Surviving this economic crisis is like going to see the latest Vin Diesel movie: Sure, it’s bad, but believe it or not, others have seen worse. How do the grizzled vets get through the ordeal? They don’t just sit there.
Major companies such as Charles Schwab, Cisco, Corning, IBM, and Intel have all experienced crises more severe and life-threatening than our current one, making today’s maelstrom for them more akin to Fast & Furious than, say, The Pacifier. Nothing creates fresh perspective like having stared into the abyss and living to tell the tale.
No wonder, then, that each of these companies is approaching today’s meltdown with distinctive strategies for not only surviving but also thriving. Intel and Corning are protecting their core advantages at all costs. Cisco, Intel, and Schwab view customer interaction and community as essential. IBM and Schwab are exhibiting a refreshing aggressiveness in chasing new business. Together, these five companies display a range of creative solutions that any business, fire-tested or not, should be applying right now. And unlike the Diesel, that’s no joke.
Intel’s Long-Term Plan
Sean Maloney just wants people to buy things. “The last six months, people everywhere have been scared about what’s happening in the world,” says Maloney, Intel’s chief sales and marketing officer. An ebbing tide — and moribund electronics market — grounds all boats: Intel’s first-quarter revenue was $7.1 billion, down 26% year over year.
In an attempt to get ahead of the game by the next upswing, the company is doing some spending of its own. After closing some smaller plants, it announced earlier this year that it would invest more than $7 billion upgrading its factories in the United States. “We doubled down on manufacturing,” Maloney says. “People said, ‘You’re insane!’ ” But Intel’s entire competitive advantage — its ability to keep pace with Moore’s Law and even exceed it — is in its manufacturing processes. “All our heavy-duty stuff is internal R&D on manufacturing,” he says. “We lost that in the ’80s and nearly went bankrupt, so it’s a fairly fanatical focus for us. Never again.”
At the same time, Intel is changing its development model to be more inclusive of customers and their needs. “We make transistors smaller and smaller in 18 months’ time,” Maloney says, “but we have almost no idea how to do it five years out.” That’s where customers come in, collaborating with them on chip development. As large institutional clients hired microprocessor-server specialists and started asking for very specific capabilities, Intel responded. For example, Intel’s latest chip, Nehalem EP, is expected to allow one server to replace nine existing ones and pay for itself in just eight months. “Our job,” Maloney says, “is to give them something so wonderful that they’ll spend money again.”
Corning’s Rings of Defense
If anyone should be able to build a shatterproof fortress, it’s Corning. But during the telecom crash earlier this decade, the specialty glassmaker for everything from medical devices to consumer electronics to cars saw revenue nosedive from $7 billion to $3 billion in 18 months; Corning almost burned the village trying to save it. “We vowed never to let that happen again,” says president and COO Peter Volanakis. Corning’s executive team, the same senior managers as during its epic fall, instituted an early-detection system to identify signs of trouble as well as four “operational rings of defense” to help it manage through a crisis in a measured, strategic way.
The first step? A good offense. Corning created its own market-research system, relying not just on its customers but also on its customers’ customers, even checking stores to measure demand for the products it helps to create, such as LCD TVs. Corning also stockpiled cash, which enabled it to absorb a $400 million loss in the fourth quarter of 2008 without selling off part of its business, as it had to in 2002 to make a debt payment. And it helped that the company modeled worst-case scenarios and a response to each.
As trouble started brewing last year, Corning implemented its first ring of defense: discretionary spending cuts, reduced production, and hiring limits. As things got rapidly worse through the fall, management quickly implemented the second and third rings: shorter work weeks in Europe and Asia, limiting its use of contractors and temps, and, finally, layoffs. But as hard as it was to trim the staff by 13%, that was a far cry from the telecom crash, when it shed 21,000 of its 43,000 workers. This crisis feels more under control, the actions “more thoughtful,” Volanakis says.
Most important, Corning has avoided the last ring, which would include reducing its $630 million annual R&D spending. Its lifeblood is new products, such as those it’s aggressively pushing this year — scratch-free touch-screen glass for cell phones and laptops, smaller next-generation data centers, and a laser-light engine that turns a laptop into a projector. “We’re an R&D-based company,” Volanakis says. “R&D is the absolute last thing we’d cut.”
