Lesson Number 1 for surviving a bad economy: Don’t put yourself in a bad spot during a good economy.

It’s an easy trap to fall into because expanding when times are good is camouflaged as a good idea. But when the economy stalls you’re faced with few options, and none of them are palatable. You had inflated your operation and now there is not enough money to pay for it all. The only things left are the layoffs, and maybe even a closure.

This common nightmare is one Lionel Phillips is looking to avoid at all costs. As president of Inside Edge Consulting, a College Road East firm serving the pharmaceutical industry, Phillips’ company is actually growing. But it’s not growing too quickly and won’t grow too big, he says. To keep the firm successful, he plans to keep it small and stable.

A year ago, when Inside Edge moved from the basement of Phillips’ Somerset home to the Forrestal Center (U.S. 1, February 2, 2008), it came with 11 employees. Now that the firm has hired David Chen, a 20-year veteran of market research and a doctor of psychology, Inside Edge has achieved its goal of having 13 employees by this point. Phillips says he hopes to employ 25 by the beginning of 2010.

But then that’s it. “We don’t need more than that,” he says. “If you grow too big you become too exposed.” More employees would steer the firm toward a “million-dollar payroll” that would require even more people to help manage it, and the circle only grows from there.

It also detracts from Inside Edge’s mission to help pharma companies, doctors, and pharma marketers understand the products and services they deal in. Says Chen: “It’s about intellectual power, not corporate size.”

The China-born Chen earned his Ph.D. in psychology from American University in 1984 and was brought aboard to help Inside Edge understand behavior patterns of the public on behalf of the firm’s clients. He had been a psychology professor at Hunter College in New York, where he dabbled in the theoretical applications of market behavior. But the itch to “see how the real world used the techniques professors devised” became too great, and he entered market research in New York City’s consumer packaging industry.

From there, Chen moved onto companies like Rorer (maker of Maalox), RPI, and Wyeth, where he headed marketing departments. He later moved to Janssen Pharmaceuticals in Titusville, and Saflon, a pots and pans company in Malvern, Pennsylvania.

The addition of Chen is “a critical expansion,” Phillips says. “We have to maintain our corporate focus, but also expand our tool kit.” Despite its wealth of sales and product knowledge, Inside Edge did not have a true marketing arm until Chen’s arrival. Chen says much of his job will be to help clients measure the outcome of their marketing efforts.

The other addition to Inside Edge’s staff is Valerie Samson, a project manager who interned for Inside Edge as she earned her English degree from Monmouth University. Hired last year as an administrative assistant, Samson now coordinates the firm’s work with the Diabetes Consortium, a Parsippany-based non-profit seeking to “change how diabetes is managed,” Phillips says. Part of the process will be helping to disseminate education to high-risk populations — particularly blacks and Latinos — that are at risk largely because of environment and ingrained behaviors.

Interestingly, the plan has little to do with drugs, Phillips says. It is more about holistic change. “You can’t manage a problem like diabetes with only drugs,” he says.

The consortium is part of a new wave of business Inside Edge has been enjoying. In fact, says Phillips, the firm is now is getting clients coming to it, rather than it seeking out clients. In the past year Inside Edge has done business with CentraCore, Synvista Therapeutics, and Forest Laboratories of New York. The last two sought the firm out, Phillips says, and he credits his two latest hires with helping to pick up the business.

Though the pharma business is feeling a sting similar to many types of businesses — Pfizer, in fact, recently laid off 800 of its scientists — Phillips says such circumstances do not generally affect his business. Inside Edge deals with the products and has clients of various size — another bulwark against collapse. Consulting, he says, does well in any economy, but does particularly well in a bad one. And as the economy comes around, Inside Edge’s direct consulting services might wane, but it is built to make up for it with its growing market research interest, and its attention to its three oft-referenced core values: brand advocacy, brand optimization, and brand control.

Different aspects of the business, whether outcome measurements, training, or “war games” (in which the company runs a product through theoretical paces to see where it could go horribly awry) can take a hit while the others continue, not letting one area become too strong or too weak, he says.

A year after moving the office from his basement Phillips says the company is settled in nicely. “It is such a joy to have a focal point,” he says. Of the 13 employees, six work in the office on College Road. The rest work remotely, he says.

Inside Edge plans to hire another consultant and an employee to replace Samson as administrative assistant.

Inside Edge Consulting Group, 103 College Road East, Second Floor, Princeton 08540; 609-520-1300; fax, 609-520-1304. Lionel Phillips, president. Home page: www.insideedgeconsulting.com.

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