As I said in Part I, the way out of this prolonged recession is business-as-usual. For technology solution providers, that means the following:

• Continued New Product Development
• Continued Spending on Marketing and Thought Leadership
• Continued Workforce Development
• Continued Process Improvement

Continued New Product Development

This is vitally important for a number of reasons. It demonstrates:

• you’re a well-run company and a little market hiccup isn’t going to hold you back,
• you realize that new competitors are entering the market every day with innovations of their own and that the only true way to provide lasting value is to continue to improve your solutions,
• you know that the only way to make things better is to keep trying, and that
• you take a level-headed approach to business with a plan to be around for the long haul.

Continued Spending on Marketing and Thought Leadership

This is just as important as New Product Development because, and I know this from experience, having the best product in the world is a moot point if no one knows it exists! This doesn’t mean you go crazy and spend twice as much as you spent on marketing during a peak business year, just that you take the percentage of your budget you’d normally spend on marketing above and beyond head-count, like 5%, and spend it on marketing. So, if forecast projections over the long term (to average out unsustainable demand increases in bull years) state that, with a slow-and-steady growth curve, you’d do 10M, you still spend that 500K on marketing.

Marketing lets your potential customers know that you’re here for the long haul and still developing solutions that will help them lower costs, increase productivity, and get out of this mess quicker. It’s also the only way to establish you as a thought leader (provided you take part of that budget to support, and market, thought leadership), which is key to not only being remembered when a customer gets a new technology budget, but getting invited to the table.

The reality is that, if you don’t market, you’re out of sight. If you’re out of sight, you’re out of mind. If you’re out of mind, you’re NOT getting that RFI or cold-call. If you don’t get that RFI or cold-call from a customer with money to spend, you’re not getting any new customers. If at most 10% of the market is buying, how likely are you to find a lead through cold calling who’ll invite you to the table … before they’ve already bought a competitor’s solution?

Continued Workforce Development

At the end of the day, your success all comes down to your people. Companies don’t build products … people build products. Companies don’t design winning marketing campaigns … people design winning marketing campaigns. Companies don’t think … people are the thought leaders. And if your budget is tight, you shouldn’t be adding too many bodies … when you need to add brainpower. And you do that by developing the staff you already have. If we’re truly moving to a knowledge and innovation economy, then you’re going to get a lot more out of educated, experienced, well-trained staff than just a body in a chair. The best developers can be 20 times as productive as an average developer (using bug-free lines of code as a metric). The best inventors can produce 10 times as many inventions. The best through leaders can produce market-changing ideas where an average person just produces refinements that might not even get noticed at all. Relatively speaking, a few dollars on training can lead to a few thousand in productivity gains.

Continued Process Improvement

And I don’t just mean doing the same process better. I mean bringing in an expert to do a complete review of your development, delivery, and operational processes to find opportunities for improvement that you won’t notice when buried in day-to-day operations. This lowers your costs, which allows you to lower your prices, which allows you to grab more market share. You don’t necessarily have to hire a McKinsey Partner at 5K a day either … there are plenty of niche consultants who can jump in, do a focussed assessment, and net you great results for 1.5K to 2.5K a day in a couple of weeks … paying for themselves almost immediately.

I’d hoped I wouldn’t have to state the obvious, but everywhere I look it’s doom and gloom together with ridiculous economic explanations pulled out of a depth so dark that even a proctologist with a flashlight would have trouble finding the source, when the answer is extremely simple. In fact, I can sum it up in one word. FAITH.

And no, I do NOT mean faith in your God, a God, Gods, what you perceive my God or Gods to be, deities, supernatural beings, faith healers, shamans, or any other religious entity you might care to believe in.

Nor do I mean faith in the government, Wall Street, or other people in power to “make the right decisions” and “pull us through this”.

I mean faith in the system. Like religion, systems only work (and catch on in the first place) if people believe in them and have just the right amount of faith^*1. Too little faith, and things fall apart. Just like the influence of a religion will decline until it eventually disappears if people stop believing in it and making it part of their daily life, the strength of the system will degrade when people stop buying, selling, and participating in the system on a daily basis … until it starts to fall apart. Similarly, too much faith will lead to problems. Just like overzealousness led Middle Ages Christians to the Crusades and small groups of Muslims to the extremist jihads of today, too much faith in the market leads to overzealous buying, selling, evaluations, and run-ups that are unsustainable and lead to crashes. In other words, too much faith broke the system, too little faith is preventing its recovery, and just the right amount of faith will fix it.

The only way out of this mess is BUSINESS-AS-USUAL. As I’ve been saying for months now (in my Dumb Company, Dead Company, and Your Marketing series … see my recent rant), business people must accept that the path to business-as-usual IS business-as-usual. In a free market economy, this includes bankruptcy (which, as Robert Rudzki points out, is vital to capitalism). We must conduct business as usual (without unrealistic assumptions of demand or profitability increase … remember, slow and steady wins the race), or we’re going to stay in a quagmire. And in this space, as I’ve repeatedly said, the leadership has to come from solution vendors and consulting firms because the majority of buyers work in organizations where the CPO is not part of the C-suite and can’t directly influence the path of their company.

