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The Jim Pinto Column: Swim upstream in a down market and 2011 prognostications
1st Quarter 2011, News & events

Swim upstream in a down market

Many companies think of an economic downturn as a time to tighten belts and safeguard cash reserves. The mindset becomes survival, not growth – the bunker mentality. The irony is that this leaves a company in a vulnerable position, organisationally and commercially.

The time to develop significant competitive advantage and increase market share is while the competition is struggling. During lean times, advertising budgets are often the first to be cut back.

The fact is that advertising is important for growth. While competitors tighten their belts and cut marketing dollars, winners gain more mind share for their money by maintaining, or even increasing, media advertising.

Research and development budgets are usually reduced to just sustaining support for old products. Buck the trend by ramping up R&D, to enable growth in new areas and yield strong advantages in coming years.

Look for adaptations of core technology strengths for applications in new markets. Stimulate out of the box thinking and creativity. Develop and promote new features and functions using iPad, iPhone and Droid apps.

Stay away from price wars. Confidence and value perception are far more important than price. It is important to keep a balanced products and services portfolio. Do not simply be forced into the strait-jacket of current pricing, margins and volume – look for new products in markets with higher volumes.

Provide extra support for good customers during bad times; this creates a bond that is hard to break. Do not waste resources on unprofitable customers. Look for competitors’ customers, particularly those with attractive growth prospects and strong balance sheets. Develop tactics to win their business.

Weak competitors often lay off good employees, and the remaining good people are often disenchanted. Capitalise on the opportunity to identify and attract talented employees.

The path to success in a down-market is to swim upstream.

2011 prognostications

After the global downturn, most automation companies are growing again, primarily through international markets where new factories and plants are being built.

In US and European markets, the installed base of automation systems reaching the end of their useful lives represents a big opportunity. Automation suppliers have expanded their offerings for upgrades, these in some cases being plug-in replacements for competitors’ systems.

Here are my picks for automation technology that will make an impact this year.

Control Systems Security: After the July 2010 Stuxnet attack, automation systems security has become a critical issue. Security chips will now be in every switch port. Expect lots of new security-related offerings.

Industrial wireless: Some of the automation majors report sizeable wireless-related revenues, but these include accessories and support products and services; no large coups to brag about. Hopefully, the initial success will stimulate wider usage in larger projects this year.

Cloud-computing: This new arena is burgeoning in business environments. Even in industrial environments, growth is starting to emerge because of the growing burden of technology obsolescence, plus continuing support for rapidly changing software. All but the most critical components will be run ‘in the cloud’.

Diagnostics: Embedded operating information and diagnostics will be included in more new automation products and systems. Self-diagnostics will migrate into lower cost products, and will become an expected standard feature.

Consumer Technology Adaptations: In a down market, with tight budgets, companies will look for adaptations beyond the same-old, same-old tweaks and extensions. iPad, iPhone and Droid apps will appear as new features and functions in many automation products. More diagnostics and service functions will be accessible via mobile phones.

The sleeping giants – robotics, vision, complex adaptive systems – continue to doze, with discernable, but still only incremental advances.

Jim Pinto is an industry analyst and commentator, writer, technology futurist and angel investor. His popular e-mail newsletter, eNews, is widely read (with direct circulation of about 7000 and web-readership of two to three times that number). His areas of interest are technology futures, marketing and business strategies for a fast-changing environment and industrial automation with a slant towards technology trends.

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