Can Lean and Mean Make the Economy Steam

Today’s enterprise models are better than they were a couple of years ago due to a new lean and mean post melt-down architecture. Examples of corporate thrift are all around us, some clearly visible and others less so but nonetheless, significant.

A landmark example of the new business economy is the name change to Vancouver’s large downtown arena when General Motors gave up its 15 year sponsorship.  GM stayed long enough to enjoy the Olympic good will but rescinded its rights to have its name on the arena shortly after in what is seen as corporate cost cutting.

The sign for GM Place may have come down, but GM is thriving. The world’s second largest auto manufacturer has undergone an astounding turnaround for a company that filed a Chapter 11 reorganization and was saved by a controversial government takeover just 20 months ago.

Another area of lean marketing plans is the drop in corporate spending at conventions. The Las Vegas Convention Center experienced a 30 percent drop in business in 2009 and has not recovered in 2010. So where do corporations go when they need to host large gatherings of employees? They go online and host conventions that cost pennies compared to thousands of dollars. The trend to virtual conventions [1] will keep growing while the attractive costs will mean that corporations retain this strategy even in a time of economic growth.

As a result of a back to basics financial approach, many corporations are selling in the 12 to 15 times earnings multiples, while their growth rate is 18%-25%.  Some companies are posting record highs and have strong cash reserves. While GDP rates were 1.10% in 2009 and -2.6% in 2010, Alan Greenspan, the former Chairman of the Federal Reserve, predicts that the economy will rise to 3.5% in 2011.

Have these lean and mean survival tactics resulted in a resurgent economy? If corporations maintain a trend of process improvement, superior customer service, coupled with reined in spending, when the next economic growth spurt returns, they will be ready.

In the post recession environment, those companies that adopted a lean and mean business plan during the downturn will experience a significant rise in profits and provide the impetus for an economic rebound.

[1] A report made by Market Research Media Ltd, states that the worldwide virtual conference market is forecasted to grow by 56% annually and reach $18.6 Billion between the period of 2010 and 2015. By 2012, there will be 100,000 virtual events annually.

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