Monday, August 23, 2010

When the Going Gets Tough, the Tough (and Smart) Get Going

Disappointing news on jobs, manufacturing and financial markets are no reason to throw in the towel or cut spending plans. Bankers got us into this mess. Tech will get us out.

Stocks sank late in the week on discouraging news about jobless claims and manufacturing data. Housing prices aren’t going anywhere and warnings of a “double dip” recession are as numerous in the media as references to the “slow economic recovery.”

From a macro and consumer-centric view things look pretty lousy. Unfortunately, that’s overshadowing some optimistic signs in the big business world that we think will eventually spill over into hiring and consumer confidence.

Bottom line. Now’s not the time to duck and cover on your hiring, marketing and infrastructure improvement plans. It may be the best opportunity you’ll have in a long while to get affordable talent, media exposure and the tech foundation you’ll need to hit the ground running when government officially calls this prolonged economic downturn over.

Just as you have to hit your Refresh button on your Web browser from time to time, we think the economy, led by big business, its hitting its collective Refresh button and the smart ones are positioning themselves to ride the inevitable wave of pent up demand that’s coming.

General Motors is planning and IPO. Yes the same GM that accepted a humiliating $50 billion government bailout during the depths of the financial crisis is about to become a public company again and no doubt leaner and more globally competitive. Intel announced plans to acquire McAfee and Dell agreed to acquire 3Par. These moves – and an overall uptick in deal activity last week – dovetailed with our point made last time in this column that the surge in tech spending by companies and gadget spending by consumers will get the cash registers ringing again.

The latest surge in M&A has spurred hopes that companies will use the $2 trillion of cash sitting in their coffers to make deals and grow their businesses. "This is a logical thing to have happen," Dick Del Bello, senior partner at Conifer Group, told The Wall Street Journal late last week. "Companies are sitting on piles of cash and they're trying to find ways to take advantage of that without increasing their risk profile dramatically."

We also found two more bright spots in the tech sector – Dell’s and HP’s ability to shake off highly publicized CEO scandals (accounting fraud and sexual harassment, respectively) without noticeable damage to earnings and brand equity. HP reported Thursday that its Q3 revenue rose 11 percent to $30.7 billion from a comparable period a year ago. Dell’s Q2 revenue came in at $15.5 billion, a 22 percent jump over its Q2/09 period.

If you’re like most businesses, you’re experiencing what the PC market is going through. You’re in the throes of great change. Pent up demand from new and existing customers is starting to emerge -- Dell said its notebook sales were up 21 percent and desktop sales up 17 percent, while HP reported a 17 percent overall increase in computer sales – but both companies know that growth trend isn’t guaranteed for long.
Chances are your business isn’t that much different from Dell’s and HP’s. You’re facing new competition on at least two fronts -- global competitors who weren’t sniffing around your market as much before the downturn, as well folks who weren’t in your competitive space before the meltdown, who now smell opportunity on your home turf.

As the tech guys know, overall demand for their stuff is higher than it’s been for a while, but now Acer, Asustek and other Asian competitors are breathing down their necks for control of the U.S. desktop and notebook market while mobile phone makers and carriers aggressively moving into the tablet market. They’ve got to hold onto their longstanding turf while innovate faster in their new turfs. Sound at all like your business?

That’s where smart advertising and marketing comes in. Reinforcing your brand superiority in longstanding markets and bolstering your brand position in your newer markets. Maybe it’s no surprise that technology companies accounted for nearly a third of the top 50 most valuable brands, according to a recent Forbes/Mindshare study. The rankings looked into each company’s brand earnings over the past three years, subtracted capital employed and then took a percentage of earnings based on the role brands play in each industry. The study authors also factored in the parent company’s P/E multiple to the net brand earnings number.

Apple, Microsoft, IBM, Google, Intel and Nokia made the top 10. They may have cut way back on their ad pages, direct mail and network TV buys, but they’re finding new and innovative ways to catch the pent-up demand wave as B2B and consumers collectively gain the courage to hit their “Refresh buttons.” We’ll talk more about their credibility marketing next week.

In the mean time, maybe it’s time you re-familiarized yourself with the Refresh button at the top of your psychological Nav bar. And clear out your cache and junk folder while you’re at it. As we mentioned last time in this blog, August is the new September, and 2011 is the start of the New Normal era.


Monday, August 09, 2010

Accelerating in a stalled economy?

HP likely to be Hurd-ing for a while, but business spending on equipment and software among few bright spots in sluggish new economic report. Companies investing for the future, but spending more on infrastructure than on people. Are you seizing the day or still hunkering down?

I ran into a neighbor of mine on the beach yesterday who thought I still toiled for a high brow financial publication. “So are we out of this thing or not?” he asked me, after mentioning his plans to subdivide his property and start building on both lots – both “scaled down” versions of his current abode. He’s a teacher at an upscale private school and his wife works in a stable healthcare organization. So while neither occupation is as “recession-proof” as they’ve led themselves to believe, they’re feeling pretty good about life right now.

