If I have learned anything over the past 30 years, both as an experienced practitioner and keen student of business strategy, it is this: Those who run companies have one basic responsibility. No, it is not to make money. It is to keep their respective companies running. The core of any strategy must, therefore, be sustainability.

Too often, you will hear the same answer, told smugly, when asked about the essence of business enterprise. Business, it will be knowingly explained, is about making money…the more, the merrier. In fact, greed is about making money, the more the merrier. Business is about building an enterprise that is capable of making money over the long haul. Strategies that yield unsustainable profits are short-sighted, short term and doomed to failure. Greed is short-sighted and almost never sustainable.

So, more than just building a profitable organizations, business leaders must be focused on building sustainable ones. A company must be able to withstand economic volatility, a hyper-competitive market, lengthy supply chain disruptions and, yes, catastrophic events. It is easy to make money when your boat, like those around it, is rising with the tide. But can your boat survive a tsunami? Can it survive a protracted industry slump? Can it survive the Chinese? How about new technologies? Sweeping regulatory changes? What would happen to your organization in the event of a major acquisition?

Sustainability in the management context is about ensuring that a company’s product or service offering responds to the needs of its customer base and that it will continue to do so in the foreseeable future. It is about its operations being as productive and as low cost as its competitors. It is about having a strong and stable customer base and a reliable supply chain. It is about having a stable cash flow and not having bank covenants that could strangle it when things become volatile. And, yes, it is about being prepared for catastrophe.

So, what is the first step in becoming a company from which investors can count on reliable, consistent returns well into the future? How does an organization become sustainable?

The answer is somewhat paradoxical. To be sustainable, a company must change. To change, the company must begin by strengthening the status quo.

Sustainability strategies require leaders to take a long-term view of their business. Getting the future right, however, first requires getting the present right. You cannot attract good people unless you take proper care of your current people. You cannot attract new customers unless you are adept at keeping the ones you have. You cannot usefully leverage a weak product portfolio. You cannot successfully expand a weak geographic base. Jim Collins writes Good to Great because you cannot go from Bad to Great. Without a strong foundation, you cannot get to there from here.

Sustainability, therefore, begins with understanding what you are doing right and then doing it better. Build from the foundation up, not the roof down. In other words, do not change. Evolve.

In a fast changing world, where most advisors would say that to succeed you must learn to change, it’s a paradox, to be sure.

1. Good marketing works best in the service of good products, like Acquisio’s ppc management software (sorry for the plug – I’m a fan!).

2. Good products beat new products. Sustainable market leadership requires equal or better products than the competition.

3. Safety lies not in products but in portfolios of products.

4. Product lines must continually evolve as the market evolves.

5. The advantage goes to first movers.

6. Innovate rather than extend. In this way, you cannibalize someone else’s product instead of your own.

7. Seek technological leadership, but never be led by technology.

8. Competition always overtakes an innovation.

9. New products should not be developed, and current products should not be maintained, unless they are financially viable.

10. Product integrity and financial viability are the direct result of good execution.

At first glance, these principles appear straightforward, almost obvious, and your company may have applied many of them intuitively. My bet, though, is that there are products or groups of products in your company’s line-up that run counter to one or more of the guidelines and that their performance has been deleteriously affected as a result.

You may know of exceptions – successful products that break the rules – but invariably these exceptions will define and ultimately corroborate the rules.

Every company is different – to a point – and every market is different, again to a point. That said, I have found, over the years, that similarities outweigh differences and that one never goes too far wrong applying basic truths and process fundamentals. I would suggest, at the very least, you think about these guidelines not just abstractly but in reference to your own company’s product offering and those of your competitors. Better still, use them as a filter to see if your company is on the right track or if you are throwing fixed and working capital at losers.

Saturn, a different kind of car company that never quite figured out how to make a go of being different and, as a result, made little difference to the fortunes of its parent GM, is now on the verge of extinction. It is ironic that the more Saturn made cars people actually wanted, i.e., the more mainstream it became, the less relevant and more redundant it became. In other words, it is good to have a point of view, but make sure the view has a point in the first place.

Starbucks had a strongly-held point of view about coffee and people and how the two could come together. And that was enough – along, of course, with impeccable execution – to make the company an institution and an icon. Over-expansion which led to under-execution, along with competition from the lower brow and lesser brews of McDonald’s brought Starbucks profits to a coffee grinding halt. Vivanno smoothies, breakfast foods and other unimaginative fixes proved to be little more than froth. So now, two years later, Starbucks comes out with its newest game changer: VIA Ready Brew instant coffee.

