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Darrell Rigby has a really hard job. He advises CEOs on what to do during a downturn as part of his work at the consulting firm Bain & Company. He tells them to think of their companies as race cars careening around a track, where boom times are the straightaway and recessions are the curves.
Rigby said it’s hard for companies to pass each other during good times, on the straightaway. The big companies stay in front on power alone.
"But on a curve," Ribgy said, "curves are driven by strategic finesse. And so even a company that has less power — if it is skillfully maneuvered in curves — can pass much larger, stronger competitors."
Rigby has research that backs that up. It shows that market share changes more during a downturn than at any other time. About one-third of industry leaders come out of a recession as industry laggards. And the other way around. One big reason? Customers look for alternatives.
"During a downturn people say, hey I’ll give it a try, what the heck," Rigby said, citing ZipCar as an example of such a company that started during a downturn. "And then they try it, find out they like it a great deal, and then when the things start turning around, they say, I’ll stick with it!"
A good example is EMC², the Hopkinton data-storage firm. Vice-President Frank Hauck joined the company back in 1990, when EMC² was just a tiny player.
"I mean our market share was 0.2 percent when I started, and IBM’s was in the 80s," Hauck said.
But then came a recession. Hauck says his company caught IBM a little bit complacent. EMC²’s product offered clients more versatility, just as they were rethinking their spending.
"I think once we saw that we could crack into the biggest accounts on Wall Street," Hauck said, "and once we got our foot in the door, we would expand our growth, I think that’s when people thought anything was possible."
By the end of the decade, EMC² was a dominant player in the data industry.
Of course, it’s easy to look back and see what worked. It’s harder to maneuver the curve when you’re rounding it. Bain’s Darrell Rigby said there are some mistakes that a lot of companies tend to make during a recession. They focus too much on cutting costs, and forget to maintain their brand and quality. They stop spending on R&D, which only hurts them later.
"You can’t just follow the crowd and do what others seem to be doing," Rigby said. "It takes a real customized strategy on curves to be able to gain an advantage."
One Massachusetts company that’s trying to reposition is a grocery store chain based in West Bridgewater. Shaw's Supermarkets' newly reburbished store in Chestnut Hill almost looks more like a food court.
There’s a panini station, a pasta bar and a brick oven pizza service. Company president Mike Witynski said the bad economy is helping Shaw’s appeal to people who used to eat out more.
"Great, restaurant-quality food at much lower than restaurant price," Witynski said. "And you don’t have to tip," he added, laughing.
The same thing goes for the groceries on the shelves. Before the recession, sales of Shaw’s own store brand products hovered around 15 percent of the company’s business. Now that’s up as shoppers try to save.
Witynski would love to keep it more like 20 percent after the recession. He’s been investing in the quality of store brand stuff, so customers really like it when they try it, and remember that when the economy gets better.
"They’re not going to all of a sudden flip the switch and go back and want to pay more," Witynski said.
In a way, Bain's Darrell Rigby said, Witynski is trying to do in this recession what race car drivers are told to in a curve: When you hit the apex, hit the gas.
Accelerating while you’re still in the curve builds momentum for the straight-away that’s around the corner. As tough as recessions are on businesses and the people who work for them, a curve is still a terrible thing to waste.
This program aired on November 30, 2009.
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