No matter what label you put on the current state of the economy, companies are looking for ideas to help their business cope with reduced sales and challenging capital markets.
As we publish this blog, the number one Google sponsored link for the search term “recession” is a link to a Book of Revelation based forecast for the end of the world. This is sobering, but so misguided. Recessions can be difficult, stressful, and they can lead to the “end times” for some companies. But companies who thrive in tough times do so by “loving” recessions as an opportunity to position them selves for accelerated growth as the economy rebounds. Time and time again, companies who have increased shareholder value spring to leadership positions during recessions, differentiating themselves from survivors by thriving in new market conditions.
• Flexibility – Their management teams strive for balance sheet and operational flexibility, spend cash strategically but aggressively on acquisitions, and improve their processes to position them to absorb acquisitions more efficiently. Enabling process improvement may require some tough decisions about retiring and replacing (or, integrating) legacy systems using service oriented architectures and mash up tools.
• Talent – Innovative leaders realize that in difficult economic times, good people can be easier to recruit and use recessions as an opportunity to upgrade their talent pool, performing assessments of their existing teams and making important decisions about staff capability and cost.
• Innovation – Importantly, they also use techniques such as open innovation, gathering valuable customer data from social networks and other sources. Successful companies innovate to create product and service diversify into adjacent markets and new geographies.
• Invest in what is measurable – They shift marketing dollars online to more measurable techniques to reach customers and develop sales leads such as eMarketing / mail, analytics, eNewsletters, webinars, streaming video combined with other methods for measurement, etc.
• They balance innovation and strategic projects with disciplines such as IT portfolio management, which help them decide what to keep – or invest in – and what to cut. This creates opportunities and tensions within corporate boardrooms and line management. Innovation can create real value, but portfolio management may if not used properly kill innovation as companies seek to address short-term cash or profit and loss challenges. Companies who cut too deeply loose capability they need as the market improves.
• Some companies emerge from a recession stronger and more highly valued than they were before the economy took an unpleasant turn for the worst.
By making strategic choices that sometimes defy conventional wisdom, they increase their stock market valuations relative to those of their former peers and thus gain more power to shape their industries.