Preparing for the Downturn

My last post was on military strategies that apply to the business world, and I’m going to stay on the topic of strategy for this post.

I’ve long believed that the word “strategic” is one of the most over-used words in business. Strategy inputs might not yield results for at least a year – likely longer. One of the giveaways that most companies’ strategies are not strategic at all is the fact they are routinely altered with each new business input.

One of the macro-factors that impact strategy is economic conditions within the market you serve. Since there’s a likely downturn approaching – a realistic scenario given the recent 10 year period of economic expansion combined with global instability and the ripple effect from US/China trade battles – the smart leader will start preparing now.

This article from Bain & Company provides a good overview on how to prepare. Let me highlight a couple sections for you, although I encourage you to read the whole thing.

First, I liked this metaphor, which highlights why smart leaders will make the right moves now while things are going reasonably well:

“Think of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded).”

Second, I’ve included an illustration below from their article that itself illustrates an eternal truth within the management consulting world: all self-respecting management consultants will generate a slick four-box visual no matter the topic. In this regard, Bain doesn’t disappoint:

These dimensions are helpful, but I particularly highlight the importance of “Industry exposure to recession or disruption” on the vertical axis. While a receding tide might lower all boats, not everyone sails in the same ocean. Knowing how your industry is likely to be impacted is an important consideration as you downshift into the turn. I’m mixing my metaphors but you get the idea.

Automation
I’ve operated much of my career with the following adage in mind: anything that can be automated will be automated. There may be political or societal forces that slow the transition, but the transition is inevitable. With that in mind, nobody should be surprised by this story about Amazon rolling out machines that pack boxes and – of course – eliminate jobs.

One unnamed source in the story said “A ‘lights-out’ warehouse is ultimately the goal”. This is inevitable as Amazon pursues automation that increases efficiency (each order has a box custom-built for it, thus reducing waste and shipping costs), speeds the time to delivery, and generates enviable ROI results.

As you consider how your particular industry will be impacted by an approaching downturn, take special notice of how automation will be used by industry participants to lower costs and compete more effectively.

As Aesop pointed out, the ant was prepared for winter, while the grasshopper was not.

Good luck!