As Fletcher/CSI continues to celebrate its 30th year in operation, we pause to reflect on how the past thirty years have changed the practice of CI.
This month my thoughts are about the larger CI cycles and where in the cycle we are now. This is based on having been active as a CI supplier since 1985, and running Fletcher/CSI since 1988. In that time, we have gone through three recessions (as defined by the Bureau of Economic Analysis) in 1990, 2001, and 2008.
By and large, CI weathers recessions well. The demand cycle for CI seems to follow these distinct phases:
- The recession starts. Businesses face intense competitive pressure to preserve margins in shrinking markets (the key definition of a recession is three quarters in a row of negative GDP growth). This pressure forces company leadership to pay attention to competitors and find new ways to differentiate in the market. Learning from competitors becomes very important as does locating any weakness in the competitor’s market position. Companies bulk up their CI departments and place a new emphasis on CI to drive strategy and tactics.
- The recession is at its depths. Companies go into defensive posture and focus on keeping existing customers. Companies are struggling to make goals and margins are falling. Companies focus on selling product to get margin and keep customers. Attempting to maintain margins, companies start to cut staff in non-essential areas. CI (and often parts of marketing) is one of the first to be cut since it is harder to produce an ROI from CI than other more sales related activities.
- The recovery starts. As markets start to pick up, companies move from a purely defensive posture to an offensive role. Recognizing a need to identify competitors’ weaknesses, companies rebuild their CI units. Early days are spent replacing outdated materials such as competitor profiles and market position papers. Staff is added on and more competitor services are added to meet growing demand for CI from all units.
- The recovery is in full swing. Markets are growing across the board and companies are meeting their financial targets. Competitive pressure is reduced by the growth of the market overall. Company leadership is comfortable with their market position and de-emphasizes the competitive forces in the market. Companies reduce the size and role of their CI departments to put resources to use supporting other initiatives.
This summary of the CI demand cycle is of course rudimentary and more general than specific, but it has been true for the past three recessions. For vendors, the main impact is that in the depths of recessions there is a flowering of new CI shops, which reflects corporate CI leaders opening consultancies as a way to stay active in the market while looking for work. The main impact of this is to drive down fees industry wide, which helps stimulate demand.
As I write this, we are looking at what may be the end of the current US growth cycle. The US stock markets have experienced several declines at a time when the overall economy is doing very well. But new technologies are on the horizon, and these technologies threaten to disrupt well-established industries across the spectrum. How that will effect CI, and where it is in the CI cycle is still to be seen, but if the past is any predictor of the future, expect to see demand for CI to grow in the short term.
–Erik Glitman, CEO, Fletcher/CSI