Duke Research Advantage

This is the third installment in a four-part series of postings by Duke Strategy Professors Will Mitchell and Richard Burton. Mitchell and Burton outline four principles for leading your business as an opportunity driven strategist in tough times, rather than falling into purely defensive positions that are destined to be overwhelmed by economic pressures.

PRINCIPLE 3. STAY OUTWARDLY FOCUSED

When times are tough, the temptation is to hunker down and focus inwardly, trying to cut costs and protect our traditional core. But tough times create advantages – firms that find ways to reach out for those advantages while protecting cash and reinforcing current advantages will both flourish in the tough economic times and create platforms for growth when times get better.

Now, we can hear you saying that it is easy for us to say “stay outwardly focused”, but is this really realistic when you have to protect cash and reinforce our current advantages. Nonetheless, firms that keep one eye beyond their walls in tough economic times will find powerful opportunities.

We stress three points about staying outwardly focused: Sources of opportunities parallel your needs for investment, outward focus reinforces principle 2, and outward focus creates opportunities for selective expansion even in tough times.

1. Opportunities parallel investments: Most opportunities parallel the focus of investment that we talked about in point two.

a. New customers: First, the fact that other businesses are failing means that some of their customers are up for grabs. Your job is to demonstrate to those customers that your advantages suit their needs.

b. New people: Second, the fact that other businesses are faltering means that great people will actively want to work for you. You can find unexpected opportunities to bring new skills to bear on your existing activities and to undertake focused expansion opportunities.

c. New allies: Third, the fact that other businesses are struggling means that you can attract new partnerships at favourable terms and with credible commitment. Again, new partners can bring new skills to bear on your existing activities and help you undertake focused expansion.

2. Reinforce principle 2. Most of the opportunities that arise outside your walls provide resources that you can use to strengthen your existing business. Taking advantage of these opportunities help you achieve principle 2.

3. Selective expansion. In addition, though, the fact that the economy has tightened up does not mean that opportunities for innovation is dead. Instead, any change in the market environment means that people will be suiting new sources of value that suit the new environment.

By keeping that one eye looking beyond your walls, you can look for opportunities to transform an existing product or service to serve an emerging market. As a result, times that are tough for most can become thriving times for innovative firms.