You've probably read that 80% of new jobs are created in small business. Even if this is true, it creates a misconception. You'd think that we need to start lots of new companies. As BusinessWeek reported in "Looking for More High Growth Start-ups" 40% of new jobs are created by a mere 1% of start-ups. The really fast growers.
We like to think that all companies contribute job growth to the economy. But that is simply not true. In reality, the vast majority of businesses contribute no new jobs. In fact, they are reducing employment. Almost all of the job growth, in fact almost all of the economic growth, comes from a very small number of companies that account for almost all the real growth. These are the 10% of companies that are in the Rapids. All others are either looking for early growth, or trying to "hang on" to an outdated Success Formula and seeing their business slowly (or not so slowly) erode.
Most small businesses are in the Wellspring. Looking for some kind of growth. Most of these – literally 90% – never really figure out a Success Formula that drives growth, and they simply die off. The other big group of businesses are somewhere in the Flats or Swamp. Growth has left them, as market shifts have taken demand to other competitors. They are facing a Re-Invention Gap between what they do and what most customers really want. As a result, they produce no inflation-adjusted revenue growth, and no new jobs. Eventually, as the re-invention gap grows, they drift into the Swamp of declining returns. Eventually they become obsolete. Think about independent pharmacies, most insurance agents, small banks, bicycle shops – you get the idea.
So where do we get new jobs? From the companies that are in the Rapids. Think about the skkyrocketing employment at places like Boeing and airlines when aviation was a growth industry in the 1960s through the 1980s. And the growth in computer and IT jobs in the 1990s. Those businesses that participatd in the Rapids are participating in market shifts, and they are creating new revenues and jobs.
Today a good example is Google. While traditional companies are lamenting "a bad economy" Google is participating in the market shift, and thus creating revenue growth and new jobs. At PoynterOnline.com, in "Google Team Offers Lessons in Innovation, Project Management", we can read how the GMail team discussed at the recent South by Southwest Conference their approach to remaining in the Rapids. While other organizations are frozen in place, trying to Defend what they've always done, and thereby falling into the Swamp, Google keeps pushing forward with new solutions that help customers do new things — and thus create additional growth.
Apple, Amazon and Cisco are additional examples of organizations that are using Disruptions and White Space to keep their companies participating in market shifts. As a result, they've kept growing in 2008, 2009 and into 2010. They don't blame the economy, they keep innovating and taking new solutions to market. Thus they grow. Those companies that are blaming the economy are simply spending too much time trying to Defend & Extend their old Success Formula, and drifting into obsolescence.
Even big, entrenched companies can grow. The Wall Street Journal recently interviewed the CEO of Austalia's phone company, Telstra, in "If You Don't Deliver Numbers You Aren't Doing Your Job." He points out that as CEO his most important role is to keep the company growing. He could easily have gotten stuck thinking of his business as a traditional, land-line telco. But his role is to balance the management of an old Success Formula with implementing White Space which can evolve his company forward into a post-modern communications company with new technologies and new solutions. As a result, what could be thought of as a bureaucratic monopoly is much more successful, growing through its participation in market shifts.
Alternatively, we have AT&T, and its former leader Mr. Whitacre now ensconced at General Motors. The original AT&T almost went bankrupt before being acquired by what was Southwestern Bell – then renamed to AT&T. AT&T kept losing jobs by the tens of thousands – as did the regional Bell Companies. Mr. Whitacre, with his "caretaker" approach to the old Success Formula, simply kept buying up old pieces of the original AT&T and laying off more people. Today AT&T is a shell of what it was in the early 1980s when split apart. It is not an aggressive part of the market shift, nor is it growing like Telstra.
And Mr. Whitacre is now at GM. Another company that is deeply mired in the Swamp – and very unlikely to avoid the Whirlpool. GM is not leading in any market shifts, and as a result its sales are not growing – nor is its employment. Lacking participation in growing markets, GM will continue shedding revenues and jobs as it marches toward obsolescence.