Faith should start with, above all else, faith in yourself and your ability to make a positive impact on your company, your industry, and the economy in general. This requires making smart decisions each and every day. Over the next three days I’ll be offering up specific starting-point suggestions that solution vendors, consulting shops, and buyers can use to get their organizations, the industry — heck, maybe even the economy — back on track.

^*1 For those of you who don’t see a connection between religion and economic models, try to look at modern culture through the eyes of a future “new” archaeologist with a strong anthropological bent. Such an archaeologist would say that societies are strongly influenced by people’s beliefs, and people’s beliefs are strongly influenced, and part of, their religion. Based upon the remnants we’re likely to leave if we vanished today, this future archaeologist would see almost universal evidence of technology and commerce but only pocket evidence of the many different religions that are practiced today. Said archaeologist may in fact be led to conclude that the major religion of our time was capitalism. Now, I’m sure my intelligent readers will find as many arguments against this as for, but it is something to think about.

Although it was targeted at retailers, a recent Harvard Business Review article titled “How to Market in a Downturn” made a good point that enterprise software and solution providers need to heed, especially if they want to not only survive this downturn but pick up new business. The message is this: “Marketing is NOT optional.”

Here’s the Catch-22: if companies don’t market, buyers don’t know they exist. And if too many companies trim their marketing budget to zero, advertising channels begin to shut down (as newspapers are doing), further narrowing opportunities for customer acquisition. In the sourcing vertical, now more than ever, buyers need a solution that can help them reduce and avoid costs, so they can notch an ROI quickly. If you’re a services provider (for example, an expert consultancy in category cost reduction or spend analysis), or a SaaS vendor with a low cost of entry, your time to acquire new customers is now — but that’s going to be difficult if customers don’t know you exist. Ironically, if your potential customers aren’t able to get the help they need, which will be tough if they can’t find you, then they could go out of business as well, taking with them an account that you’ll never win.

As the HBR article pointed out, building and maintaining a strong brand — one that customers trust — remains one of the best ways to reduce business risks. IBM, who had a record profit last year and who recently announced that they plan to have another record profit this year, has spent decades building their brand. Closer to home, Ariba, Oracle, Emptoris, and other big names grab the lion’s share of the spend management business, funding, and buzz. They are names people know, because, year in and year out, they make sure people know them and what they do. Are they the best solutions? With regard to most of their spend management offerings, they are not the best, sometimes not even close to being best. But that doesn’t matter, because everyone knows who they are and they get invited to almost every RFP, while most of their best-of-breed competitors, who haven’t done enough marketing (or, these days, aren’t marketing at all) aren’t invited to the party.

Now, you’re free to believe what you will and disagree with me, but from where I sit, this is what I see: any vendor who doesn’t market is likely to be among the next to go. This prolonged recession is busy doing what years of M&A activity couldn’t, namely, condensing the market to a small handful of key players for each technology and services offering. A number of providers in this space, who thought they could forego all marketing, halt new product development, stick their heads in the sand, and wait it out, have already undergone significant layoffs, and I know of a few who are on the block. I thoroughly expect that more folks who have adopted the conserve-cash and wait-it-out strategy will join them in the year ahead, especially those that simply don’t have the cash reserves or the steady revenue model that will allow their competitors, but not them, to survive.

Thus, if you are an end user, it’s very important to take a good look around and see if you notice your vendor. If they no longer take out advertisements, go to trade shows, host webinars, or appear on the blogs, chances are they’ve stopped marketing. A muzzled marketing department is often the canary in the mine, and it can mean that pipelines have dried up and new deals aren’t closing. Note that this is especially true of traditional software companies whose revenue models rely on hefty up-front payments from new sales. Such companies are particularly vulnerable to dry pipelines, whereas companies using a sales or services model that yields a steady revenue stream are much less vulnerable.

If a company doesn’t have enough customers to sustain themselves at their current level of operation, you’ll see them slashing head count. This is pretty much guaranteed to affect your service level. And if they were already operating at a minimal level of staffing, as many of them were before the downturn, then there’s a chance they could cease operations altogether, leaving you high and dry.

So, take a good look around and make sure your vendor is visible. If they’ve gone radio silent, it would be a good idea to take the time to ask them how they’re doing, and not let up until you get a straight answer. Don’t be afraid to ask them, point-blank, what happens if they don’t get any new customers for a whole year (which is a question you should ask every SaaS provider anyway). If you don’t like the answer, considering looking for a more stable provider. The last thing you can afford in this economy is to be left high and dry when you are depending on critical cost-saving e-sourcing and e-procurement software.