Gearing Up for the New Economy

The current recession is the most significant since the “Great Depression” and certainly the most significant in most of our lifetimes.  Those who were around for the “Great Depression” and those who were raised by its survivors, know that the experience changed their lives, lifestyles and attitudes toward money, spending and debt, for decades to come.  It is true that we tend to forget those minor ups and downs in the economy and go right back to our old ways quickly thereafter.  But will that be the case after this one?

One thing that the “Great Depression” and this current recession have in common is the degree to which individuals and businesses were over-leveraged with debt, leading up to it.  In both cases, once it became apparent that the economy was slowing, a massive effort to de-leverage, all at once, led to sharply decreased spending across the board, further exacerbating the problem.  Throughout this recession well meaning financial advisors in the media, have given what is sound individual advice, telling people to stop spending, start paying down debt and start saving.  Good individual advice but when everybody tries to do it at once, the results are disastrous.

Some would say that this disaster was necessary to correct for the over-spending and under-saving in our culture.  Regardless of your point of view on this, the crisis has been a wake-up call for most Americans.  Most of us have, out of necessity or fear, changed our spending behaviors.  We have become much more conscious of what we spend and much more frugal in our spending decisions.  We are looking for bargains and ultimately for value, more so than I can remember in my adult life.

Those of us who are in business, have had to adapt to the changed circumstances of our customers.  To hold onto the customers we have and continue to find new customers, we have had to make changes to our business model in some way…whether that involve cutting prices, adding free services or offering alternative goods or services that are less expensive.  Those who have not adapted their business practices, in some way, are either in a completely recession-proof industry or they have lost significant market-share…perhaps gone out of business altogether.

As we set our strategy going forward, we need to ask, in what way will the recovery impact our customers’ behaviors, needs and wants; and in what ways will their attitudes and behaviors be forever changed by this recession.  To what degree will they go back to their old ways and to what degree will they continue to be very frugal in their spending decisions and very cautious about debt.  At the same time we need to look at the changes that we have made in our businesses, in order to survive and determine which of those should become long-term changes and which need to be tweaked, overhauled or scrapped, altogether.

There is both an opportunity and a necessity to make more significant long-term changes to our business models and overall strategy that will capitalize on the changed perspectives and needs of our customers and those of our competitors.  As the father of modern evolutionary theory, Charles Darwin said, “It is not the strongest of the species that will survive, nor the most intelligent.  Rather, it is the ones that adapt most readily to change.”