Catch Phrases for Surviving an Economic Downturn
Image Courtesy: Forbes.com
In a recent conversation, renowned leadership coach Marshall Goldsmith makes a crucial point that when there is a demand slump, the best way to cope is to accept that the business may not revive in the near future. By doing so, true leaders hedge their risks while refraining from giving false hopes to their employees.
He quotes the examples of popular restaurants in New York that have shut down and scores that could follow suit. For a city that welcomes tourists through the year, a hope of revival would be as realistic as a thunderstorm in a desert. Marshall Goldsmith calls it “pragmatic realism” as business owners hoping for change could well be “Waiting for Godot”.
Does that mean every business where demand is going down, as is its wont during a downturn in global spending, should read the writing on the wall? The answer is a resounding Yes, but the solution is definitely not bidding adieu to one’s dream of revival. In the past, enterprises have dealt with such declines via innovation-led cost reductions, process efficiencies and right-sizing.
For, when growth goes out of the window for a few months (or years), survival is paramount. In fact, a recent report by Innovation Leader, a research company, claims that 28% of all Fortune 1000 companies had shifted focus off growth initiatives while 46% realigned themselves to the core business of their organisation.
Of course, some may argue that such a strategy could result in getting left out when revival returns, for there is a good chance that competitors could have adopted a wait-and-watch policy by simply reducing operational expenses and retaining resources. Several Indian SMEs are said to be using this strategy of reducing salaries in the hope of forthcoming orders.
The flip side of this move is as riskier if not more, given that the business that one is operating may take longer than others to revive. Take the case of India’s automobile industry which had seen demand falling even before Covid-19 came knocking on our doors. In this scenario, how can the auto-component maker plan for fresh orders in the near future, unless of course they are more into spare parts than OEMs.
However, there are some catch phrases that emerge every time there is an economic downturn and we present some of these right here, with the clear caveat that what serves one may not serve the other in the same way…
- Lean & Mean is the first of these. These words crop up every time an enterprise goes into cost-cutting mode, this phrase makes an appearance. However, even before getting into this frame of mind, it might help if enterprises did some actual market research, not the variety where the reports end up reiterating what one wants to believe. How many of us remember McDonald’s famous “Why I’m lovin’ it” campaign to get direct response from real use cases? Maybe, enterprises can use some of their ‘redundant’ staff to go around and conduct these surveys instead of hiring external market researchers. And, what stops companies from getting inputs from their friends or family and even via social networks? For e.g. couldn’t Maruti Udyog conduct a Facebook survey on when some of the users plan to purchase their next car?
- Customer priorities automatically take the second slot because the above research would more likely than not help enterprises get a clearer idea of what could sell when recovery appears on the horizon. Look at the sudden surfeit of smartphones hitting the market post the Unlockdown! This while overall sales fell by half in the first two quarters of the calendar year. Of course, since most of the companies that sell these phones aren’t required to share their inventory positions, we would never know the truth, barring probably those of Google (Pixel) and Apple (iPhone). Keeping customer needs on top of the mind simply ensures their loyalty when life returns to normal.
- Focusing outside is the third catchphrase that appears during recessions. If this sounds contradictory, do not be surprised because in a sense it is. While right-sizing and getting lean and mean, enterprises are nudged to look outside for resources, both in terms of technology and knowledge. In other words, they refrain from in-house expenditure on any innovation and trust the market to deliver quality resources from other companies who are struggling to survive. The Facebook deal to gobble up Instagram post the 2008 meltdown is what comes to mind immediately.
Of course, there are other catch phrases that get bandied around, such as product innovation, process optimisation, reskilling and upskilling and organizational restructuring that one comes across, not just when the going gets tough globally, but even at other times. We do not want to waste your time discussing these at this juncture because we believe the above three could help drive you through the current phase of uncertainty.