The Critical Curve
We’re in a recession and it’s going to deepen. Whether we’ll enjoy a rapid ‘V-shaped’ bounce back, endure a longer ‘U-shaped’ recovery or worse suffer an elongated ‘S-shaped’ path back to economic growth isn’t clear. But the critical ‘U’ curve seems the most likely path. How long we’ll be on its flat bottom depends partly on when the locks come off, but more so on what business leaders, owners and investors do now and at the base of this critical curve.
Are you concerned about how your business can survive the recession? Are you worried about growth? What should leaders, owners and investors do?
One thing is clear. Sticking your head in the sand and waiting for things to ‘get better’ won’t work. And ‘going for broke’ might just be self-fulfilling. Evidence developed at the Harvard Business School from the behaviours of 4,700 companies in the 1980, 1990 and 2000 recessions is clear. Being overly defensive (focusing heavily on preventing losses) or overly offensive (focusing heavily on promoting business development) doesn’t work. Insolvency beckons from positions of total defence or total offence. Experiences from 2007’s GFC back this up.
What works? Harvard found that pragmatic combinations of defence and offence steady performance in recession. When twinned strategic moves like this are optimised, growth follows.
What should leaders do? Look carefully at your business models. First seek ‘value assurance’ from conserving key resources, processes and partnerships with an eye on cost elimination and reduction. This assurance extends from preserving customer relationships in core segments and through core channels too. Once the foundations are assured, don’t waste time on a slow build back to ‘business as normal.’ All the signs are that we’ll have a very different new ‘normal.’
Better to look for a progressive, clear focus. Raise value in existing segments and create value in new ones through pivoting (incremental innovation) or shifting (disruptive innovation) your business model. Look for opportunities that leverage key resources (chiefly people), key processes and key partnerships. Combine this with an eye for optimised costs in what Blue Ocean strategists call ‘value innovation.’ As you act to deploy your new model, the business will accelerate and your cash flow will change in form and quantity.
Performance and Support
As you pivot or shift, or both, you’ll need to push your personal and professional performance as well as that of your team, to match your new value dynamics and cost drivers.
Propelling out of this downturn further requires personalised support for professional development for you and your team. This will enable you to further extend your foundations for a successful high growth bounce (becoming a Gazelle company). In short, you and your team need to grow if your business is to.
Balanced Offence and Defence: Assurance then Growth
You can’t bounce with your head in the sand. Pure defence or aggression will not see you through.
Look up. Look forward. Pivot or shift, then push and propel. Be progressive. Balance defence and offence. First comes assurance, then comes growth.