Myths about lifecycles abound. The biggest is that if you stick to your core, you will keep growing. Somehow you will jump from one new product line to the next, and maintain growth. But it just doesn't happen. Focusing on your core causes you to drop out of growth as market shifts make you irrelevant – like Wang, Lanier, Digital Equipment, Silicon Graphics and Sun Microsystems. Growth slows, employment shrinks. To succeed you have to continuously participate in market shifts, to keep yourself in the Growth Rapids. And for our economy, we desperately need more leaders to refocus on creating Disruptions and White Space to grow – like Google – if we are to get the U.S. economy growing again.
Did you ever notice how often a large company will introduce a new solution (often a new technology), but then retrench from promoting it? Frequently, the market is developed by an alternate company that captures most of the value. We can see that behavior looking at smartphones.
In 2008, three early leaders were Microsoft, RIM and Palm. But Microsoft chose to invest in Defending & Extending its PC software business – with updates to the operating system in Vista and OS 7. As the market has shifted toward mobile computing, Microsoft has been clobbered. But largely because it remained stuck trying to protect its "core" while the market shifted away. Palm also tried to Defend & Extend its early position with updates, but because it did not follow the pathway to greater usage with new applications it also has seen dramatic share decline.
Meanwhile, RIM has promoted new uses within the corporate world for mobility, and thus grown its market share. And Apple has made a huge impact by bringing forward dozens of new mobile applications, closely followed by Google. What we see is a classic example of the early entrant fading largely because they decided to Defend the old market, rather than investing in the new one. Really too bad for shareholders in Microsoft (losing 20 share points) and Palm (losing 10 share points), while good for shareholders of RIM, Apple and Google.
And in Apple's case we can see that the company continues using White Space to grow revenues by expanding the new marketplace. The iPad is off to a very strong start, with tens of thousands of units ordered last week. But of greater importance is how Apple is promoting the shift to mobile devices from traditional PC devices. At SeekingAlpha.com, in "How the iPad, Slates Will Evolve the Next Two Years," the reporter projects how demand for all laptop products will decline as more capability and functionality is added to mobile devices like smartphones and these new slate products.
Microsoft can keep trying to Defend & Extend PC technology, but it won't be long before their efforts largely won't matter. Don't forget that once Cray computers was a rapidly growing super-computer company. But increasing performance from much alternative products eventually made Cray irrelevant. Same for Silicon Graphics and Sun Microsystems.
Today the market capitalization of Microsoft is about $250B, about 4x sales. Apple's market cap is just over $200B, about 6x sales. Google's market cap is about $180B, about 8x sales. All reflect investor expectations about future growth. The D&E company is simply not expected to grow – and in fact is much more likely to disappoint than the companies growing share in growing markets toward which customers are shifting.
And any company can choose to participate in growth, versus Defend & Extend. While Tribune Corporation is trying to find a way out of bankruptcy, and struggling to figure out how to deal with market shifts away from newspapers, Hearst is taking positive action. The Wall Street Journal reports in "Hearst Jumps Into the Apps Business" how the old-line newspaper company has set up a White Space project, complete with dedicated people and its own funding, to begin developing mobile applications for news!
Even when business leaders see a market shift, far too many choose to Defend & Extend the "core." Unfortunately, that leads to disappointments. Keep in mind Microsoft and its rapid loss of Smartphone share as users move increasingly to mobile devices from PCs. To succeed leaders need to drive their organizations in the direction of market shifts, and growth. Like Apple, Google and even Hearst.
I don't know the source of the phrase, but since a young boy I've heard "Nero fiddled while Rome burned." The phrase was used to describe a leader who was so out of touch he was unable to do the necessary things to save his city and the people in it. Lately, it seems like General Motors is ancient Rome.
"General Motors to launch the 'un-Dealership" is the Mediapost.com headline. Trying to leverage auto shows, GM is going to open minimally-branded brick-and-mortar locations in 3 or 4 cities where customers can test drive Chevrolet and other cars. The idea is that with less pressure from salespeople, customers will come use the internet cafe and hang out while occasionally test driving a car. Then they'll be fired up to go buy a GM product.
