Editor’s note: This article was first published in October 2015; its figures and claims reflect that time, including Starbucks trading at all-time highs with an 89 billion dollar market capitalisation, iTunes songs at $0.99, and Uber and Cabify still facing legal obstacles in Spain.
When people say that crises are excellent opportunities, they don’t say it lightly. Where some see difficulty, others go into partnership with it. We all saw how, in the boom years, business owners popped up out of nowhere. And they were all doing well. Although, as the saying goes, “a calm sea never made a skilled sailor.”
Today, the fastest-growing companies were forged in the last crisis. We should remember that the great entrepreneur, before being a creator, starts out as a destroyer: he destroys an old business model to make way for the new.
Many companies have simply had to fill the gap left by the many companies that have fallen. As for others, the new entrepreneurs have taken care of speeding up their collapse.
Difficulties in the economy become excellent business opportunities for the most creative entrepreneurs, those who can do more with less. It is in hard times that two kinds of companies emerge: 1. the one that tries to survive by thinking the same way, and 2. the one that completely reinvents itself and even uses the new scenario to expand.
If there is one thing we know about business, it is that the market will always be changing, and if your business isn’t nimble and quick to change, you’ll have a front-row seat to watch it sink.
Just bear in mind that if you find a profitable market, you are going to face fierce competition, and the best strategist will win. Likewise, if your company faces a crisis and comes out of it stronger, it will be harder to knock down in the future, because it will be a sign that someone is taking the company to another level when adversity strikes.
Starbucks nearly ceased to exist in 2008, when its earnings collapsed completely and, for the first time in its corporate history, it stopped making a profit and ran up large losses. All because of the crisis, a crisis that could only go on spreading across the rest of the world.
But Starbucks, even though hardly anyone was betting on it as a company any more, is trading at all-time highs today, with a market capitalisation of 89 billion dollars. How did Starbucks come out of the biggest financial crisis since 1929 stronger?
The company’s founder and chairman, Howard Schultz, acted quickly, cutting more than 500 million in costs. In addition, one day in February 2008 he decided to close Starbucks’ 7,000 stores in the United States for several hours to talk to his employees and train them, as Schultz himself explained in his book Onward: How Starbucks Fought for Its Life without Losing Its Soul, where he describes precisely how he managed to turn the company around without losing its values, focusing exclusively on the customer.
At first sight, the problem Starbucks faced might have looked like an obstacle that would force it to close, but in fact it became the company’s greatest opportunity to become the leader in its market, and the measures introduced in those times of crisis have only strengthened its values as a company, a company with two very clear values: its customers and its employees. And all of this was achieved through innovation, adaptation and evolution.
(See: 9 lessons from Howard Schultz’s success)
How to beat a big company on its own turf
Any small business today has the means to compete against a large company. You simply have to bet on one of your strengths and attack one of that big company’s weaknesses. This was how Richard Branson (Virgin) originally went about creating businesses: he entered industries where customers were widely dissatisfied.
But recent business history shows us many more cases of small companies that are giants today because they destroyed the giants that came before them.
1. The inability to adapt.
Taxi drivers are going to fall. I don’t know when, but it’s certain that the taxi as we know it is going to cease to exist. And most likely sooner rather than later. Taxi drivers are not willing to adapt, and that makes them weak in the face of new markets.
Will it be Uber, Cabify…? It doesn’t matter how many battles are lost by the new tech companies that run into legal obstacles preventing them, for now, from displacing the taxi. It’s a war that traditional taxis are going to lose. For sure.
These apps will find a way to make their business model profitable by closing all the legal gaps they have today. And I’m sorry for the taxi drivers, but progress cannot be stopped.
The only possible way for the taxi sector to survive is to reinvent itself. Refuse to do so, and you’ll disappear.
“Look for a company or industry that is afraid of change or too lazy to change, a complacent company that, like Kodak, tries to carry on with a chronically ill business model. Sooner or later it will run out of branches to cling to.”
2. The competition has caught them off guard.
In a 100-metre sprint, if you fail at the start, you’ll have lost the advantage of the initial push. A few seconds that can make the difference between victory and defeat.
The Blockbuster chain was a sleeping giant that hadn’t prepared to fight. By the time it realised that the film rental and sales business was going to be more digital than physical, Netflix had already won the race.
Getting ahead of the competition is one of the best ways to succeed in business. There will always be changes, but if your business is the one taking part in the change, so much the better.
3. Adapting to users’ new “culture”.
You have to listen to users, not impose something on them. The music industry was slow to understand this. Musicians and record labels wanted to go on living off CD sales. When Napster came on the scene, users took advantage of free music downloads.
The industry called it “stealing”, and Napster was accused of being the Al Capone of the tech era. Indeed, there was some theft involved (profiting by giving the public something that isn’t yours), and Napster certainly didn’t play fair. Then other kinds of file-sharing networks appeared that basically served to download all kinds of files for free.
It was no longer a question of putting a name to what was happening. Whether we call it theft or a right to download something, a clear message from users was emerging: “We’re not going to buy an album at an outrageous price. We’d rather download it from the internet.”
One way or another, the music industry’s revenue began to plummet. Then an obnoxious, pretentious businessman called Steve Jobs had an idea to save that industry by giving users what they wanted. And after numerous refusals from the music industry, iTunes finally arrived.
Now users don’t have to download a whole album when they only like one song. For $0.99 you can download the song you want from your smartphone. That way, users get what they were asking for, and the music industry keeps earning revenue.
So listen to users. They are the ones who will show you which path to take in an industry facing a problem. In the solution, you’ll find a good business.
Further reading
- How to find a profitable product to sell and build a business
- 10 psychological techniques to sell more in your business
Featured image: Kenyh, CC BY-SA 3.0, via Wikimedia Commons.
