The prognosticators are busy forecasting a tough 2009. Coming after the big slowdown in 2008, it would be tempting to do like Microsoft (see chart here) and cut costs in an effort to improve short term profits (read article here). Microsoft hasn't developed new products generating excitement or growth for a few years. It's botched effort to take on Google by purchasing Yahoo! was a disaster, leaving the company with no growth projects of note. Meanwhile, Vista had a lackluster launch, and is now being forced on new computer purchasers who regularly say they would prefer to run the older Windows XP. And every month Linux eats into Microsoft's market share. So for the first time ever, Microsoft appears to be planning to layoff employees - of as many as 10%. For a tech company dependent upon growth, this is not a good sign.
A better response can be seen at Domino's (see chart here). Since inception, Domino's has been synonymous with home delivered pizza. Although a leader in its segment, the company has not fared well for years, causing it's equity valuation to fall precipitously. Price wars in pizza are constant, and new product varieties are consistently being brought to market by endless competitors. In the last quarter, sales in open stores fell 6% versus a year ago, and net income fell almost 10%. It would be easy for Domino's leadership to redouble its effort to Defend & Extend its pizza business, and let some franchisees fail as it shrunk the open store base and cut costs.
Instead, Domino's is going into 2009 with an attack on Subway's Sandwich shops (read about launch here). In 2008 Domino's leadership recognized that following the pizza market into price warring would not improve sales or profitability. So it Disrupted and explored new opportunities to grow. After various tests, the company identified an opportunity in sandwiches, and a target competitor in Subway's. Using White Space to test and refine the approach, the company developed its initial Success Formula modifications to move beyond pizza – which has long been part of the company name and identity – and enter this market, reaching new customers at new times of day with new products. Confronting a difficult market, instead of "digging in" to an unprofitable war Domino's used scenario planning, competitor focus, Disruptions and White Space to identify a growth opportunity — even in a tough economy.
There are no rules requiring businesses keep doing what they always did. Those who prosper realize that when growth slows it's smartest to find new markets in which to compete. For every market suffering from price wars and over-competition there is a market with opportunity. Maintaining long-term success requires moving into new markets, launching entirely new products and acquiring new customers. Those companies exhibiting these Phoenix Principle behaviors will do a lot better in 2009 than those who focus on layoffs and cost cutting.