Yes. You heard it right. Economic downturns can also be an ideal time for businesses to eliminate waste and invest strategically in their operations. It might sound alarming, but many companies have leveraged this situation and achieved great success. That’s what we are going to be looking at today. Strategies that can help businesses to turn destructive forces into constructive ones.
Let’s dive straight in.
Experts believe the currently anticipated recession may significantly differ from the previous one. According to an Ernst & Young survey, more than half (55%) of CEOs believe that new factors, such as realignment of geopolitics and reassessment of global supply chains and operations, would play a critical role this time.
About 38% believed that policy decisions would lessen the severity and duration of a downturn.
In any event, let us look at some strategies to avoid waste and how investing during tough times could be a smart move.
Waste can occur in different forms in a business, including unnecessary expenses, inefficient processes, excess inventory, and underutilized resources. Economic downturns can magnify these inefficiencies, making it crucial for businesses to critically assess their operations and identify areas where waste can be eliminated.
According to Patrick Choquette, Senior Business Advisor, BDC Advisory Services:
“There’s always a company hidden inside the company. If only 25% of what we do is value-added and we can eliminate two-thirds of the waste, you’ve basically got another company in there”.
3 Steps that help identify waste
1. Observe Operations
Walk around the floor and observe the work.
2. Identify Redundancy
Ask how certain tasks can be drastically reduced or eliminated.
Involve your team, analyse things, and plan changes and implementation
Here’s a simple approach to differentiate between “Value-adding activity” and “Waste”:
Value-adding activity = Any operation that your client is willing to pay for
Waste = Any activity that mounts cost without creating any value for your client
While economic downturns may tempt you to cut costs across the board, strategic investments can be key in driving future growth. Rather than slashing budgets indiscriminately, use the opportunity to carefully evaluate areas where investments can yield long-term benefits.
- Investing in employee training and development can enhance skills and capabilities, positioning the business for success when the economy rebounds.
- Investing in R&D can lead to innovation and new product offerings, creating a competitive advantage.
- You can also consider investing in marketing and customer engagement strategies to build and maintain customer loyalty during challenging times.
- Another area where investing may make sense amid a recession is the exploration of new markets. As competitors falter, this could be the time for you to gain market share.
Focusing on Efficiency and Technology
Re-evaluating your business technology during a recession can help you adapt to changing market dynamics and consumer preferences, positioning yourself for future success. For example, businesses can leverage cloud-based solutions, data analytics, and other digital tools to streamline operations, improve decision-making, and gain a competitive edge.
Finding an opportunity that is already there in front of you
In a downturn, many businesses cut their product ranges and concentrate on their core services. As a result, businesses that can spot and address market gaps will have more chances.
A fine example is Facebook’s digital wallet, Novi. When it was shut down, it opened a door of opportunity for a new digital wallet entrant – Martian, which raised $3 million in pre-seed.
During a recession, these opportunities are all around us. As established companies concentrate on their core products, new competitors can enter the market and take advantage of the scenario.
Wrapping it up
We saw that It’s essential to take a proactive approach, analyze your operations, and make informed decisions to optimize your resources and build resilience during tough times. We at Blue Hellion offer insight-based advisory and lend execution support to help clients identify and eliminate redundant processes and strategically invest during an economic slump. We help you with the right tools and knowledge to defend against recession and its associated risks and pave a smooth road ahead.
Fix a Free Discovery Session with One of Our Senior Leadership Team.