Given that our industry is about navigating through cycles, in which Power-One has successfully navigated five, what are the keys to capitalizing during this downturn? The three keys to charting a down cycle are early detection, advanced preparation and quick execution. Inventory levels, lead times, capacity indicators, and customer sell-through numbers enabled us to realize the down cycle was approaching, and there will be similar indicators to observe as the cycle ends.

In an up cycle, customers are simply looking to fill product orders. Products will typically sell if a supplier continues to crank out slightly improved devices every few months. Breakthrough technology is not typically introduced during this time because suppliers will actually lose market share if they are not paying close attention to the incremental product advances that meet the customers; demand.

In a downturn, it is futile to release incremental advances, because customers must burn through their existing inventory and, in reality, 50 to 75 percent of customer end-projects wind up being canceled or delayed. This is why it is essential to invest in breakthrough long-range technology in a declining market cycle.

When launching R&D initiatives in the past up cycle, most CEOs would have said that their chief concern was the lack of top-tier technical talent available. When the slump hit, there was an abundance of talent accessible. In bad times, with stock options underwater, and downsizings throughout the industry, you are able to recruit the best minds in the business, allowing them to lock in new stock options at a low point. Therefore, the talent required to implement major technological initiatives can more easily be assembled in the down cycle.

Advanced preparation includes having a detailed plan in place to first reduce operational costs, while simultaneously obtaining top technical talent capable of executing breakthrough technology. With a typical design cycle of two to three years to introduce innovative technology, a supplier now has the time and talent to focus on R&D ingenuity and get it in front of customers early enough to get feedback, and modify to the customer's needs. Essentially, the breakthrough technology is designed in and the launch will coincide with the market recovery. Leading-edge technology solutions that had begun at the onset of the downturn benefit the bottom line, as demand increases and sales are realized. In an up cycle, initiatives such as these are much more difficult.