In our last post, we spoke about why insights matters more now than ever before, particularly for organisations that are suffering but the impact of this uncertainty and disruption is a huge unknown.
So while these organisations are currently focused on implementing business continuity plans and setting up their teams for home office/remote working, what is the plan beyond the next two weeks?
What’s your plan?
Today’s post continues on the theme of business survival and the role of information and insights in making smarter, quicker decisions.
What? Quicker and smarter decisions?
We all know what quick decisions look like.
A company whose customer demand or revenue has contracted by 100% must make radical decisions like closing the entire business or standing down staff, today.
But for other organisations, large or small, where customer demand or revenue has contracted by say 20 to 50% and unsure whether this is temporary or a sign of more to come, what do you do?
- Do nothing and wait, hoping that this is just a short term slump?
- Do something?
But if you do something, what do you do?
While there is no blueprint to follow, we can learn from finding out what 4,700 public companies did in prior recessions and depressions. In our homework, what we were looking to figure out was:
- How many organisations survived?
- Who thrived? Did anyone actually get ahead during the recession? If so, what did they do right?
- How long did all of this take to return to pre-recession growth rates?
What the HBR research found was surprising.
- 17% of companies didn’t survive. They went bankrupt, were acquired or became private.
- 80% of companies that managed to survive, hadn't returned to pre-recession sales or profit growth rates after three years. Yep. Three years.
- Only 9% of companies that managed to survive, thrived. ‘Thriving’, defined by doing better on key financial metrics than before and outperforming competitors by at least 10% in terms of sales and profit growth.
So what does this mean? It means that if the business survives, there is hope to get ahead during uncertain times, however it will be a long journey.
So, what did the winners do differently?
- They cut costs focusing on where they could make operational efficiencies instead of reducing headcount, AND
- They spent more than competitors on marketing, R&D and assets to spur growth.
Sounds easy, right? A sprinkle of offence and a dash of defence.
Easy to say, hard to do.
But even knowing that the best strategy is a bit of A and a bit of B, the difficulty is compounded by:
- Which costs? You need high quality insights to guide which costs will make the difference to improve operational efficiencies, but how do you do this when you're stuck with static reports and overwhelmed Finance and BI teams?
- Discipline to not touch headcount - Sure, touching headcount may make the biggest difference to your cost saving today, but will completely cut your muscle tomorrow (and the study shows that the companies that reduced headcount were significantly - we repeat, significantly - less likely to outperform rivals.
- Which opportunities? Not only do you need high quality insights to identify which opportunities will spur growth, but the conversation about spending money may seem totally counterintuitive and parked (i.e. ignored) for not being ‘mission critical’ when your Zoom meetings are centred around what we must do today. Nobody can see beyond the fog that is the next two weeks, let alone knowing which opportunities may help the organisation stay on track during a long period of slow growth ahead. But, if nobody is thinking of this within your organisation, benchmarking to the HBR research over three global recessions and 4,700 public companies, then you’re setting up the organisation to fail, not flourish.
You may look to your organisation, leadership or even people you know that have experienced a downturn for ‘the plan’. However, they don’t have a playbook to navigate this one.
Nobody has a master plan when they enter a recession.
But we can learn from the experience of 4,700 companies that died, survived or thrived.
We can get cracking to identify both the cost and growth opportunities, and how to master the delicate balance of doing both. It won’t be easy. But it will force you to stretch your organisation beyond the immediate fog, as there is a high chance, a very high chance, that others, your rivals, your competitors are not doing this. They are too busy focusing on managing the fog that is in front of them.
So back to the topic of quicker, smarter decisions?
Today’s post was all about helping you identify a plan for which insights matter when faced with a recession. Rapid decisions can be made immediately, sure. However, holding yourself and the organisation accountable for smarter decisions? Decisions that invest both in reducing costs and investing in growth? It’s hard. But we urge you to take the findings from the 4,700 companies seriously.
As a business leader currently in the thick of tackling immediate priorities, you must pivot today to help your company to cope with the ‘new normal’. The world as we see it is unlikely to resemble the one before it. In the thick of the fog that is COVID-19, the future of your business will remain foggy without you taking a moment to understand how high quality information and insights are delivered, on demand, within your organisation.
We are here to help you make sense of the ‘new normal’.
Today’s post continued on the theme of business survival and deploying a strategy of cutting costs and investing in both operational efficiencies and spurring growth. In an upcoming post, we’ll talk about how to find those opportunities, especially when it feels like you’re ‘looking for a needle in a haystack’.
So, that’s our thoughts for today. Good luck in your businesses. Stay tuned for more on how to find the key insights during these uncertain economic times.
We recommend reading the original research cited in this post:
R Gulati, N Nohria, F Wohlgezogen (March 2010) "Roaring Out of Recession", Harvard Business Review.