Around RLH, we’ve been talking lately about a concept we call
“Passing In The Curve”. It is a strategy for our portfolio companies that
encourages them to make investments and add capabilities today,
notwithstanding the recession, that will drive growth in revenue and
profitability over the next three to five years. The strategy’s title derives
from the world of auto racing, where the more skillful drivers with superior
vehicles can pass competitors who slow down to navigate the curve. We
believe this same opportunity exists in the business world for the well
positioned and well capitalized company as its competitors slow down
due to the economy.
It’s counterintuitive to take actions that will reduce cash flow from a
business during a downturn of historic magnitude, but this is the best
time to gain ground on competitors. While others are laying off employees, damaging morale with benefit cuts, reducing R&D spending, and closing
offices, the foresighted few well capitalized companies are seizing the
moment. Here are just a few examples (inspired by our portfolio
companies’ actions) of how you can "Pass In The Curve":
- Add personnel with scarce talent who may rarely be available for
hire in better times – in today’s knowledge economy, the team with the best talent is often the winner.
- Invest in the creation of new, more effective product or service
solutions – when purchasing picks up, your offering will be at the top of
buyers’ shopping list
- Develop or purchase new software to improve operational efficiencies – as demand grows, you will reap the cost benefits of scale.
- Increase the size, geographic coverage, and quality of your field sales
force – you will find and capture the new revenue opportunities before
competitors reach them.
This is the time to take such initiatives – the opportunity to pass is not
in the straightaway when your peers are running on full power, but now
when your competitors are slowing down to take the curve. As Herb
Brooks said in his speech to the 1980 US Olympic hockey team before
their historic game with the Soviets, “Great moments are born from great
opportunity, and that’s what you have here today.” Seize the opportunity
of these times and great moments of success for your business will follow.
Sincerely, |
