Budget Cuts Turn Priorities On Their Head
Buyers Confront New Market Realities
(a) Buyers Confront New Market RealitiesA long period of buoyant growth ended suddenly in 2008, resulting in a fundamental shake up of industries and economies worldwide.
Thus it was that a golden age of corporate growth, confidence and ambition gave way to a period of retrenchment and uncertainty. Almost universally, organizational priorities have changed from growing sales to cutting costs. No where can the effects of this be seen more than in terms of organisational buying.
A Changed Organisational Mindset
Budgets have been slashed, with major projects and purchases scaled back, scrapped and stalled. Reflective of heightened marketplace risk and uncertainty, organizations are vacillating over major projects and purchases.
‘Organizational priorities have changed from growing sales tocutting costs.’More fundamentally, the downturn has revealed a Dr. Jekyll and Mr. Hyde dimension to the corporate personality.
The table below shows just some examples of how the outlook, focus and strategies of organizations contrast so dramatically before and after the recession.The Recession Has Changed ‘the Way Organizations Think’
The Recession Has Changed ‘the Way Organizations Think’
|Before the Recession
|After the Recession
|· Expansionary mode – ‘Full speed ahead!’
|· Retrenchment mode – ‘Steady as she goes!’
|· Increase revenues, expand, innovate
|· Cut costs, increase efficiency
|· Multiple Projects & Priorities
|· Fewer Clearer Priorities, Projects Must Compete for Scarce Resources
|· Appetite for Ambitious Projects
|· Projects Delayed / Shelved/ Scaled-back
|· Long term payback – pursuit of vision, or LT strategic objectives
|· Short Term payback – immediate results
|· A certain amount of waste is inevitable
|· All waste is to be eliminated
In general, managers are expected to make do with less and tomake what they have got go further. They are expected to innovate in finding more cost effective solutions, utilize existing resources and ‘do it in house’. Suddenly, quick fixes, ‘work-arounds’ and ‘point solutions’ have become acceptable.
(b) Buyers have never had it so tough
Rarely has it been so difficult to get purchases and projects approved. Managers who want ‘a go ahead’ for their projects havea lot of convincing to do. There are more people to consult, more documents to prepare and more steps to follow.
But, if it has been tough for buyers it has been doubly so for sellers. There has been a fundamental shift in the balance of power, as more vendors chase fewer customers.
Vendors have been forced to adopt an ‘anytime anywhere’ approach to the search for new customers, straying into new markets and segments in search of whatever business is to be found.
(c) A Return to Business As Usual?
At the time of writing the global recovery is gaining momentum.But, how soon before there is a return to ‘business as usual’? That is a return to customers chasing suppliers, as opposed to the other way around. Well, perhaps never.
Things won’t simply return to the way that they were! The rigour, caution and control that dominated organisational buying in the slowdown is here to stay. After all, the global slowdown has simply accelerated trends that were already underway.
When it comes to the business of buying, things will never be the same again! The increasingly sophisticated approach to major purchases is here to stay.
Top 5 Implications for Sellers
1. Now more than ever vendors have to help buyers build a compelling business case, demonstrating a fast payback and minimizing organizational risk.
2. They also need to help buyers explore new and more flexible means of product bundling, pricing and delivery.
3. Vendors cannot simply sell to those who have a budget for this quarter, or this year. In other words they are going to have tocreate demand as well as to seek it out.
4. Vendors need to recognize that the main competition is not other vendors, but another project, or call on the organization’sresources.