No matter what the “experts” will tell you, it is near impossible to predict economic downturns, but they are certain to happen. Given the various changes that the world is going through, these economic cycles that effect your business adversely will certainly increase in the future. Higher volatility in certain businesses is certainly going to be normal for a few years if not decades.
How do you plan for the future then? How do you predict the economic outlook and formulate a strategy around it? This may seem like an impossible task, but there are characteristics that businesses can build to be better prepared for the storms, actions that can be taken that can help weather through it.
Building resilience in a business obviously is a function of how resilient the leadership of the company is, but the mindset needs to trickle through the culture of the company as well. Some of the things you can do to be more resilient are:
Build modularity and flexibility in operations - Allow for certain elements of your business to fail without the entire system collapsing. Build processes and flows that are integrated and efficient but have well defined interfaces that can be rewired if necessary. Additionally, understand what part of your operation is inflexible and what is causing that rigidity. Ensuring that your business is as flexible as possible without compromising on efficiency is vital to survival.
Optimize on costs before needing to do so - It is important that as soon as the downturn signs are apparent, businesses move quickly improved efficiencies. This means cutting out fixed costs that are not essential, reducing the cost of goods sold to build in operational efficacies, re-imagining the Balance sheet to be more flexible by cutting out debt or divesting etc. However, it is very important to know and understand the impact of cost optimization so as to not negatively impact the operational efficiency of the business. Optimizing costs means spending for the same amount of productivity.
Invest heavily in technology and a team that can think outside the box – Instead of cutting spending the minute a downturn is eminent; businesses should invest in improving their efficiencies and upskilling their workers. The idea is not to blindly spend on trends or training but to truly understand what would be required in future and performing risk assessment before adopting any tech or training on any skill.
Whatever businesses plan to do during the recession, teams should always keep in mind that the recession will pass. No recession will last forever. It is important to find a balance between measures that will ensure survival and measures that will ensure recovery. A crisis should be treated as just an event – an event that allows us time to re-evaluate our current state.