Ask 37signals: Does “Getting Real” work in this economy?
Written by on November 14th, 2008 in Uncategorized.
David asks:
The recent economic downturn has me wondering… Are small ‘Getting Real’ businesses like 37signals more resistant to the declining economy or is it just that any downside is much less dramatic than multi billion dollar failures and job cuts in the thousands? Have you been impacted directly in reduced growth or increased cancellations as far as you can tell?
How do most companies handle economic downturns? They keep a closer eye on spending, they cut back on hiring (or lay people off), they waste less time, they focus on their core competencies, they push to eliminate complexities, they cut back on long tedious projects and instead focus on quicker wins that have a more immediate impact on the bottom line, and they consolidate roles and trim fat.
This is what Getting Real is all about. Staying small, being frugal, focusing on just a few core things at a time, quick wins, eliminating abstractions that lead to miscommunication and complexity, only doing what you need to do instead of everything you could possibly do, etc. We believe companies that live these ideas are better off all the time — but especially when times get rough.
Charging for your product is safer
Another key tenant of Getting Real is charging for your product. You make something and your customers pay for it. Connecting your revenues to your customers helps you stay focused on the things that really matter to the people who pay your bills. It’s a healthy alignment that helps during tough times.
This isn’t the case when advertisers are the ones funding your operation. When the people using your product aren’t the ones paying for your product you’re at a strategic disadvantage. Your improvements can’t just be targeted at users, they also have to be targeted at advertisers. So now some of your energy is split into pleasing two different groups. It’s possible advertisers and users have the same goals, but it’s less likely. You’ll notice I’m calling people users now. That’s what people become when they don’t pay for your product—they are users, not customers. That changes the entire dynamic.
One more point on advertising-funding businesses: They’re at greater risk in economic downturns. Advertising budgets are among the first to get cut when things go bad. If your business is based on someone else’s advertising budget, your in for an especially difficult time in a down market.
Source: Signal vs. Noise
Original Article: http://www.37signals.com/svn/posts/1398-ask-37signals-does-getting-real-work-in-this-economy