If that isn't fiddling…… well…… When will leaders admit GM is in seriously dire trouble? The company has lopped off complete product lines (Saturn, Hummer, Saab and Pontiac) and whacked away large numbers of dealers. Their cars are uninteresting, and losing market share to domestic (Ford) and foreign manufacturers. Design cycles are too long, products do not meet customer needs and competitors are zeroing in on GM customers. Product sales, and even dealerships, are being propped up using government subsidies. The best news in the GM business has been all the troubles Toyota is having.
During this malaise, the new GM Board agreed to appoint Ed Whitacre as the permanent CEO (see ABCnews.com article "GM Chairman Ed Whitacre Named Permanent CEO.") Great, just what GM needed. Another 70 year old white male as CEO who developed his business experience in the monopoly of the phone industry. Who's primary claim to fame was that after Judge Green tore AT&T apart to create competition he was able to put it back together – only after the marketplace for land-line phones had begun declining and without growth businesses like mobile data.
As the ABC article notes, Mr. Whitacre sees his role running GM as "a public service… I think this company is good for America. I think America needs this." Just the kind of enthusiasm we all like to hear from a turnaround CEO.
GM needs to get aggressive about change if it is going to survive in a flat auto business with global competitors. The company has no clear view of how it will be part of a different future, nor any keen insight to competitors. It is floundering to manage its historical products and distribution, with no insight as to how it will outmaneuver tough companies like Honda, Kia and Tata. It has not attacked its outdated product line, nor its design cycle, nor its approach to manufacturing. It has very little R&D, and is behind practically all competitors with innovations. A caretaker is NOT what GM needs.
I blogged months ago that GM needed a leader who was ready to change the company. Ready to adopt scenario planning, competitor obsession, Disruptions and White Space to drive industry change and give GM a fighting chance at competing in the future. It's going to take a lot more than 4 test drive centers with internet access and latte machines to make GM competitive. But given what the new Board did, putting Mr. Whitacre in the CEO role, the odds are between slim and none the right things will happen.
One of the worst impacts of Defend & Extend Management is the placement of a bullseye on your business. Take for example Microsoft. When everyone knows what software Microsoft is going to release, they start targeting it for hacking and otherwise spoiling. Likewise, competitors can predict Microsoft's moves and launch products that compete alternatively – such as Firefox and recently Chrome have done in Browsers. And has cloud computing using mobile devices. As leaders take actions to Defend & Extend the Success Formula the business becomes predictable, and much easier to attack.
And that's now a big problem for WalMart.Advertising Age is now discussing this problem at the world's largest retailer in "Stuck-in-middle Walmart Starts to Lose Share." As WalMart kept promoting, over and over and over, its message of "low price" (how many "rollback" ads did you see on television with images of falling price signs?) a single position was drummed home.
But while WalMart did this, smaller and more nimble competitors like Dollar General have actually been able to undercut WalMart on price – sucking away customers. Additionally, changes to improve margins in WalMart stores, and some redesigned stores, have caused prices to go up at WalMart making the company no longer the price leader! In several categories Target has beaten WalMart in professional pricing surveys! What happens when WalMart, with its concrete floors, limited merchandise and lowly paid employees is no longer the price leader?
Unfortunately, not everybody wants low price – especially all the time. And smart competitors like Target have been figuring out how to beat WalMart on specific items, while also offering a better shopping experience. While WalMart keeps trying to cut prices on the backs of vendors, thus not being the favorite customer of most, Target and others have been smarter about making deals which offered more win/win opportunities. They took specific aim at weaknesses in WalMart's strategy, and are now ruining WalMart's day by beating WalMart selectively while simultaneously offering more! WalMart made it possible by signaling its strategy and tactics so clearly. A result of Defend & Extend management.
WalMart would like to move away from being strictly low price. As the article details, the company has implemented a "project impact" intended to upgrade stores and make them more merchandise and experience competitive. However, this has raised prices and confused shoppers. If WalMart isn't "low price" what is it? Again, when management is all about Defend & Extend then customers aren't able to understand behavior that is different from doing more of what was always done.
