A ccording to new research from the Harvard Business School, companies emerging strongest from a recession have achieved the elusive balance of improving operational efficiencies while investing strategically in new growth markets. Symantec Chief Financial Officer James Beer shares his strategies for how businesses can grow their top line through aggressive expansion and improve bottom-line performance.
Stay close to your customers. In uncertain times, customers need your help. Invest in creative ways to address their changing needs. Consider bundling products or services together and offering them at an attractive price. This will generate new customers and broaden your relationship with them beyond your core product. Also think about implementing a dual-brand strategy. This allows customers access to solutions at a price point that meets their current needs, and allows you to reach new customer segments. In addition, focus on figuring out where your customers’ business is likely to go post recession. Understand what of their previous buying probably isn’t coming back, and use this knowledge as you place your investment bets.
Reduce your costs. Cost reduction is clearly critical during the recession. However, not all cost reduction is created equal. The most useful approach is truly sustainable. Depending on the industry circumstances, pay freezes, pay cuts, and large-scale layoffs may be necessary in the short term but are unlikely to all be sustainable over time. The real focus of cost reduction should be on sustainable change. Think in terms of process simplification and other ways in which you can redefine the path of your company. Align targets with the direction of your customers and their future buying behavior.
Redistribute spending. Be tough on parts of the business that are no longer as attractive to new customers. Reassess your product and market portfolio, and align your investments with the opportunities of the future. During a recession, it is particularly important to rigorously review your product portfolio and be brutally honest about the growth prospects of your products and services. If a part of your portfolio was marginal before a recession, it probably doesn’t make sense to invest in it now. Those products that are key to your company’s future should be funded to the maximum degree practical.
Stay focused on developing your talent. In a recession, job losses create insecurity and distraction. But people are the key to holding the company together. Communicate openly and regularly with your employees about financial performance and investment or reduction decisions. Also, compensate your best talent differentially so they are less susceptible to the call from a competitor. On the flip side, don’t let short-term budget constraints stop you from picking up some star talent that may be available. Rotating top performers into a new role central to the company’s current challenges will bring fresh thinking into a key area, and allow them to broaden their perspective on the business.
A recession, while painful, is a regular cleansing market mechanism. It can—and should—accelerate competitive market dynamics and thereby force companies to make hard decisions.