Schwab’s Pep Talk
When the running joke is that what’s left of your money is better off under your mattress, how, exactly, is Schwab wooing customers? Talk to Chuck.
People are gravitating to the comfort that apparently only founder and CEO Charles Schwab, who looks like the last guy who’d spend $15,000 on an umbrella stand, can provide. Becky Saeger, Schwab’s CMO, has used a souped-up version of the “Chuck” campaign — the same one that helped resuscitate the company in 2005 — to win new, albeit nervous, customers.
On Schwab’s site and in conversations with representatives, reassurance is a hot commodity. “People want more analysis, opinion, and market information,” Saeger says. And they have lots of questions. “If you’d told me that people were going to want to know what holdings were in their money-market funds, or whether we were financially stable, I would have said you’re out of your mind.” Saeger has worked quickly to find the right tone. “We had to strike a balance between not bullshitting people, but also giving people some reason to be optimistic.”
The wild swings in the national mood have forced Saeger to perform customer service at lightning speed. “We’re now saying, in real time, What do our customers need to know from us right now?” she says. When anxiety is high, for example, Schwab markets products that speak to safety, such as high-yield checking. The effort has not been lost on customers and prospects, who are now talking back to Chuck. “We’re watching how people interact with us,” Saeger says, “and seeing a community evolve in real time. We’ve been surprised by the level of engagement.”
IBM’s Smart Timing
“Follow the money” is not just a maxim for investigative reporters; it’s also good business. Launched in November, IBM’s Smarter Planet initiative — its ambitious approach to health care, energy, infrastructure, and other problems — sounds like a marketing campaign. On the ground, though, it’s a rallying cry that focuses every aspect of the company on doing what it does best: solving problems through well-coordinated data-driven systems. It’s also a grab for the estimated $101 billion in IT spending on U.S. projects triggered by the stimulus package, according to market forecaster IDC.
Although IBM has laid off nearly 8,000 employees so far this year, some groups are pursuing and winning new business. The global energy and utility team, one of the company’s fastest-growing divisions, helps utilities cut costs and modernize. Six months ago, IBM began “adding intelligence,” as it puts it, to the grid north of Dallas. Oncor, a local utility, has been installing about 15,000 smart meters a week in homes and businesses. Instead of monthly readings performed in person, the new meters inform Oncor’s network about energy use every 15 minutes. IBM analyzes the new data to let Oncor pinpoint outages to a single home and let consumers monitor consumption; the utility expects usage to drop by 10%, which corresponds to a similar cut in carbon emissions.
Oncor’s plan to install 3 million smart meters by 2012 is just one of about 50 IBM smart-grid projects. “There’s an urgency now like I’ve never seen,” says Allan Schurr, a VP in IBM global energy. “The utilities are acting all at once to change their business.”
Cisco’s Web Engine
“We’ve gotten good at market transitions over the years,” says Sue Bostrom, Cisco’s CMO. “Market transition” may be a charming euphemism for meltdown, but Cisco’s real transition has been to use technology to connect with prospects, turbocharging Cisco.com from an expert resource for about 15 million visitors a month into a lead-generation engine of real power.
In the past nine months, Cisco’s site has rolled out a “virtual account manager,” an online system that does all the things that expensive salespeople do — chat up prospects, make them comfortable, and build relationships. “The key is personalization,” says Mike Metz, Bostrom’s senior director of Web marketing and strategy. “If we figure out that you live in Chicago, are interested in health-care information, and need to learn about wireless, we can direct you to a healthcare and wireless seminar near you.”
When a prospect is ready to make a decision, the site cinches the deal. Let’s say you’re an IT manager from upstate New York, shopping for a phone system for four offices. A phone call, or click-to-chat feature, connects you to a person who knows your history as well as the details of the specific product you need. You can then be connected on the spot to an authorized Cisco reseller in your area. “It can all happen in real time,” Metz says. Cisco has introduced the virtual manager in 35 countries and 14 languages. “We’re converting about 15% of those prospects,” he says, resulting in hundreds of millions of dollars in revenue. “There aren’t enough salespeople in the world for what we need to do.”
Corning’s Rings of Defense: A Survival Strategy That Grew Out of the Telecom Crash
How Big Blue Is Pursuing Its Share of $101 Billion in Tech Stimulus Spending
Schwab’s Pep Talk: Using Community to Reassure Jittery Consumers
Cisco’s Web Engine: A Growth Machine