WalMart's move to upgrade stores is laudable. But the company cannot implement a change through the traditional store operations. Phoenix Principle companies know that good new ideas cannot survive as part of the existing D&E business. Confused customers, unhappy and confused management and conflicts with historical metrics (like pricing and margin metrics) simply makes the new idea "out of step" with the Success Formula. And as Lock-ins (like "we are low price") are violated discomfort leads to resentment and a desire to get back to old ways of doing business. People start asking for a "return to the core of what made us great." For these reasons, "project impact" is not succeeding and has no real chance of succeeding.
WalMart is in trouble. It's growth has slowed as competitors are figuring out other ways to compete. Ways WalMart cannot follow. Competitors are picking apart the WalMart strategy, and siphoning off revenue and profit. Walmart is stuck in the Swamp, with no idea how to regain growth because the old approach has rapidly diminishing returns and the new approach is not viable in the organization.
To succeed, WalMart needs to apply The Phoenix Principle to "project impact." It must first develop its future scenario, and start spreading that message throughout WalMart and analysts. Otherwise, confusion will remain dominant. Secondly, WalMart must be honest with employees, customers, vendors and analysts about changing competition and how WalMart must change to remain competitive. It must talk less about WalMart and more about competitors and market shifts. Thirdly, WalMart has to be willing to Disrupt itself. Instead of all the incessant "rah rah" about the great "WalMart way" of doing things top management has to start saying that it is going to attack some lock-ins. It is going to force some changes. Then, "project impact" needs to be implemented in White Space. It needs to report outside the existing WalMart operations, have its own buyers, merchandisers, employees (maybe even allowing a union!). It needs permission to violate old Lock-ins in order to develop a new Success Formula, and the resources committed to really do the implementation – including testing and changing.
WalMart is Locked-in and its Defend & Extend Management approach is not good news for investors, vendors or employees. We can see that competitors, from on-line to the traditional Target, are taking shots at the bullseye Walmart has so proudly worn. Market shifts are happening. But WalMart is not establishing White Space to develop a new solution, and as a result the leadership is confusing everybody about "What is WalMart"? The company doesn't need to go back to its old ways – instead it really needs to apply The Phoenix Principle. But so far, D&E Management seems to be leading.
Two tech giants are Microsoft and Google. The former has been around for over 30 years. The latter about a decade. Which is the company you should work for, or invest in? The one that has demonstrated a long history and great record of earnings, or the newer one participating in new markets still not well understood with a slew of new – but largely unproven – products? You might think the older one is less risky, and feel more comfortable backing.
But we know that Microsoft is losing market share, especially in growing markets. Although its products have been dominant, the market for those products (personal computers used as servers, desktop machines and laptops) has seen substantial slowing. New solutions are emerging that compete directly with Microsoft (new operating systems like Linux and others) and compete indirectly (cloud computing and thin applications on mobile devices.)
In just 18 months Microsoft Internet Explorer has lost 13 market share points – dropping from 68% of the market to 55%. Almost all of that has gone to Safari (Macintosh) and Google Chrome. Chrome has risen from nothing to 7% of the market. And since internet usage is growing, while desktop usage is shrinking, this is the "leading edge" of the market.
Also, the Chrome operating system will be launching later in 2010. It also will go directly after the "Windows" franchise which had a very unexciting launch of System 7 in 2009.
Let's look at valuation: First Microsoft – which has gone basically sideways. Huge peak to trough, but overall not much gain for investors despite launching two major upgrades during the period (Vista and System 7 as well as Office 2007). Obviously, upgrade products have produced very little growth for Microsoft, or its valuation.
Now we can look at Google. Google investors have doubled their money, while employment has grown. All those new products have helped Google to grow, and investors have an optimistic view of future growth.
