There’s no question that the United States, and the world as a whole, are in an economic downturn. Due to COVID-19, we could see a repeat of the 2008 recession, and some experts even think we may hit lows equal to that of the Great Depression of the 1920s and 1930s. With all the unknowns, how should companies operate their business now, so they come out ahead when the market starts to turn around?
One might think cutting costs wherever possible will be the best way to preserve the integrity of a business. However, according to a yearlong study by Harvard, companies that did this actually fared worse than others. The main reason for this – the mentality teams acquire during the time of a downturn. If companies only focus on cutting costs and preserving what they have, they begin aiming too low and produce less value for their customers. This will lead to less customer satisfaction, which will hurt the business even more when the market starts to recover.
So during times of uncertainty, eliminating jobs, cutting R&D costs, and reducing asset spending isn’t the best method. Instead, how about ramping up spending on marketing or innovation? As it turns out, companies that take this approach don’t do well either. Why? Because if a company only focuses on an aggressive tactic, they tend to become overconfident and miss the negative realities. You’re setting your teams up for failure if unrealistic expectations are put into place, only to have their morale crushed by unexpected results. While no one wants to be a Devil’s advocate, it is crucial when the business is at stake.
If you can’t go heavy on the defense or offense, how do you survive as a company? As it turns out, pragmatism is key. Understanding that there needs to be a balance between making defensive and offensive choices will be the difference between coming out on top and going bankrupt. Harvard found that many progressive enterprises took this option, and it allowed them to come out a winner.
If you’re wondering about specific moves to make to give your business the best chance of surviving during this time, know that efficiency while acting on new business opportunities may be the way. Defensively, eliminating jobs may seem like a good way to save money. However, improving operational efficiency within the company is the best course of action, rather than just decreasing the number of employees. Remember: with fewer workers, you still have the same amount of work. Think of ways to be more efficient. Secondly, times like this provide great opportunities for investing. Companies that survived recessions invested in R&D, marketing, and assets while the markets were lower.
As we all consider the best mix of prevention and promotion during this time, our team at Marketing Works is poised to assist in providing solutions that best fit your business style, culture and level of engagement. Reach out directly to me to schedule a PULSE session, or to simply brainstorm ideas for your new initiatives. We’re here to help. Bill@marketingworks360.com.