Many are trimming their ambitions and expectations. That's not the way they should be acting. Here are seven ways they can go on the offensive instead.
On July 4th Tech Crunch was cheering that “2011 may go down as the year of the tech IPO.” Silicon Valley was gearing up to party like 1999. How things have changed. Negative economic news abounds, Wall St. gyrates, Europe is messy, Washington looks broken and people are occupying this and that.
Right now many tech CEOs are nervous. So as they work on closing Q4, some are quietly taking down their 2012 sales forecasts, freezing hiring and travel, back-peddling on M&A deals, trimming R&D efforts and dampening their valuation/market cap expectations. As a CEO recently told me, “it’s real work out there.”
The big mistake most company leaders make in a recession is playing too much defense. So if we are heading into another tech downturn what should you do? Play equal parts defense and offense.
To be clear, now is no time to be reckless. Cash is always king. And if 2012 is going to be worse for tech companies than 2011, putting spending under a microscope right now is smart. Acting as if your last funding event, was your last funding event for a while is even smarter.
That said, don’t miss the opportunity to play bigger. A McKinsey study of the 1990-91 recession found that companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R&D and ad budgets.
So why do so many leaders fail to seize opportunity in bad times? Because downturns are scary. It’s hard to mobilize boards and executive teams to action in the face of increased uncertainty. It is easier to default to the mean, saying “let’s cut costs, keep our powder dry and we’ll get more aggressive as the economy improves.” This is akin to saying “I’ll throw logs on the fire, once things warm up in here.”
What is predictable is that your competitors are collecting spreadsheets and planning on playing mostly defense. So as you examine your defensive strategy, here are some ideas for your offence:
If I’ve learned anything being in the Silicon Valley octagon for several boom and bust cycles, it’s that legendary people build legendary businesses in good times and bad. While the economy has some impact on a company in the short-term, over the long-term it doesn’t matter that much. Apple, Facebook and VMware (to name a few) took massive market share in the last recession. So as you complete your 2012 planning, be equally smart about playing defense and offence.
Christopher Lochhead is co-founder & partner of Play Bigger Advisors.