Do you make decisions looking in the rear view mirror, or out the windshield? It can be tempting to be influenced by a great past. But that really isn't relevant. What's important is the future. And we can see that Microsoft, which keeps trying to Defend & Extend what it knows is rapidly falling behind the market changer, Google, which is rapidly moving toward where markets are heading.
D&E Management never creates growth. By trying to recapture the past, new market moves are missed and growth opportunities lost. Companies have to move forward, with new products, into new markets. And if you have any doubt, just compare the results of Defend & Extend Management at Microsoft the last 5 years with Phoenix Principle management using White Space at Google.
Apple's shareholder meeting was last week. In an era where shareholders are most worried about the survivability of the companies where they are invested, the biggest issue at Apple is what to do with all its cash! Reuters.com reported "Apple's Jobs says must think 'big' on cash hoard." In 2009, when most companies saw their market value decline, Apple's value doubled. Yet, it's cash is fully 1/5 (20%) of its current market capitalization! Clearly the company is generating cash faster than it has found investment opportunities. Even after launching the iPad with expectations of selling 2 to 5 million units in 2010!
We all should be so lucky, to have this problem of riches. Apple has enough cash that it could buy all the equity of Dell. Of course, why do that? It just goes to show that the company that built its market cap in the 1990s on Defend & Extend behavior – focusing on execution in a growing PC marketplace – has seen its valuation multiple shredded as buyers have shifted to other solutions. Meanwhile, Apple's value has skyrocketed because it entered new markets and created new solutions. Yet, it's cash flow has skyrocketed even faster!
It is possible for all companies to follow Apple's lead, increasing revenues and valuation. Last week I was interviewed by Zane Safrit for his radio program and highlights are on his blog, and the full interview is available for listening at the BlogTalkRadio site. In the interview Zane brings out how so many business leaders are stuck defending and extending broken Success Formulas that cannot produce better returns, and waiting for a "better economy" to "save" them. What Zane also cleverly brings out is how The Phoenix Principle can be applied to any business, with results that can be as stunning as Apple's. If leaders will start focusing on the future, obsessing about competitors, utillize Disruptions and White Space.
Of course, these are amplified in the "10 Ways to Stay Ahead of the Competition" I posted in yesterday's blog. I've received comments that the links to the deeper discussion on both the Business Insider web site and the IBM Open Forum weren't working, so I'm reproducing them here again.
All companies can grow like Apple. But it takes a different way of approaching management. I hope you can find time to listen to the interview and explore how your organization can become like a Phoenix, forever growing through constant rebirth.
Guy Kawasaki contacted me a couple of weeks ago, asking me to write a short piece for him. I was happy to do so, and he published it at the BusinessInsider.com War Room as "10 Ways to Stay Ahead of the Competition." Fortunately for me, the article was also picked up at IBMOpenForum.com with the alternate title "How to Stay Ahead of the Competition." Full explanations of each bullet are at both locations (although the graphics are outstanding at Business Insider so I prefer it.)
Develop future scenarios
Obsess about competitors
Study fringe competitors
Attack your Lock-ins
Seek Disruptions
Don't ask customers for insight
Avoid Cost Cutting
Do lots of testing
Acquire outside input
Target competitors
Blog followers know that this program has now worked for many companies who want to grow in this recession. The reason it works is because
You focus on the market, not yourself
You avoid Lock-in blindness by avoiding an over-focus on existing products, services and customers
You use outside input, from advisers and competitors to identify market shifts that can really hurt you
You put a competitive edge into everything you do. Competitors kill your returns, not yourself.
You use market feedback rather than internal analysis guide resource allocation
Of course this works. How can it not? When you are obsessed about markets and competitors and you let it direct your flow of money and talent you'll constantly be positioned to do what the market values. You'll have your eyes on the horizon, and not the rear view mirror.
The biggest objection is always my comment about "don't ask customers for insight." So many people have been indoctrinated into "always ask the customer" and "the customer is always right" that they can't imagine not asking customers what you ought to do. Even though the evidence is overwhelming that customer feedback is usually wrong, and more likely destructive than beneficial.