“How the heck should I know if we’re out of this economic S--storm?!” I thought to myself, since nothing I could say was going to dissuade him from his renovation plans. But, then thought I better respond with something a little more scholarly in case anyone else was listening in. I took a deep breath, admired the sailboats and kayaks frolicking on the water and came up with this pearl of wisdom: ”It all depends,” I said. “Depends on what?” he replied, with some impatience.

I said it depends on whether you think things are getting better or whether you think things are getting worse. Overall personal incomes dropped nearly two percent last year, according to US Department of Commerce stats and my neighbor and I live in one of the five wealthiest -- but hardest hit metro areas in the country (see stats)

My neighbor's obviously pretty optimistic about the future and that’s my point. He may not be earning a king's ransom, but his kids go to an elite private school for free. He's got summer's free, doesn't commute far and his wife's doing well, too.

People and companies who think things are getting better are hitting the ground running with expansion plans, they’re hiring, they’re pulling the trigger on delayed purchases, refinancing their mortgages etc. with the thought that “things may never be this cheap again for a long, long time.”

At my neighbor’s elite school, he said they haven’t lost a single family during the recession, “but they’re sure re-thinking that country club membership.” At the other end of the spectrum, we know have close to 2 million people going on 99 weeks of unemployment benefits and that’s not counting the discouraged, early retired, independent contractors, etc. which is probably three to four times that number.

Switch gears to Middle America. WalMart’s still doing well (Net sales for the first quarter of fiscal year 2011 were $99.1 billion, up six percent from a comparable quarter last year), but Nascar events that continually sold out in the middle of the decade drone on in front of acres and acres of empty seats. Nielsen says Nascar’s TV ratings are down 25 percent 2005 Nascar merchandise sales are down 23 percent from its 2006 peak according to The Licensing Letter. Consumers saved a whopping 6.4 percent of the after-tax income in June, according to a new report. It was one to two percent before the recession, and for most of the Baby Boom generation’s adult lives.

They don’t see any improvement from September 2008, when most folks think we officially went into the tank, and they’re hoarding cash like there’s no tomorrow. Millions of homeowners would unload their homes tomorrow if anyone would actually buy em. Millions of employees still lucky enough to have their jobs are fed up with being paid the same as they were five years ago, despite handling double the workload and three times the stress. They’d leave in a heartbeat if there was anywhere else to go.

So it all depends on whether you think things are get better at a better rate, or things are getting worse at a worse rate.

On Friday, HP’s remarkable turnaround was derailed temporarily by sexual harassment allegations against CEO, Mark Hurd. The company’s stock price took a 10 percent hit on the news, but the company will find a way to shake it off, stay focused and get back on track in the same matter of fact way it issued Friday’s press release about Hurd’s termination.

Outside the corner office, the U.S. economy lost 131,000 jobs in July, but that number was distorted as the government let go 143,000 temporary Census workers during the month. The more closely watched private payrolls numbers were also disappointing, showing just a 71,000 increase, less than the 100,000 that economists expected. To make matters worse, the June data were revised lower to a loss of 221,000 jobs from a previously reported 125,000. But the official unemployment rate improved to 9.5 percent, which is a few ticks less pathetic than 9.7 percent last month.

Great. So, things really are improving you say? Not so fast.

Ben “the Bummer” Bernanke, said last Monday that while the U.S. economy continues to grow at a moderate pace – 2.4 percent in Q2, down from 3.7 percent in Q1 -- significant restraints remain on the recovery. In prepared remarks, The Fed Chairman said the U.S. had a "considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings."

Companies spending on equipment, processes – not people

But, the government report showed a bright spot continuing in the economy: the growth of business spending on equipment and software. This spending continued to surge, increasing by 21.9 percent in the second quarter, compared with a 20.4 percent rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.

Many management and turnaround consultants I’ve talked to said business has never been better. And if you’re selling productivity tools and processes, things are looking pretty rosy too. So if you’re in the business of helping organizations do more with less – you’re liking this long-term state of flux and uncertainty. But, if you’re trying to get in, stay in or sell to an organization who’s trying to do more with less, than it’s kind of a sucky time.

So if you’re trying to reach B2B decision-makers then we recommend you hit it as hard as possible right now as we’re about to enter the Q4 selling season. There could be several years of pent up demand unleashing itself between now and year-end and you don’t want to be kicking yourself this time next year wishing you had made one more phone call to that VP or Purchasing, or sent one more e-mail blast to that Sr. Manager of Technology or tried one more time to get that white paper over to the Web marketing manager who asked for it two months ago, even though they said budgets were frozen? And what about that Webinar you scrapped mid-summer, because you thought too many thought influencers would be out of the office? Could you have just blown a chance to make the sale of the year in order to save a few bucks in your marketing budget?

When it comes to long-term purchase decisions, you never know if it's six time you touch a prospect, the ninth time or the 12th time that will do the trick.

If things are so bad, then how come business magazine ad pages are up 40 percent at Forbes from this time a year ago (Source; Mediaweek or 36 percent at Wired or 33 percent at Inc?

As we’ve been trumpeting all summer, we’re fast approaching the tipping point in which the “Opportunity Seizers” will be zipping past the “Hunker Downers” and the “Shoulda-Woulda-Coulda’s.”

Which train will you be on?