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Home > Nanotechnology Columns > Alan Shalleck-NanoClarity > Profiting by Countering the Economy

Alan Shalleck
NanoClarity LLC

Attention management of a budding nanotechnology venture. The world economy has become your worst nightmare. Everything looks bleak and not filled with economic possibilities. However, that is not true. Let us see if we can construct the correct strategic action plan to counter all the bad economic news.

July 6th, 2008

Profiting by Countering the Economy

Profiting by Countering the Economy
Nanotechnology Strategy in a Down Environment
Alan B. Shalleck
NanoClarity LLC
July 2008

Attention management of a budding nanotechnology venture. The world economy has become your worst nightmare. Everything looks bleak and not filled with economic possibilities. However, that is not true. Let us see if we can construct the correct strategic action plan to counter all the bad economic news. First a scenario.

Your nanotechnology company is about to introduce the commercial versions of your now fully beta tested new nanoproduct offerings. You have been planning this move for over a year and have identified target customers that might pay you for commercial versions of your nanotech products. Nine-twelve months ago, when you laid out your growth business plan, you were feeling excellently about your company prospects. You believed that you could finally make the successful switch to production and cash generating sales after 5 - 6 years of negative cash flow R & D. Moreover, your investors had been told that there was now an identified path to positive cash flow and that their investment in your company looked increasingly secure, including an exit possibility through the public markets. Things were looking up for the entire nanotechnology industry (if you can call it that).

However, during the last six to nine months conditions have radically changed. The US economy is in a recession and is pulling down the economies of the rest of the world; GNP's are plummeting everywhere; The US stock markets are going nowhere for the future; there are no IPO's on anyone's horizon; Banks are in serious jeopardy and have pulled back; Your potential customers are worried. They are feeling scared, laying off employees and are not very positive about their projected earnings for the next 12 - 18 months. Moreover, considering external conditions, your potential customers are cutting back on new product and systems improvement expenditures, lowering their sights, reducing their risks, and conserving their cash until the economic outlook brightens considerably. So are their competitors and their customers. It seems to be the incorrect time to introduce any new product, let alone one that few in your customer's cadre or management understand (like nanotechnology).

Logically, as a careful management of a nanotechnology based company, the natural corporate strategy to adopt would be to reflect those apparent external trends and corporate behaviors and pull in the reins; i.e. delay any product introductions, reduce spending and mimic the path of the rest of the economy. Certainly, your Board of Directors would find no fault in saving funds until general economic conditions improve and not taking on any economic risks other than those already underway. Sounds prudent and responsible, doesn't it? However, you would be missing one of the great strategic economic opportunities for nanotech commercialization since the National Nanotechnology Initiative was first published!

The correct strategy in such a down environment for a serious and opportunistic nanotech company is not only to continue to introduce its products commercially but to accelerate and to intensify that introduction. Why? Well, (and I have not only done this myself with my own companies but I teach it in graduate school) the reasons are very justifiable.

First, remember where you are financially. Typically, you are not making money right now so you have no further financial downside than you are already experiencing, maybe a little more loss, and that means you'll use up your capital a little faster but with an upside to replenish it. No incremental reason for not following your introduction plan, correct?

Second, examine at your business options from a marketing and sales view. Normally, a potential customers can give you three answers - "yes", "no", or "maybe". Without trying sell of your "ready" nanotech product, you already have a "no," isn't that correct? You do not have a cash-producing sale. The only way you can possibly get a sale or a "Yes, I'll buy it," or "maybe I'll buy it but I have to talk to a few people." is by introducing your nanoproduct - i.e. putting it in front of the customer as planned, isn't that correct? The old saw, ‘If you don't ask, you don't get" applies here. A recession should not affect your growth plan if you are not yet generating positive cash flow. Go for it.

Third, and here I make a radical recommendation, greatly increase your marketing budget and sales effort to take advantage of the recession generated opportunity. It is not an opportunity? Sure it is. Your potential competitors are not going to follow an aggressive marketing approach. Most likely, they will "prudently" back off and you will be alone in making your pitch to your potential customers. Moreover, most companies will not be approaching your potential customers with new products. They will be following the conventional plan to mimic the economy by cutting back and holding all new initiatives until the economy recovers. You will therefore get more attention from your potential customers for your new introductions because no one else will be pitching them. Interestingly, you singularly can try to capture the reduced amounts of new purchases allocations in your potential customer's budgets because you will be alone. This economy is potentially a very benevolent environment.

The bottom line is that if in a bad economy you want to raise your bottom line potential, do not cut back, keep your plans and increase your marketing efforts. The odds are with you.

Alan B. Shalleck
NanoClarity LLC

© NanoClarity LLC 2008

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