Downturns and recessions are a part of life but they do not have to signal dark times for business.
With business and consumer sentiment levels low and continuing to decline, and the R word being used with increasing frequency, it is important that businesses do not fall immediately into the trap of thinking that scaling back, cutting prices and people is the right and only answer.
Organisations by their very nature evolve over time. During prosperous times growth is rarely carefully considered and planned. In fact, in most cases, businesses adapt and adjust to deliver products and services to customers. During these periods, hiring additional resources is often the sole strategy considered. We all get caught up in success and the cycle continues – hence the economic ‘certainty’ of the boom and bust cycle.
“During the last recession, producer prices fell by nearly 8% and took nearly two of years to recover. Why? Executives often assume that slashing prices and profit margins is the only way to keep their customers and market share. Salespeople, desperate to meet targets, fail to hold the line on discounting, and companies want to maximize their use of assets even when demand softens.”
‘Why You Shouldn’t Slash Prices in the Next Recession’ by Shihwan Chung, Ron Kermisch and Mark Burton, October 30 2019
Rarely do businesses take a step back in the lead up to a downturn and consider whether their operating model and strategy is creating sustainable success in boom times and resilience for downturns.
Across-the-board cuts can permanently erode a company’s profitability and strategic position.
During times of uncertainty, but well before we move into a recession, the opportunity exists to take a breath and consider whether our strategy and business model is still relevant or whether we should be looking to identify and eliminate waste, revisit strategy and embrace a next-gen operating model.
The fundamental question is whether we do ‘more of the same’ or ‘disrupt business and set off on a new path with a new vision’.
A significant number of opportunities exist to position for success – key measures include:
- considering your operating model and considering change and value adding levers;
- reviewing your strategy;
- reducing waste in all areas of your business;
- unleashing the power of data across your organisation;
- implementing broad-based, real-time reporting;
- knowing your place in the market and exactly what drives your profits;
- empowering and leveraging your people;
- consider pricing through a segmented, value-based approach;
- patch all price leakage across your business; and
- developing dynamic pricing where it makes sense.
Outcomes
In our experience:
Businesses that have never implemented a structured waste reduction program can improve their bottom line by up to 20%
Implementing a Next-Gen operating model can sustainably improve the bottom line while at the same time, positioning the organisation to improve customer services and service delivery.
Overlay that with an updated strategy, properly executed, of course, and two things happen:
Firstly, the organisation is better positioned to deal with downturns and recessions.
Secondly, the organisation is immediately prepared for when the economic curve heads upwards again.
We are passionate about talking to clients who want to position themselves for success through positive, proactive actions. Enjoy a complimentary coffee on us over a chat about how our approach can help your business with Innovation, Growth and Sustainability.