According to the company’s spinners and weavers, Ready Brew is a breakthrough in “soluble” coffee:

“Ready Brew is different – it’s full-bodied and flavorful, just like the Starbucks coffee you know and love…The magic is in a proprietary, all-natural process that we spent years perfecting. We microgrind the coffee in a way that preserves all of their essential oils and flavor. No other coffee company takes this step, and it makes all the difference.”

The wording is reminiscent of an old ad for Tab, a vile diet drink introduced in 1963. “How could just one calorie taste so good?” the jingle asked teasingly. “Because the Coca Cola Company kept the flavor in Tab.”

Ready Brew takes direct aim at the $17 billion instant coffee market. Starbucks hopes to satisfy analysts without resorting to franchising and other brand-sensitive restructuring initiatives. But you’ve got to wonder: will the Nescafe crowd spend more for a Starbucks brew and could a frapuccino freak fall for an instant coffee? Will the brand be damaged by its implausible dip in the soluble pond? My guesses are no, no and yes. Time will tell.

So what about those 50 points of IQ? Starbucks shows what happens when your view gets fuzzy and Saturn when there is no substantive and sustainable view in the first place.

Time to yank out the PIMS database. The marketing budget was not going down without a fight. In fact, I had little trouble convincing my colleagues of the need to keep investing in marketing and product development. To my surprise, we had even less trouble convincing the Board. The issue arose with our attempt to determine the extent of this investment.

I came up with a plan to focus expenditures on winning technologies, products, markets and even specific customers. My Power of One presentation explained why we should put all our money on leadership products, first movers, consolidators and core markets. I was successful on the principles of the thing, but not the details. My colleagues were all for focusing, but to most that meant keeping the pressure up on those areas and pulling back elsewhere. Which translated not into the reallocation of funds and resources but into cutting what had now become ‘non-strategic’ investments. Hmph…here I was, hoisted on my own petard!

Seeing the Big Picture

It was useful, however, to take a broader view of things. Pulling back on the marketing spend (as I would normally define it) was offset by pushing ahead in R&D and operating efficiencies. What is Marketing in fact? Arguably, the additional investment in R&D and operations covered two of the four Ps…maybe even three. In fact, the company was about to embark on the biggest capital program in its history.

So now the marketing exercise was to get the biggest bang for the buck being spent on the ‘focus’ items and find a way to keep the rest sailing along in their slipstreams.

Remember the last post? “In down times, consumers and businesses alike look to safe havens, familiar brands and dependable suppliers that focus on delivering consistent value.” While we kept plugging away at our key focus items, all items were ceremoniously dumped in the safe haven / familiar brand / dependable supplier basket. Public relations, customer service, complaint handling, loyalty programs…all those things that make customers comfortable with a brand were tightly managed with the safe/familiar/dependable relationship in mind.

The jury is still out on how, ultimately, this strategy will work. But the company is sticking to the plan and, in fact, has returned to the black well ahead of schedule. The future looks bright…even if, right now, that future feels very far away.

Note: Our best wishes for a speedy recovery to David St Lawrence over at Making Ripples. The long-time blogger, author, artisan, community activist, gentleman and friend recently suffered a heart attack. This obviously strikes close to home, given my history. Take care of yourself, dear reader, and pay heed when your body sends you signals that something is wrong.

These are tough times, to be sure, but they seem tougher because they are so oppressively omnipresent and so aggressively in your face. It seems that every time you turn around and everywhere you turn, you are confronted by bad news. A pall seems to have settled over the landscape, a pall that is pervasive and pernicious. There is no light apparent at the end of the endless tunnel that we have constructed in our minds.

But – trust me – this too shall pass. There will be a turn-around. It is an eventuality framed by a certainty.

True, you’ve got to survive the recession – or the depression, if you like, or the Second Great Depression, as some like, but when it is over – and it will be over – where and what will your company be?

Might I introduce, for your consideration, the PIMS experience. The PIMS (Profit Impact of Marketing Strategy) database, includes the real world business performance experiences of more than 3,000 businesses representing 16,000+ years of data. Originating at GE in the mid-sixties and further refined at the Harvard Business School, the PIMS database has been managed by the autonomous Strategic Planning Institute since 1975. The strategic data includes information on markets, competitors, quality, structure, environment and financial performance.

Its findings, endorsed by the Corporate Executive Board (I was, for a number of years, a member of the CEB Marketing Leadership Council), are illuminating:

• Marketing spend does not significantly damage return on capital employed (ROCE) during a recession;
• Companies curtailing their marketing spend damage their profitability when the economy recovers;
• Companies that increase marketing spend and that commit to product development during recessions reap the largest future rewards.

The supporting data applied to both B2C and B2B companies. It applied to companies equally in the U.S. and the U.K.

