We keep hearing about all the bad news in this recession (Tribune Company, GM, Circuit City for example). You could easily believe there is no good news. But if we look a little harder we can see that there are businesses which are looking forward and taking actions to build market share – winning against competitors that are reacting by retrenching and hiding in a foxhole. There is a better way to manage when times are tough than cutting costs and "waiting for times to get better."
Ever heard of Tractor Supply Company (see chart here)? If you live in a big city, probably not. As the name implies, this retailer has largely supplied products to farmers and competitors in the agrarian economy. Of course, the number of individual farms has been declining for decades as the economy shifted from agrarian to industrial – and now to information. So you would expect Tractor Supply to be disappearing from the retail landscape, especially during times so difficult that much better known retailers are disappearing and filing for bankruptcy.
But that is not the case. Tractor Supply realized that while "production" farms are fewer and becoming a less attractive market, on the periphery of more and more cities there were people with unsupplied needs. And as cities expanded, and corporations moved headquarters to the suburbs, these ex-urban and suburban families were increasing the number of pets – and in some cases picking up pets like horses and other animals traditionally considered livestock. "Gentleman farms" of only 5 or 10 acres were increasing, where families escaped urban lifestyles to enjoy a connection with gardens, small crops and a few animals. They also needed tools, and hardware for fences and buildings – in short a panoply of products not readily available at Home Depot. And with that insight to the changing market, Tractor Supply has been expanding. The chain has 834 stores (and you never heard of them?). The company opened 20 new stores last quarter, compared to 21 a year ago and 70 this year compared to 63 last year. They are now opening 2 stores in outlying Chicago. The company is growing more today than last year, and moving into new markets where even Wal-Mart has chosen to leave. (Read article about Tractor Supply growth moves here.)
Another great example is Papa John's pizza restaurant chain (see chart here). We keep hearing about how people are eating out less now than before. The marketplace is struggling, as chains such as Bennigan's have shut their doors, unable to draw enough customers. So analysts keep talking about more failures in restaurants. Yet, Papa John's ignored the analysts and figured out a way to grow.
Instead of restricting itself to the "tried and true" revenue growth approaches used by most chains – such as television advertising and newspaper coupons – Papa John's studied how people were using the internet, and created White Space to develop new marketing approaches. They created a one-day campaign, flooding websites such as MySpace.com, NHL.com and others with display ads, via Google ad placement. The result was a 20% revenue jump. By driving people to order on-line, rather than old-fashioned telephone orders, they saw average ticket sizes increase 10-15% due to increased ordering. And they have connected many more customers to Papa John's email marketing. For example, on Facebook the number of Papa John's fans increased from 10,300 to almost 187,000 – an 18X increase in just 3 weeks! Now Papa John's is adding more on-line opportunities for customers, such as advance ordering (up to 21 days – say for a party) and "repeat last order" capability to make transactions fast and easy. As the world moves to the web, Papa John's is learning to use the web to connect with customers and grow! (Read about Papa John's on-line marketing programs here.)
It's easy to bemoan a recession, say there's little you can do, and start whacking at costs. It's easy to get down in the dumps, and lose interest in trying to do better. Tough market news can breed discontent and worry and inaction. In the cost-cutting process you well might lose some of your most valuable employees – and leave yourself quite unprepared for future competition (read here at Harvard Business Press about how traditional recessionary cost cutting reduces competitiveness). Even worse, while you tread water, you greatly increase your vulnerability to competitors who focus on market shifts, analyze competitors to upend them, Disrupt their old behaviors to create future focus, and use White Space to try new things which can create a much better returning Success Formula in the changed marketplace. These Phoenix Principle companies are the ones that will lead future growth in revenue and profits by not running for foxholes today, instead concentrating on how they can Disrupt and use White Space to become a far more successful competitor.