The Avenues For Business Success In A Struggling Economy
Chris MacFarland, 25/01/2010, posted in "Analysis"
Chris MacFarland has more than 18 years experience in the telecommunications, software and computer hardware industries. As chief operating officer, MacFarland is responsible for all operations, sales, business development, marketing, ...more info
Chris MacFarland has more than 18 years experience in the telecommunications, software and computer hardware industries. As chief operating officer, MacFarland is responsible for all operations, sales, business development, marketing, IT, systems and product management functions for MASERGY. He most recently was chief technology officer of PAETEC Holdings through PAETEC's acquisition of McLeodUSA. Chris joined McLeodUSA in early 2006 as group vice president and CTO, where he was responsible for leading the network architecture, marketing, technical product development, corporate training, engineering and network planning functions for the company. Prior to McLeodUSA, Chris served in executive positions for a variety of telecommunications and technology companies, including BroadSoft, Allegiance Telecom, Verio and CompuNet. ...less info
Many executive teams are assessing their business strategies for surviving the current economic downturn. From lowering prices to reducing service levels, managers can adopt a variety of tactics to minimise losses – but while short-term strategies may bolster revenue, they also create a dilemma for the business. Restoring healthy margins post-recession requires a rebuilding of customer value; something that may have been lost when undertaking short term measures.
While cost cutting may be inevitable, there are other options available that maintain competitiveness. Deploying a success-based business model, leveraging industry knowledge for market positioning, maintaining flexibility for unanticipated challenges, focusing on the customer experience and offering value-based performance are all approaches that do not risk the long-term value of the company.
Success-Based Business Model
The success-based business model allows companies to compensate for economic swings by employing techniques that range from growth-driven technology deployment to just-in-time production and/or inventory management.
The networking industry is filled with facilities-based carriers who build and own the long-haul/local access transmission lines. This business model is slanted toward a “build it and they will come” approach. A significant capital investment is made in facilities and pressure is applied to the sales team to “fill up the pipes” with traffic.
To compete, companies may find it better to adopt an alternative business model; one that follows a “build it when they come” approach. For example, leasing local access circuits to connect customers to the provider’s network and only spending the capital to build a hub after establishing a minimum number of local access circuits in a market. This lets the company align its costs with customer growth.
Leveraging Industry Knowledge and Flexibility
Traditionally, businesses have always competed on price, technology or service. By understanding its industry and identifying which areas to demonstrate market leadership, a successful company can dominate its chosen sector.
For example, large carriers are typically facilities-based, giving them considerable power over the prices they can charge to use those facilities. Customers are often apprehensive to adopt new technology and, because of their comfort in legacy networks, rarely support new service providers.
To combat this, new service providers could choose to deliver a superior networking experience by opting to compete primarily on service. In a service-based approach, beating the competition involves working with your customers to identify and deploy meaningful new service offerings. This approach builds the service provider’s value while helping clients maintain a technological edge.
Customer Experience/Value
Perhaps the biggest mistake service providers make is thinking that when the economy faces a significant downturn, customers simply want lower prices. However, even during a recession customers continue to focus on value. Customers that receive superior service often will look elsewhere for savings rather than sacrifice that experience. Delivering a holistic approach to service is key to making the customer experience count, thus helping the customer form a tangible impression of the value provided.
Ultimately, companies that wish to maintain both customers and healthy margins must direct the focus of the customers away from what they think they are losing (money) towards what they realise they are getting (value). A legitimate approach could be creating a customer experience index which measures how well the provider is performing in those areas that are important to the customer.
Positioning for Success
Economic recessions provide opportunities to bring out the best in a customer relationship, rather than driving down to a zero-sum experience. Companies built on a success-based business model have an advantage over infrastructure-centric competitors because of their focus on managing costs and delivering exceptional customer service.
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