Just remember, IBMs best customers (data center managers) told them the PC was a stupid product, and IBM dropped the product line 6 years after inventing the PC business. DEC's customers kept asking for more bells and whistles on their CAD/CAM systems, then dropped DEC altogether for AutoCad ending the company. GM customers kept asking for bigger, faster more comfortable cars – improvements on previous models – then moved to imports with different designs, better gas mileage and better fit/finish. Circuit City customers asked for more in-store assistance, then took the assistance across the street to buy from cheaper Best Buy stores. The stories are legend of failed companies who delivered what the customer wanted, and ended up out of business.
Enjoy the links, and thanks to Guy for publishing this short piece. Follow these 10 steps and any business can stay ahead of the competition.
"From the day we start kindergarten we fear the teacher's call to our
parents saying, "Hello Mr. and Mrs. Smith. I'm sorry to tell you that
Mary has been disruptive in class." We are taught, trained and
indoctrinated to go along and get along, to not disrupt. In fact we're
constantly told to seek harmony. But in business that can destroy your
entire value."
That's the first paragraph from my Forbes.com column, posted today,"To Succeed You Must Seriously Disrupt." Companies that don't Disrupt remain Locked-in to Success Formulas with declining value until all hope is lost – just look at Sun Microsystems. Although Chairman Scott McNealy was famous for his Disruptive corporate behavior – he was unwilling to tolerate disruptions from his own organization to the company business model. In 10 years Sun went from $200B market cap to out of business.
Now Toyota is struggling because it wouldn't Disrupt. Meanwhile Honda is doing much better than most, because it is willing to Disrupt. Listen to the 40 second video on Disruptions, and read the article so you can see the need for Disruption and adopt in your business!
Google keeps on growing. While many companies bemoan revenue losses and poor results in 2008 and 2009, Google keeps new products flowing out the door and revenues continue to increase. New markets are being developed.
This Google revenue growth is powered by use of White Space, as CNN.com reported in "Gmail holds Graduations and Funerals." GMail labs is a White Space team that develops new applications and uses for Gmail. Its operating premise is that it should develop the products rapidly, then push into the market to get feedback. Then the team can determine what to modify and test further, what to push into the market as non-beta and what to kill. As recently demonstrated in the headlined behavior, Google is ready to keep some things and kill others based upon market feedback – not just what the internal people or analysts think.
"This isn't the first time Gmail Labs has graduated and killed some test
features since Gmail Labs started in June 2008, but the event does
underscore an idea that Google says is key to its success as an
innovative company: Let people create products they'd use themselves,
get those products out to the public as soon as possible, and make
consumers think it's OK for things to break."
""At Google, in general, the philosophy is to get things out quickly in
front of our users and not make huge promises," said Ari Leichtberg,
another Google engineer"
Nothing is more accurate than real market feedback, as readers of this blog have heard me say often. Scott Anthony of Innosight recently took up this mantra in a Harvard Business Review blog "How to Kill Innovation: Keep Asking Questions." He relates how a large company with a new idea kept asking "what if" questions about a new idea. Each piece of research led to more "what if" questions. With its massive resources, the company could keep asking and researching forever, never getting real market input and never getting the innovation to market.
In traditional companies, with a new product funnel and stage gate implementation process which can take years to run through, once something moves into the market the internal "champions" are so vested in the innovation they can't stand for it to fail. Far too often, if the innovation were to fail the champions would lose their jobs – or see their careers tank. Too much analysis causes too few ideas to make it to market, and causes the organization to overspend on the innovation that does. After launch market feedback is often ignored, or manipulated, to allow the innovation to be pushed harder and longer on the hopes that with "just a little more time and effort" it will succeed.
What keeps Google growing, and attracting top talent, is its willingness to use White Space. It is willing to develop ideas quickly and obtain real market feedback. Then decide what to keep, and what not to keep. Because it moves quickly, market input shapes the offering. Market input allows the company to see what people really use, and thus worthy of additional investment. Or what people don't use, and thus needs to be dropped before too much is sunk into the idea.
