Are You Among the 9 Percent of Companies Who Flourish in Down Times?

Are You Among the 9 Percent of Companies Who Flourish in Down Times?

According to an article published in Harvard Business Review, three scientists, Ranjay Gulati, Nitin Nohria, and Franz Wohlgezogen, conducted a study to discover the strategies that generated the most – and the least – profits in lean times. First, here’s a list of sure-fire ways to kill your business:

  1. Slash headcount with huge layoffs.
  2. Have solely a short-term focus.
  3. Employ executives who take a loss-minimizing approach.

This approach is too short-term and defensive in nature. Companies and leaders that take this prevention-focused tack often get acquired or go bankrupt. Being too extreme on the other end is a problem too, though:

  1. Aggressive spending on promotion, such as the old wives’ tales about how companies need to spend more on marketing during down times and they will get ahead.
  2. Rolling out too many new products.
  3. Employing executives who take too long-term of an approach and neglect the short-term.

This approach focuses on the long-term to the exclusion of the short-term and is offensive (vs. defensive) in nature. This promotion-focused, aggressive approach also fails. A big-company example of this was HP under Carly Fiorina’s leadership.

So what’s the right answer? A middle-of-the-road balance among these 4 strategies:

  1. Operational efficiency to streamline costs and patch money leaks.
  2. Market development, R&D, investing in new revenue lines, making existing products better.
  3. Investing in yourself and your business for the long-term. Buying new equipment, skill development, resource accumulation.
  4. NOT cutting talent because customer service and quality suffers too much, which causes a mass exodus in clients.

Take a strategic look at your operations to see how you can course-correct to not only weather the storm but to make your own sunshine in your business.

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