Keep The Product Fires Burning

Products don’t exist in a vacuum. They draw their fire from the dynamic interaction of manufacturing, selling, and buying, to say nothing of the economy. When the interaction works well, products thrive. When it doesnt, some die. You know this.

What you may not know–at least, not with certainty–is how to keep products thriving when times are tough.

Calls coming into NUs Products Desk tell me this is a concern for many readers right now, whether from field, home office or other industry sectors. The callers are troubled by announced job cuts at several financial firms (including some major powerhouses), abrupt shutdowns of lines or divisions, more restructuring, and so on.

Its not just bottom-layer shifts that bother them; its cuts at the top, too, and ones nicking friends and associates.

Most blame the economic slowdown, which as you know has been blasting the financial camp for most of this year with bone-chilling winds. They fear the winds may be strong enough to snuff out product fires that have been burning brightly for several years. So, they ask again and again, how do we keep the fires burning?

Its not that they are clueless. Many are pros who have seen downturns before. But this is a new economy, and they are unsure of which remedies to apply. Its doubtful that anyone has a cookie-cutter solution that will work for all, but let’s see if we can find a few ideas–and a little hope.

The way many managers react to downturns is to retrench. They curb perks, salary increases, and new hires. Trim education, training, and R&D. Pare back travel and entertainment. Limit promotions, ads, and outreach.

I doubt anyone would quarrel with the immediacy of the results. You trim the outflow, saving whats left for necessities. The entity gets by.

But if thats all you do, your products and firms can get dangerously thin. You may cut out not just fat, but also some muscle.

By contrast, financial firms that ride the economic waves successfully use sales downturns as points of growth, not decay. They may cut back in one area, but they work tirelessly to renew and/or conceive new products and services in other areas.

Think back over the past few decades. In the late 1970s and early 1980s, traditional whole life insurers saw sales falling as consumers turned toward vehicles paying the higher interest rates. Rather than fold their tents, many insurers, led by newer companies but followed by older-line companies, began selling universal life insurance, complete with credited interest rates that tracked more closely with the broad interest rate environment.

Similarly, the meltdown of the stock market in the late 1980s and recession in the early 1990s saw people giving the stock market wide berth. But, as it turned out, that was the period that gave rise to the modern variable annuity. VAs had debuted in a simpler form several years earlier, of course, but they werent big sellers. Rather than bid them adieu, however, the players retooled them–right in the heat of the late-1980s downturn–in hopes they would sell when the market rebounded. As you know, it did and they did.

Another example: In the mid-1990s, interest rates were lagging and as a result, sales of fixed-rate insurance products were languishing. But that is the very time when some insurers began rolling out a new type of fixed interest product, the equity indexed annuity (and later equity indexed life policies). Now, six years later, EIA sales have hit a quarterly record industrywide.

Some very sensible people nix the idea of rejuvenating or developing new products when sales slide. “That takes too much time and money,” they say. “Its safer to make cutbacks and sit tight.”

The argument has logic. But, as you have seen, people and companies can and do find ways to rise to the occasion. Practical ways. Here are a few:

Reassign staff. If you have talented staffers whom you do not want to let go when you do your cutbacks but who have time on their hands due to the slowdown, reassign them to renew/new development efforts. They may be your key to revitalization.

–Choose a course of action and set priorities. As in the good times, during periods of slowdown, it pays to focus on one or two growth areas or a planned sequence of same. Trying to do it all at one time saps energy, resources, and focus.

Keep everyone informed. To reduce anxiety and increase productivity, keep workers apprised of whats happening. Yes, some will hear your reports as bad news and jump ship. But others will pitch in and help, because now they know why its necessary. Besides, if you dont fill them in, the rumor mill willand not to your liking. I know of many insurance and financial firms that have learned this lesson the hard way.

Find the money. Firms that commit to the long haul somehow find the money to grow products, even in leaner times. Theyll restructure loans, partner with collaborators, sell assets that arent mission critical, etc. This takes fortitude, humility, and openness, plus lots of midnight oil, but those who do it say its worth the effort. P.S.–if you have a sound business plan, youll find lenders are less resistant.

Lead, lead, lead. This wont be easy, because youll be offering enthusiasm when many are dejected; hope when some feel despair; and vision when others see darkness everywhere. But if youve done the other four things, youll be able to speak with conviction.

That can make a huge difference. As Walter Lippmann, the widely read 20th century political commentator, noted, the final test of leaders is that they leave behind in others “the conviction and the will to carry on.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


Copyright 2001 by The National Underwriter Company. All rights reserved. Contact Webmaster