When the dot com bubble burst, I was young and overly optimistic. At the time, I was working at a promising startup. I was excited about the-then fairly new medium of the Web and its potential to engage with customers in a new way. Fueled by my enthusiasm, I had put nearly all my 401k investments into tech companies. I was all in.
Looking back, at least I learned some lessons early. Yes, the lesson about the need for diversification in stocks, but also the need to look ahead instead of focusing too much on the present.
Twenty years later, it’s wise to anticipate another economic decline.
Additionally, research shows that those that do well in the midst of a recession have a plan ready before it hits.
(This is the first blog in a series on where to focus your planning to weather an economic downturn.)
Ok, let’s begin. It’s time to future proof your business.
The core elements here are: one, solidify your core competitive advantages, two, get aligned on strategy and three, select a few key initiatives to deliver on your strategy. In your planning, consider opportunities that might develop given different scenarios. Also, consider how you could streamline the business or trim non-core elements if needed. Savings from those non-essential elements could help fuel your focus activities.
You can see how this advance planning gives you clear priorities and will be an essential guide and reference for your ongoing work.
Study of the Last Economic Downturn
To illustrate this approach, look at the results of a Bain & Company study shown below (https://www.bain.com/insights/using-the-next-recession-to-change-the-game/) from the last economic downtown. The winners focused on things such as getting clear on their competitive advantage. They created wish lists of potential acquisitions, considered which star employees to recruit, and trimmed non-core activities to focus funds on key competitive initiatives. In contrast, those that struggled had no advance planning and no clear focus. So their response was to go into survival mode. Those in this camp struggled during the downturn but also lost momentum and had a hard time bouncing back when the recovery came. That won’t be you, because you are going to start planning now.
I want to clarify an important point here: Your revenue source is not from products, it is from the customers who buy your products/services to solve a problem they have. An analogy is that a customer does not buy a hammer for its own sake. She purchases the tool because she wants to enjoy a new wooden patio in her backyard. So, let’s focus on customers and their needs rather than narrowly looking at products to sell them.
Other important notes from Bain’s research are:
- Stress-test your business. Closely review all ideas you developed that are a departure from your current work. Consider how well your existing company can do with these new scenarios. Also look at your exposure to a sharp downturn.
- Envision a winning formula. How can you win regardless of what scenario you encounter? Get clear on how you would execute such plans. What are the opportunities in each scenario and how do your capabilities match up? Is your team ready?
- Draw up a playbook for details on each scenario that is tied to your strategy. Get clear on what actions are tied to which conditions and how to prioritize your efforts. Outline when and where to use which approaches.
Don’t be overly concerned about whether your pre-planning can imagine every conceivable option. What is important is that you will have thought through key issues, considerations, and how to stand out and thrive despite challenges. Get your scenarios defined and get ready to adapt as needed, that is your focus right now.
I’ll offer more ideas in the next blog, until then, it’s time to start thinking and planning.