Worse, projects you do win are far less profitable.

This is nothing new. We live in a market economy and prices for consumables have been dropping since the dawn of the industrial revolution. The phenomena of dropping prices, isn?t steady, it comes in fits and starts. This is one of those down moments. A couple of years ago it was all up. However, over the long term the downward trend is relentless. That’s the big picture.

The small picture, however, is where it can get really ugly.

The current economic climate has unleashed a wave of corporate cost reductions that have hit my clients hard: Walmart’s relentless pressure on suppliers to lower prices; P&Gs recent pricing drop to private label levels; Microsoft’s adoption of tighter purchasing policies.

Some say that the giant public companies are using the recession as an excuse to cut costs across the board far in excess of what’s necessary, using the recession as cover. Maybe so, but the real question is what to do about it.

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3 Comments

  • The big issue is that most creative firms want to spend more time blaming the economy instead of changing to be a successful part of it. We can’t WAIT for things to return to NORMAL. The past is just that… past. Look at your business model, eject the parts that no longer fit, and build something that is sustainable in this new world.

  • Dick Malloy says:

    Hi Ted!

    Nice to hear from you. I am glad I am retired.

    Dick

  • In this down economy, business has moved into a mode of trying to improve the bottom line by cutting costs. It?s a short-sighted strategy, but when share-holder value is a higher priority than creating real value, this strategy does what they want. For those of us in creative business, we experience this as a lowering of value for what we do and for creativity in general. Eventually business will come to realize that ?you can?t shrink your way to greatness,? as Tom Peters once said. There is no way of knowing when that will turn around, and in the mean time, it is our reality.

    The opportunity for creative people is to look beyond corporate business to find new opportunities that perhaps didn?t exist before. The same technologies that have caused so much disruption for traditional businesses are also opening up new opportunities for creative people. At a recent conference I heard Sergey Brin say ?at Google, we constantly ask ourselves, what can we do with this technology that we couldn?t do before.? It?s a great question for creative professionals to ask of themselves. I?m excited about the ways I?m discovering to do an end run around the corporate giants.

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