There are reasons for this:

• Brand building requires consistency. Companies can grow share by continuing to generate high levels of awareness, which ultimately translates into customer-perceived value or quality;
• R&D requires similar commitment. Technological advances don’t zig and zag in lockstep with economic cycles. Technology moves relentlessly forward.
• In down times, consumers and businesses alike look to safe havens, familiar brands and dependable suppliers that focus on delivering consistent value. Companies that pull back fall back. Companies that move ahead, stay ahead.

Nothing is ever that simple. But it is not that complicated either.

There are times, however, when strategy junkies need a quicker fix than can be provided by books, good or bad. These cravings can be satisfied by reading various business magazines and blogs. Not all are of these are of equal value either and some blogs, especially, are thinly-disguised platforms for selling services and are unabashedly self-serving.

All this is to introduce a business magazine I discovered quite by accident in a store that offers for sale obscure magazines, toy soldiers and Marvel comic memorabilia. The discovery was the Spring ’08 issue of Strategy + Business. Published by Booz Allen Hamilton, the huge strategic management and technology consulting firm, Strategy + Business is – to their credit and my relief – neatly disguised and only mildly self-serving.

Interestingly, it wasn’t the feature articles that most captured my attention but the front section columns. A number of these should get you thinking :

Upturn Thinking in Downturn Years

In market downturns, the companies that emerge strongest are those that, while retrenching, push ahead with long-term strategic planning. One example of a company that did just that is Lucent; even while the telecom hardware business was in decline, CEO Patricia Russo pushed ahead with an initiative to identify new growth areas that would make use of Lucent’s core capabilities and provide stable revenue and income streams going forward.

New Metrics for Media Campaigns

The reach and frequency metrics used in assessing traditional media campaigns are losing relevance in this age of the web, social networking platforms, cell phones, PDAs, podcasts and video games. Marketers are looking to deliver “contextually relevant messages” to specific, i.e., targeted concentrations of potential customers. They are seeking more precise information on how this digital activity correlates to actual sales. As this information becomes available, they will increasingly embrace the pay-for-performance advertising model.

Undiscovered Riches in IP

In an age of commoditization and globalization, you might imagine companies would dig deep to find and exploit assets that yield sustainable differentiation. Among those assets, Intellectual Property may well be the next frontier. Companies are getting wise to the significant revenues that can be gained through patent and technology licensing. IP is moving out of the legal counsel’s office and into the corporate development arena. In fact, in the past 15 years, licensing revenues have burgeoned from $15 billion to $110 billion. To take it to the next level, companies will have to make their intellectual property both serve the business and be a business in its own right.

New Life for Tired Brands

Ford is attempting to revive the Taurus brand out of the ashes of the Five Hundred, and Proctor & Gamble is using Red Zone antiperspirants and deodorants to reposition Old Spice among teen males. Should and can old brands be revitalized? Have the attributes which once made the brands successful been eroded or been made irrelevant by competing brands? Are the products suffering from the poor opinion of its original customer base or poor awareness from new, potential customers? A proposed four-step Brand Vitality Assessment (which, no doubt, Uno Who could conduct) would provide the answers.

All in all, I rate this magazine a lucky find, one for which you might keep an eye out. You might also want to scour the back issues. Go to www.strategy-business.com. Of course, with Booz Allen Hamilton being a mega consultant, you should not expect a free lunch. Not while they’re trying to build the brand at any rate.

Sooner or later, overcapacity will plunge your company into the maelstrom, the on-going, off-putting madness of a hyper-competitive market. If it is to survive, the organization must continuously rethink its business model and continually update its offerings.

I am reminded of Jack Welch’s parting advice to Jeffrey Immelt when the latter ascended to the GE throne in September, 2001. The man some anointed as one of the greatest CEOs of all time, the hard-nosed head of arguably the most successful company on the planet at the time, told his successor to “blow it up”!

And he did. The GE that we had grown to know, if not necessarily love (unless, of course you owned shares), the GE buoyed by boundarylessness and buttressed by Six Sigma, began to change. The famed management machine moved from the primacy of its promote-from-within policy to looking for the best people – and if that meant going outside, so be it. A tightly-managed organization saw the black belt disciples of Six Sigma and continuous improvement embrace the creative imperative of Imagination Breakthrough. Cash cows in decline were jettisoned in favor of hot prospect biosciences, wind power and entertainment. How is it going? For all the right reasons, GE makes everybody’s list of Most Admired Companies.

In the homogenized, globalized world of overcapacity, even the swiftest corporate leopard must change its strategic spots. It isn’t easy. I know. My previous employer responded to an influx of cheaper imports by moving from a strategy of diversification to one of focus. I was part of the decision making process (which was interesting) and some of the resultant dislocations (which were not).

In the end, though, our willingness to face the issue of capacity head on will enhance our capacity to deal with it.