Three Easy Steps to Winning a Recession

  1. Get Operationally Efficient

    This is not about cutting costs, but cutting fat and spending strategically on quality and performance. If a product, service, or piece of software improves productivity by 30% and reduces operating costs by at least 3X its annual cost, you buy it, even if it costs six or seven figures. But if all a product does, like an online T&E application that your employees rarely use, is save you 50,000 a year for it’s 30,000 price tag, you eliminate it and invest the 30,000 somewhere else where you’ll get a return.

  2. Increase the R&D Budget

    Your prosperity depends upon your ingenuity. That will require innovation, which requires top talent and the resources they need to break through traditional barriers. That requires that R&D have enough money to support pure research in addition to product development and day to day support. And in R&D, a little investment can go a long way. It only takes one breakthrough product to make tens, if not hundreds, of millions (or billions) of dollars of revenue down the road.

  3. Invest for the Long Term as well as the Short Term
  4. This is the real reason most companies fail. Simply put, failure to invest for the long term means that when a new innovation is needed to maintain or secure new market share, it’s not there. Failure to invest beyond the next quarter means that instead of working on new products, the company is focussed on extending the life-cycle of existing products which have sold well, trying to eek out every last penny. The problem with this strategy is that as the market gets closer and closer to full saturation, the profit per sale drops exponentially. In comparison, if the company shifted focus to a new, promising, product, around the 70% saturation point, by the time the market reached the point where the profit per sale was unattractive (which usually happens around the 80% saturation point), the new product would be well into it’s growth curve and profits would hold steady.

That’s it. If you don’t believe me, you can read the very well written, but very lengthy, article on roaring out of recession in the Harvard Business Review, but winning a recession is very simple. Stop focussing on cutting costs and start focussing on improving the value you bring to the market. Even in a recession, people still want, and need, to spend. The only difference is that they’re more reserved and willing to hold out for products and services that provide great value at a great price. The first company to offer them the first great product or service they want at a great price typically wins. It’s as simple as that. (And that’s one of the main reasons why 85% of market leaders get dislodged during a recession … they fail to understand that value trumps even long term loyalty when money is tight, giving you an opportunity.)

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