Resilient Business, Resilient Self - Part 1 of 2

With the various components affecting our modern business environment, such as geopolitics, economic cycles, globalization of the workforce and supply chains, and fast-changing technology... a higher volatility in our business environment IS the new NORM.  

Building resilience skills will help you when the economy is on shaky ground AND will also serve you when the economy is back to something closer to "normal."  In this blog post, I'm going to cover what resilience looks like for businesses, and I'll follow it up with a second post on building your own personal resilience.

Resilience in Business 

2 Comprehensive Studies (and what they found)

Both studied how major economic downturns affected companies and what those companies did to get through recessions successfully, and in some cases, came out the other side of it in better standing than they were when the economic downturn began.

*Study 1: 1100 companies, range of industries and geographies, one recession time period

*Study 2: 4700 companies, range of industries and geographies, 3 global recessions reviewed

Study 1 findings:

• • 10% of the companies stood out as fairing much better than the rest. That 10% dipped less than their peers AND came out of it guns blazing when the economy recovered.   
  • Pre-recession, those 10% were actually under performing compared to the median when looking at returns to investors. So they were stronger during the downturn and after the downturn than the other 90%, but not because they were the strongest going into the recession.  
  • At the very lowest point in the economic downturn, these successful companies had grown earnings by 10% while their peers had losses of earnings around 15% (25% gap). And that’s super relevant because the main reason they did better than their peers is because of how they focused on earnings, rather than focusing on revenue.

Study 2 Findings:

• • 17% didn’t survive the recession.
  • 74% slow to recover—3 years after recession, still hadn’t returned to pre-recession growth rates. 40% of those hadn’t yet returned to pre-recession sales levels.
  • 9% flourished. So we’ll talk about what that 9% did differently... the delicate balance between cutting costs to survive during the downturn and investing to grow tomorrow. (a combo of defense and offense)

4 Types of Company Reactions to Economic Downturns

The mindsets and behaviors of businesses in reaction to a recession basically fell into one of 4 categories, 2 of which didn't serve those companies well at all, 1 of which turned out okay, and 1 of which was clearly the most successful. 

Prevention focused – minimizing costs... trying to survive by cutting costs, culling employees, and spending as little as possible. This is basically the austerity approach. Didn’t work.

Promotion focused – throw money at the problem. Spend whatever it takes to try to drive results, but with no changes or improvements to operations. Didn’t work.

Pragmatic – little of both. Combo of cutting costs by cutting employees or improving efficiencies and operations or both employees and efficiencies, and spending for growth by acquiring new assets or entering new markets. Worked... just not quite as well as the last type.

Progressive – cut costs by efficiencies not cutting staff, growth by investing in R&D and new assets that helped them respond faster / grow faster coming out of the recession. Also stayed closely connected to customer needs, which was a powerful filter for making those growth decisions.

When you analyze your own business, you can probably see where it aligns with a resilient business attitude and where it has the most room for growth.  The place to start is with planning for the inevitable downturns.  Do you have a tendency to be austere or progressive with your business, or somewhere in between?  And what can you do to move your business toward a more progressive plan, since it's been shown to give your business the greatest chance of not just surviving a recession but thriving? 

7 other factors we found that helped companies succeed during economic downturns.

Businesses that survive and thrive during an economic downturn have some or all of these traits in common:

• The ability to pivot – they have multiple streams of revenue and are able to shift their attention to the parts of their business that are more suited to the current climate, able to rapidly adapt while maintaining continuity for their customer
• They serve customers who are more insulated from economic hardship
• They provide a service that’s relevant in any economy
• They provide a service that allows their customers to continue doing business
• They plan during times of profit and security for how they’ll handle times of economic downturn and business disruption
• They are a business that people respect and feel good supporting even when they’re being more conservative about where they spend their dollars
• They had a staff who clearly understood their own roles and responsibilities in order to remain productive
  

When it comes to business resilience, one other thing is clear... part of what makes a company resilient is having a leader that is resilient. In the next blog post, I'll dive into personal resilience - your ability to adapt and bounce back in times of stress. 

written by Amiee Mueller

edited by Gloria Otto

Photo by Riccardo Annandale on Unsplash

Reference Material:

• https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/bubbles-pop-downturns-stop
• https://hbr.org/2010/03/roaring-out-of-recession
• https://www.businessinsider.com/successful-companies-started-during-past-us-recessions-2020-4
• https://hbr.org/2009/04/five-rules-for-retailing-in-a-recession
• https://www.investopedia.com/articles/fundamental-analysis/09/recession-proof-industries.asp