I’ve just been reading the headlines on the BBC website, which should come with a government health warning. Stories included high inflation and interest rate rises, the war in Ukraine, record-high hospital waiting lists and the impending UK strikes. Even the current good weather was reported in terms of the dangers of dehydration!
It’s clear that we are entering an economic downturn that, on top of post-pandemic supply chain issues, is creating serious business challenges. Effective cost and investment management will be essential to delivering profitable returns over the coming months and, potentially, beyond.
Yet, all the research shows that the companies that do best through a recession and, in particular, the post-recession period are those that find the right balance between cost management and growth investment. This research has identified the following guidelines:
- When it comes to cost-cutting, focus on improving operational efficiency, not just headcount reduction.
- Stay as close as possible to your customers, to understand and respond to changes in their needs and priorities.
- Be willing to make selective investments to improve long-term performance (potentially taking advantage of the depressed property, equipment and asset prices).
- Continue to invest in R&D and brand marketing. This may add relatively little to your performance during the downturn, but it will help drive growth on the other side of the recession (and, as other companies cut back on their marketing spend, you might find you get more marketing for your buck!)
Finding the right balance of defensive and offensive actions is, of course, far from easy. But it starts with adopting a mindset of looking to exploit new opportunities, and not just resolve your immediate problems.
What new opportunities will the upcoming downturn create for your business?
Off The Record: Life’s What You Make It by Talk Talk
Celebrate it
Anticipate it
Yesterday’s faded
Nothing can change it
Life’s what you make it