Second, companies that start in
downturns build long-lasting frugality
into their cultures. During recessions
people are willing to work for less.
Managers are conscious of every penny they spend. And the frugality lasts
once it is built in. For example, I began
my career working at Hewlett-Packard. One day I took a few extra pencils
from the box and was reminded by
my peers of “profit sharing.” Frugality was ingrained into every employee
at Hewlett-Packard. The firm is one of
the greatest companies of the world,
and it has lasted for 60 years. Companies that last this long (or more) are
always this frugal.
IllustratIon by yarek Waszul
Third, managers in many established companies become shortsighted during downturns, and often
their governing boards do too. These
companies make shortsighted plans
for product development, for research
projects, and for company road maps.
What do they do? They forget that the
downturn will not last forever. They cut
expenses today that would have helped
their future. Then the future arrives
and they find they have not prepared
for it in advance. Worse, they are behind those who did prepare.
Fourth, during recessions entrepreneurs are not subject to what has be-
come known as “venture fratricide.”
In the boom times, for example, my
firm would fund companies and then
discover that 20 competitors were
funded by venture capital brethren.
The companies would all fight over
market share and spend tremendous
amounts of money to win the market.
This happened in the dot-com boom,
where anything dot-com got funded.
The new market was enormous, but
enormous amounts of money were
lost in the process.
To survive venture fratricide young
firms specialize. Then markets became too narrowly defined to amount
to anything big. For example, after
Why do recessions
give birth to some
of the greatest,
longest lasting, and
in the world?
someone started a flowers.com someone else started a roses.com, further
segmenting an already small market.
Established firms also specialize, but
with their own versions of me-too divisions. This also happened with the
dot-com boom. Every pure play online
retailer eventually faced one or more
Today’s recessionary markets do not
have problems with fratricide or me-too divisions. Very few other groups are
starting up with money, or going after
anything new. Here is the message for
a true entrepreneur: Since funding is
not readily available, by necessity, an
entrepreneur has to create a business
model that works and is sustainable. If
you start a business now, today it is an
open green field.
moore’s Law Does not slow
Down for economic Downturns
Many commentators believe big ideas
crop up once a decade or so. That is
just wrong. Moore’s Law marches on.
The potential for innovation is growing
exponentially and globally. The innovations and changes that occur in the
next 10 to 15 years will change our lives
as much as all the innovation that’s
happened in the last 50 to 100 years. If
you are a technologist, the innovations