Is it possible to grow a business despite the current economic crisis? Yes, the opportunities are there, but it’s necessary to ask the right questions to find them. Different questions can broaden or narrow the focus of your search for options and provide different frames for decision-making. Here is a simple example. The framing question, “What shall we do on vacation?” leads to a different type of decision from the framing question, “Where shall we go on vacation?” The first frame focuses on activities and downplays locations; the second does the opposite.

A bad frame may hide choices and lead to bad decisions. For example, the frame, “How much should we reduce costs to survive the crisis?” is a bad one. Why? Because it focuses on the size and amount of cost cuts, not on the wisdom of making cost cuts.   

Thus, the question can lead to mindless, across-the-board 30-percent cuts. Along with line people, out go employees who are essential for executing the company’s core competence. A better framing question is,  “What should we retain to preserve the competitive strength of the business?” because it leads to options that result in wise cost reductions.

Shift Your Decision Frame
Actions taken to survive a crisis can lead to bad decision frames for growth. For instance, a persistent focus on protecting against negative conditions builds the perception that negative conditions are everywhere and dominant. That perception creates assumptions and fears that will block inquiry about and awareness of very positive growth opportunities.   

There are sizable pockets of opportunity for anyone willing to dig deep enough into each market. To find them, shift the decision frame by identifying and challenging negative assumptions about growth opportunities. Use the framing question, “How should we change our business model and market focus to find and exploit growth opportunities now, during this time of crisis?” This question acknowledges the fact that yesterday’s business models are not viable. Customer priorities and competitive conditions have changed. Accordingly, strategy has to change to uncover growth opportunities.   

Four actions are necessary to change strategy:

1. Change the value proposition.
2. Find the best targets for growth.
3. Change the marketing tactics.
4. Construct opportunities from vulnerabilities.
   

Change Your Value Proposition
A value proposition describes why customers buy from a firm. In other words, it defines the value the company gives its customers. For example, FedEx’s value proposition is reliable, safe, overnight delivery of packages. Toyota’s is to provide good-quality, dependable vehicles at reasonable, affordable prices. The greater the value a firm provides its customers, the better its growth prospects.  

To assess the value proposition, first list the needs the company helps customers meet. Then, do two ratings: one for 2007 and one for today. Chances are any value proposition in use before October 2008 is now less effective. To develop each of the ratings:

1. Prioritize customer needs.
2. Rate how well the company meets those needs.
3. Rate how well the competition is meeting those same needs.
   

The goal is excellent performance scores on high-priority needs. And, unless those scores are better than the competition’s, the value proposition is deficient and the firm’s growth potential is limited.    

This exercise is a great frame shifter because it reveals how the value a company provides its customers has changed and where performance gaps exist. It can lead to greatly improved growth if used as the basis for plans such as:

• Using superior manufacturing quality to gain wallet share with the top 20 percent of customers (as injection molder Nypro did).
• Providing enhanced, unbundled after-market parts and services (as leading networking equipment maker Cisco did).
• Using more manageable pricing strategies (as GE did by providing jet engines on a pay-per-hour basis).
• Creating new processes to do a better job of meeting high-priority needs (as Progressive Insurance did to provide fast claims handling).
  

IBM provides an example of how critical it is to stay up-to-date with customer expectations. When Louis V. Gerstner Jr. became CEO in 1993, the company was dying from a poor value proposition built on hardware and mainframe computers. Potent for 30 years, the value proposition’s power declined rapidly starting in the 1980s. Gerstner shifted to a new value proposition based on service and the Internet and thus restored IBM’s growth. He describes the company’s transformation in his book, Who Says Elephants Can’t Dance?

Find the Best Markets for Growth
The best opportunities for growth could well be found not only among current best customers but also among switchers. Best customers are defined as the 20 percent who account for 80 percent of profits. Switchers, the customers who are not particularly loyal and buy from competitors as well, represent market share that could be acquired. Actually, both types of customers are excellent targets for growth if one can find ways to increase value to them and thereby gain a higher share of their wallet. For the switchers, it’s necessary to alter the value proposition to increase their loyalty to the company without sacrificing margin.   

Growth may depend on shifting the decision frame that determines which customers to pursue. For both categories, best customers and switchers, sharpen the focus by segmenting them in two ways. First, score each customer as low or high in terms of potential for survival and growth. Then, focusing only on the high-potential customers, classify each according to one of two psychological categories: (1) high concern about the crisis, (2) low-to-moderate concern about the crisis.    

Next, assess the priorities of high-potential customers in the high-concern and low- and moderate-concern segments. Then, use these assessments to find growth opportunities, which may derive from a new value proposition, new product and service offerings, or new pricing strategies. For the high-concern targets, changes should emphasize how the offerings will help them weather the crisis. For the low- and medium-concern targets, changes should focus on helping them gain competitive advantage.

Change Your Marketing Tactics
Cost-cutting decision frames can lead to unwise chopping of marketing budgets. To avoid that mistake, use the framing question, “What type and level of marketing effort do we need now to succeed?” Then budget sufficient resources to deliver the company’s marketing message to the targeted customers.

This will alert them to the new value proposition, offerings, and pricing. Also remember to budget sufficient funds to support the brand, but in a way that fits current conditions and reassures customers. Dell Computer, for example, has modified its advertising message along those lines. It uses the slogan

“Out of the box, within your means” for the high-concern customers and “Depend on Dell for simple solutions in tough times” for the low-and moderate-concern customers. These concepts are explored further in the April 2009 Harvard Business Review article, “How to Market in a Downturn,” by John A. Quelch and Katherine E. Jocz.

Build Opportunities from Vulnerabilities
A fourth frame shift to identify growth opportunities begins with the question “What could cause us to lose business, and how could we offset that loss?” Let’s look at an example from the farm irrigation business, whose sales are highly seasonal.

During the summer, irrigation equipment makers are vulnerable to big drops in sales, leaving much of their factory capacity idle. Valmont Industries and Lindsay Corporation have been very proactive in finding ways to use that idle capacity by making fabricated metal products for other markets. Valmont has been so successful with this effort that the idle-capacity business now accounts for the majority of sales!

At SRC Holdings, an engine remanufacturer, each business unit regularly identifies vulnerabilities that can reduce sales and then finds alternate business it could pursue to replace the lost sales. Over time, this has supported healthy growth and the spinning off of 55 new businesses. A visit to the company’s Web site at www.srcholdings.com is an excellent way to study an innovation winner.

Change the Game
The four shifts in strategy just described can uncover excellent growth opportunities with little risk, even in a stagnant economy. There are times, however, when something even bolder is possible – changing the game.    

That is what Southwest Airlines did when it said it competed with buses, not other airlines, and used a point-to-point network, instead of a hub-and-spoke network. At FedEx, Fred Smith did just the opposite when he created overnight delivery. He used a hub-and-spoke system for packages, instead of the old multi-node, point-to-point delivery system. In the auto industry, the time to change an assembly line from one model to another was considered fixed and lengthy in the 1970s, and manufacturing runs were based on the fixed changeover time assumption.   

Toyota challenged the assumption, drove changeover time down to just a few minutes, changed the auto industry and began its march to dominance.   

To change the game, define the formula on which your business and that of your rivals is based. Then shift the frame by exploring how a different formula could change the business.   

If the time is right, and you are sufficiently innovative, you just might find a way to redefine the business in a way that leads to unexpected growth.