When Microsoft decided to add "clippy" to its products it was a herculean effort to install it across all products. This computerized help tool has had little use, and is often despised by users. Microsoft decided to create this feature based on almost no market input, instead relying on some customer focus groups. After making the enormous investment – in lieu of many other opportunities passed over internally – Microsoft simply became "married" to the innovation. Now "clippy" is still on the applications, but is almost never used. And it gives Microsoft's products no user advantage.
All companies can grow in 2010. You need to act more like Google. Develop early stage products quickly, and get them into White Space projects which will market test them. Don't spend too much time, money and effort "what iff-ing" or doing "market research" trying to predict future customer behavior. Listen carefully for market input, then modify. Have more than one opportunity in White Space, because you don't want to over-invest in any single idea that ran the internal gauntlet. Be ready to move forward quickly with things that work, and abandon those that don't. If you use give yourself permission to test new things in White Space, and resources, you too can grow in 2010 and climb out of this recession.
Every day it seems someone tells me they "are looking forward to an improved economy." When I ask "Why?" they give me a horrified look like I must be stupid. "Because I want my business to improve" is the most frequent answer. To which I ask "What makes you think an improved economy will help you?"
This recession/depression is the result of several market shifts.What people/businesses want, and how they want it, has changed. They no longer are willing to part for hard earned (and often saved) dollars for the same solutions they once purchased. They want advances in technology, manufacturing processes, communications and all aspects of business to give them different solutions. Until that comes along, they are willing to put money in the bank and simply wait.
Take for example restaurants. Many owners and operators are complaining business was horrid in 2009, and still far from the way it was years ago. And regularly we hear it is due to "the recession. People fear they'll lose their jobs, so they don't eat out as often." Nicely said. Sounds logical. Makes for a convenient excuse for lousy results.
Only it's wrong.
In "Dinner out Declines: Economy Not Sole Factor" MediaPost.com does a great overview of the fact that dining out started declining in 2001, and has steadily been on a downward trend. Across all age groups, eating out is simply less interesting – at least at current prices. When the recession came along, it simply accelerated an existing trend. Increasingly, people were less satisfied with cookie-cutter, similar establishments that had similar food (almost all of which was prepared somewhere else and merely heated and combined in the restaurant) and exorbitant drink prices. For years restaurant prices had outpaced inflation, and simultaneously family changes – along with the growth of better prepared foods at grocers and specialty markets – was enticing people to eat at home.
This is true across almost all industries. A revived economy will not increase demand for land-line phone service. Nor for large V-8 American autos costing $60,000. Nor for newspapers, or magazines – or even books most likely. Or for oversized homes that cost too much to heat and cool. In fact, it was the trend away from these products which caused the recession. People simply had all of these things they wanted, so they stopped buying. Fearful of economic change, they simply accelerated a trend brought on by shifts in technology and underlying ways of doing things. When we once again talk about better economic growth in America it will not drive people to these purchases. Rather, people will be buying different things.
For the recession to go away requires a change in inputs. Providers have to start giving buyers what they want. They have to understand market needs, and give solutions which entice people to part with their money. Waiting for "the economy" will make no difference. Government stimulus can go on forever, but it won't create growth. It can't. Only new products and services that fulfill needs create growth. That will cause spending (demand), which generates the requirement for supply.
There are companies that had a great 2009. Google, Apple and Amazon are popular names. Why? Not just because they are somehow "tech" or "internet" companies. 2009 saw the demise of Sun Microsystems and Silicon Graphics, for example. The difference is these companies are studying the market, looking to the future and introducing new products and services which meet market needs. Because of this, they are growing. They are doing their part to revitalize the economy. Not with stimulus, but with products that excite people to part with their cash.
Those who are waiting on the economy to improve are destined to find a rough road. An improving economy will be full of new competitors with new solutions who did not wait. To be a winner businesses today must be bringing forward new products and services that meet today's needs – not yesterday's. And if we start getting winners then we will climb out of this economic foxhole.
