We have supposedly seen some more “green shoots” of recovery over the last few weeks. It’s true that many companies have exceeded analysts’ expectations but their accounts reveal that, in most cases, this has been achieved by cutting costs rather than growing revenues. Microsoft, for example, announced its first ever sales drop this week, but in their case cost cuts didn’t make up for revenue reductions.
Personally, I remain bearish on the economy. Just because GDP numbers are less bad than last time does not mean that they are good, that we are into a new bull market or that the recovery has started.
But recessions do not have to be all doom and gloom. Interestingly, they have given rise to some enduring brands and innovations – Edision’s incandescent light bulb (1873), Colour TV (1929), Rice Krispies (1931), Diet Coke (1982) and the IPod (2001). All of these innovations went on to produce substantial revenue streams, jobs and shareholder value.
Here’s the interesting point about this list; at the time when most firms went into lock-down these organisations had the vision to identify opportunities for innovation and growth. They actually invested in their future rather than simply cutting costs.
Clearly, some cost cutting is inevitable during a recession – even in the best run organisations. However for the weaker, highly-geared and less resilient organisations times are harsh and Darwinian.
So, what can organisations do to ride out the recession and be stronger for the upturn?
Develop a clear, well thought out strategy
Regularly test assumptions made about customers
Ensure that leaders are visionary
Build a culture which values innovation and achievement
Up-skill the workforce – and leaders – particularly – are not exempt from this process
I agree that this list may seem daunting, but as the Roman poet, Virgil, famously said – fortune favours the brave.