It seems counterintuitive. Invest in a time of crisis? At a time when it seems the most logical thing to do is to hunker down and ride out the storm, how is it that I should be considering investments?
In times of crisis, every business leader, regardless of industry, is faced with daunting questions. Do I operate as I would normally? Do I dramatically cut back on expenses? Do I try to squeeze more efficiency out of operations? Do I downsize? While there are no easy answers, there is some guidance and a fair amount of evidence to indicate that crawling into your shell is not the solution.
Running my own business, I have grappled with these same questions since the onset of COVID-19. Granted, as a management consultant who does not have employees, my situation is quite different from most small businesses required to make payroll. However, my days of having run businesses that had plenty of people counting on me to make smart decisions are not too far in the rearview mirror.
Given the challenges faced by leaders in times of crisis I wondered if there were any studies that had been undertaken that might cast a light on strategies that proved useful and ultimately aided companies in capturing success once the crisis abated. I came across an interesting Harvard Business Review study from 2010 entitled “Roaring Out of Recession.” The study reviewed 4,700 companies in three periods: three years pre-recession, three years post-recession, and the recession years themselves, looking specifically at the recessions of 1980-1982, 1990-1991 and the dot-com bubble of 2000-2002.
Interestingly enough, the study found that companies that were “prevention-focused” performed the worst exiting a recession, while those companies that were “progressive” and took a targeted approach to investing and saving performed the best. Maybe more telling was the fact that 17% of companies didn’t survive, 80% didn’t regain their pre-recession growth rates for sales and profit after three years, and only 9% flourished.
Based upon the analysis it is quite evident that whether a recession or a COVID-type crisis, business leaders need to be thinking in terms of the most effective areas to save while at the same time identifying specific investments that can act as a catalyst on a long-term basis.
This got me to thinking about two key areas that can often be overlooked especially in times of crisis: strategic planning and business process efficiency. Let’s think in terms of strategic planning first. It’s no secret that today’s leaders sometimes aren’t the best strategic planners. It’s not that they don’t have the skill; it’s often that they don’t have the time. Buried in day-to-day tasks in a business world that is ever increasing in pace, today’s leaders often don’t make or don’t get the time required to effectively plan.
However, if you’re not going to engage in planning during a time of crisis when will you ever? If we consider COVID-19, virtually every business has seen their initial business plan (if they had one) tossed out on its ear. As a business leader, have you sat down and redesigned your plan given today’s new reality? If not, my guess is that you will either be one of the 17% who don’t survive, or maybe you’re in the “prevention” focused pool. Either way, the prospects aren’t bright and, in all likelihood, if you do survive, your competitors who have taken the time to restructure their plans will perform significantly better when this is all over. While the Harvard study previously referenced offers some good input concerning what the more successful companies tend to do, these companies all have one thing in common: they took the time to build a strategic plan.
So, strategic planning seems like something business leaders should prioritize on their “to-do” lists, and it won’t even cost much. What about business process efficiency? Most businesses I have worked for or with are saddled with processes that are either antiquated, lack automation, or are just downright poor. One of the traits of companies that are successful coming out of crisis is that they all invested in process efficiency activities. Of course, the beauty of doing so is that the savings don’t just come once. The savings are continual. As a result, the benefits are long-lasting and ultimately serve to drive ongoing improvement for the business.
Where should I consider investing from a business process perspective, you ask? There are many areas, some of which will cost you more than others; however, some of the areas that provide excellent long-term returns include marketing automation, accounts payable/receivable, customer relationship management, sales territory management, and financial reporting/analysis. You know your business best, so target one or more areas that you know need improvement. There’s no better time than now to get this done.
Business crises can be scary, particularly those that are seemingly unpredictable, like that one we are experiencing today. However, history shows that there are often opportunities in times of crisis. Business leaders who take a well-planned approach to cutting where reasonable and investing for the future tend to be tomorrow’s winners.
Best of luck as you plot your next move.
Dennis Amorosano is the president and founder of Dendog Strategy Insights LLC, a management consulting firm focused on strategic planning, new business development and go to market execution. Providing services in the areas of strategic business planning/execution, new business development, content creation/marketing automation and technology sourcing support, Dendog Strategy Insights brings 30 years of technology marketing, sales, product planning, software engineering, and professional service experience to help clients implement strategies that yield success.