We are not technically in a recession.
During a recent press conference, the chair of the Federal Reserve Jerome Powell said he “does not think the US is currently in a recession [because] there are just too many areas of the economy that are performing too well.”
But Vox says there are recessionary “vibes.” And certainly a lot of headlines like this popping up prompted by a spreading narrative.
On Today, Explained, Vox laid it out like this: “New GDP numbers indicate the U.S. economy contracted for a second straight quarter… But! GDP alone does not determine what’s what, recession-wise. Which is why the term 'technically' is being thrown around a lot today. But! Recessionary vibes like the ones we’re seeing do have real effects on hiring, investment, and markets.”
So with whispers of a downturn growing louder and darkening the mood, businesses and consumers are battening down the hatches to prepare for a tougher economy.
But preparation for executives doesn’t necessarily mean hunkering down or making overly conservative decisions. Especially if they want to be true business leaders.
Here’s what they can do instead — according to analysts and leaders who have been here before.
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How business leaders can flip and win the game during economic slowdowns
Bain & Company, a “global consultancy that helps the world’s most ambitious change makers define the future,” suggests that “winning companies behave differently” during downturns — and even turn them to their advantage (source).
They compare recessions to “sharp curves on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways,” saying the best drivers (aka leaders) do the following:
- Take out excess costs through early cost restructuring without losing muscle
- Identify the short list of projects that will form the next business model
- Spend and hire before markets have rebounded
So what should execs include in their “short list of projects” to “form the next business model” aka “flip their game”?
Bigtincan’s own CEO and Founder David Keane — who led the company and more than doubled revenue during the height of the pandemic — recently shared his 4-pronged strategy for turning tougher times into a business advantage:
1. Encourage creativity
“Encourage innovation and recognize efforts that demonstrate creative thinking and go above and beyond to meet the needs of your customers and your business. This also helps foster focus, passion, and your employees’ personal ‘why’ — all of which are essential for an energetic and dynamic workplace.” -David Keane
The innovations that occur within winning companies during slower periods have lasting effects on markets.
“Downturns rearrange the board,” write Tom Holland and Jeff Katzin of Bain & Company. “The number of US companies that substantially increased profits was 47% higher during the last downturn than during stable periods. And 89% more US companies lost profitability in the last downturn vs. stable periods. No question, recessions can swing the future market capitalization of a company by billions of dollars.”
So encourage every member of your company to bring new ideas to the table. Executives and board members are often isolated from the daily workings of individual teams and employees, so when employees bring forward their ideas they offer a different, but valuable perspective.
Executive strategies (like these) are often high-level and have a trickle-down effect. Employees in the thick of it can bring tactical suggestions that make a huge difference in day-to-day operations, which affect the whole company from the bottom up.
2. Be flexible
“Being flexible means taking short, achievable steps that enable you to measure progress and adjust as needed. A series of smaller, measurable achievements enable you to look back at how you have achieved those things, and then make the best next steps for the future.
Building flexibility into your models allows for both rapid changes as the market changes, but also enables you to get the work done so that you can finish the things you start and deliver that to the market.” -David Keane
Be open to change. What worked two years ago or even six months ago might not work for the next couple of years. And you may need to make several changes over a short period of time.
So take the opportunity to retire old processes, abandon rigidity, and take a more open-minded, agile approach.
3. Take risks
“Invest in both organic growth and innovation in the development of products.” -David Keane
Leading effectively through tougher times and coming out ahead of the competition requires spending strategically, not spending less.
Companies that “flipped their game” and emerged as winners from past downturns “moved deliberately to capture opportunities before the recession. While they focused intensively on cost transformation, they also looked beyond cost” (source).
When fewer companies are taking risks, risks have greater rewards. There is also more opportunity and more space to explore new avenues or expand upon avenues that already do well but could do even better.
This usually includes exploring new technologies, whether you’re building them or buying them.
Bain & Company provides a few examples of this:
"In the finance function, for instance, FedEx is using robotic process automation to automate tax, payroll, credit card reconciliations and other finance processes. Likewise, Honeywell is deploying augmented reality tools to cut maintenance costs on offshore platforms by up to 50%, reducing the number of workers who need to be flown to the platform."
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4. Enable cross-team collaboration
“Everyone in the company needs to encourage each other to take risks and collaborate across teams.” -David Keane
Tougher economic conditions are the perfect time to tighten and unify teams and their operations to single-mindedly work toward collective solutions. You can eliminate redundancy in efforts or wasted efforts while setting every team member up for success by giving them a more defined role.
Be sure to clearly communicate your vision with your staff and get everyone on board. (Bigtincan CMO Rusty Bishop shared his vision on LinkedIn). While creativity may be a bottom-up approach where any employee can bring forward a great idea, collaboration and culture is most impacted by a top-down approach.
So start by building collaboration on the leadership level with the heads of different departments and then have management help build the collaboration within and across their teams on the individual level.
We’re already seeing this take priority with the renewed focus on sales and marketing alignment in several industries.
Executives considering their company’s economic outlook and coming up with their strategy should consider the advice of economic reporter Maddie Ngo: “The numbers do get revised pretty often... Just because it's negative today doesn't mean that the revision won't show that, for instance, GDP could have been positive in the second quarter.”
So the moral of the story is that business leaders don’t need to doom-scroll through a recession rabbit hole just yet. But planning ahead and making key investments never hurts — especially if you want to stand out from (and ahead of) the crowd.
Speak to our team to learn how Bigtincan builds cross-team collaboration and gives companies a competitive edge.
