A lot has already happened in the first half of 2022 and we can’t ignore it. With compounding factors such as the war in Ukraine and a post-COVID-19 market leading to higher inflation, the worry of tighter financial conditions is beginning to creep into the collective consciousness of employees and business owners alike. Knowing the characteristics of recession resilience can be a huge advantage in future-proofing the success of your company. With this in mind, let’s run through five success factors to ensure your company stays recession resilient in spite of the predicted economic turmoil:
1. Listen To Your Customers
A recession is a period of depressed consumer confidence–which culminates in lower spending and business activity. As recession-conscious consumers are more likely to be cautious with their spending habits, your company needs to address their pain points with razor-sharp precision to beat the competition. Rather than just attaining market fit, you need to maintain it.
As technology, markets and competitors evolve, so will the type and severity of your customers’ pain points. Keep your customers' needs at the forefront of your company as you drive innovation and product development.
2. Focus on Organizational Agility
Agility is all about how well-equipped organizations are to respond to changes in business conditions to deal with disruptive events - a looming recession and unpredictable market conditions being the prime examples here. In a volatile business environment, companies must be able to anticipate and adapt to change in order to survive, and ultimately thrive.
Inability to anticipate and swiftly respond to change impairs organizational performance, jeopardizing competitiveness and possibly the future of the company.
To improve their agility, organizations should focus their attention on:
- Examine what tools you already have in place: Assess the effectiveness of any practices that have already been adopted to enhance agility. Are your tools and processes as agile as they could be? If not, challenge your organization’s collaboration approaches, workflows and processes to make them faster, simpler, and more agile.
- Analyze external sources: Analyze the suitability for adoption of agile practices that have proved to be effective by external sources such as industry peers, external research, and consultancies.
- Make your work model agile: Fundamentally rethink the way your organization leverages its people. The pandemic proved that people are taking factors such as flexibility, location, hours, and remote/hybrid models seriously. Being agile enough to move with the wants and needs of the workforce will serve your organization in the long run.
- Establish change management: Given that the most significant inhibitor of increased agility is human resistance to change, establish a strong change-management program.
- Develop a roadmap specifying which practices will be adopted, fine-tuned, accelerated or sustained.
3. Assess Your Necessary Trade-Offs
Unfortunately, trade-offs may be necessary, but remember that there are steps you can take to make each decision strategic, with the needs of stakeholders in place. Firstly, create a prioritized list of the resource trade-offs you will make in cost management and budgeting. Next, focus your attention on communicating a clear narrative that explains your thinking to stakeholders to build buy-in.
4. Optimize Your Digital Processes
In the era of digital transformation, it’s becoming more and more critical to optimize your digital offerings. Examine the following processes:
- Automating your processes is the first step to permanently reduce the cost of doing business. Adopting technology such as artificial intelligence to reduce labor costs, shore up production and free up high-cost talent will put the focus on bringing value to your organization.
- Improving the customer experience via digital offerings: focus your efforts on producing more relevant digital products and services.
- Focus on predictive analytics: invest in predictive digital projects that make your organization faster and leaner, including in its decision-making.
5. Clearly Differentiate Your Organization In Its Field
Michael Porter’s competitive strategy tenets state that a firm cannot be everything to everyone and must focus on leading either through cost leadership or quality differentiation. Having a clear north star towards one of these sides will ensure that a business stays on the right path during hard times. This a particularly important factor for start-ups to consider, who might try their hands at being too many things at once in the early stages of development. Instead, focus your attention on clearly differentiated offerings to stand out from the competition.
Summing It Up
Although many are split on the likelihood of a recession, now is a good opportunity to revisit lessons learned from prior downturns nonetheless. Remember, this is not the time to panic, but the time to reassess.