3 Strategies to Build Your Company’s Resistance to Economic Upheaval
Statistically speaking, many companies might stumble and fall if we enter a lengthy recession. Nevertheless, many other businesses will come out stronger. Make sure yours is one of the latter by overcoming recession fear and implementing disruptive measures to outwit the downturn.
Today’s economic churn rate didn’t just happen because of the pandemic or inflation. Throughout history, companies have risen and fallen during good and bad times. Yet there are several that have survived for decades. Their secret? They don’t give in to recession fear because they realize that there are always opportunities in a recession.
Most corporations won’t fall into this category, of course. Take one look at Fortune 500 lists over the years. According to AEI research, roughly 10% of Fortune 500 companies remained on the list between 1955 and 2020. They include well-known names like Kellogg, Owens Corning, and Coca-Cola. So what made them resistant to the turnover that toppled other Fortune 500s, even during unstable American corporate growth? One answer is that they knew how to lean into disruption.
Being able to embrace disruption — including digital disruption — offers companies the chance to develop resilience and versatility. These traits, in turn, help businesses stay financially sound and competitive. Time and again, companies that ignore disruption are the ones that fall by the wayside. Blockbuster’s underestimation of Netflix tends to be the example everyone cites. But Blockbuster is hardly the only corporation to turn away from disruption instead of leverage it.
Economic Challenges for Leaders and Businesses
Why don’t businesses immediately rush to change their business practices during recession points or when they see disruption coming? Many just aren’t sure how to balance their short-term and long-term objectives.
Case in point: As a leader, you naturally want to make sure your shareholder numbers for the next two quarters remain strong. At the same time, you want to invest in disruptive innovations over the coming five years. However, your business has a finite budget, making it seem impossible to do both. Consequently, you might frequently prioritize short-term goals, which only sets your business behind the disruption happening in the industry.
Many leaders assume that volatility cannot bring opportunities simply because they haven’t mastered disruptive and creative thinking within their organizations. This mindset prevents them from executing quick changes when entrepreneurial startups swoop in with fresh thinking, exciting initiatives, and breakthrough products.
How to Make the Most of a Recession
If this sounds familiar, you don’t have to be dismayed. Instead of living in fear of recession, you can take action to see areas of opportunity even as economic churn swirls around you. Below are some tactics to keep moving forward and not become a victim of so-called “digital Darwinism” every time a recession or unexpected event occurs.
- Invest in an internal venture ecosystem.
Finding your next industry-disrupting billion-dollar revenue stream won’t happen through one-off corporate events or pitch days. Instead, you must set up your internal ecosystem to drive constant innovation. Fortunately, not all of the innovation has to come from your employees. There are ways to set up collaborative venture ecosystems that drive disruption in your business. Many ventures are being pursued right now by next-level thinkers. By selectively investing in small ventures that align with your corporate goals, you can begin to construct a machine that pumps disruptive ideas, products, features, and more into your company. This type of collaboration is similar to what happens in the athletic “farm system.” Big league teams invest in farm system teams to spot talent early. With an internal venture ecosystem, you’re doing likewise. And during economic disruption, the cost to invest or buy is generally lower. When you have an established process in place, the ecosystem will funnel disruptions your way. Your competitors will likely be unable to leverage this type of sustainable disruption system, giving you a competitive advantage when economic churn occurs.
- Grow closer to your customers.
There are few better brand insulators during rough times than brand loyalty. Your company’s strongest followers will be the last to leave you. More than half of all people in the U.S. remain brand-loyal even when they have to pay extra for what they buy, according to a 2022 Yotpo survey. Why? They feel a symbiotic relationship with the brand. However, that’s not something you can manufacture overnight. Retaining customers costs far less than replacing them. If you don’t have processes to help keep buyers in the fold, now is the time to develop them. Every time a current customer makes a purchase, you’re increasing the lifetime value of all your customers. Accordingly, you want to keep customers satisfied and engaged.
An excellent way to start working on retention is through customer satisfaction surveys. Gather feedback and see where your gaps are. Where are customer drop-off points, for instance? Do customers tend to leave between the first and second year? Find out why, and make efforts to change what you’re doing to meet their unmet needs. As you grow increasingly customer-centric, you’ll naturally be in a better place to build customer loyalty.
- Foster a culture of innovation.
Many companies struggle to make sudden disruptive moves because their cultures weren’t established on innovation. Your employees should feel empowered to disrupt regularly. Otherwise, they won’t immediately conclude that they have the authorization, approval, and support to propose out-of-the-box solutions.
Promoting disruptive thinking will involve giving employees the tech, time, and other resources necessary to develop innovative solutions. Remember that proposed solutions don’t necessarily work the first, second, or even 20th time. Therefore, make it clear that failure isn’t a negative. It’s a learning experience on the path toward stability during disruption.
If this type of thinking runs against the traditional grain of your culture, you can expect it to take time to sink in. Many employees might be uncertain about how to proceed. However, they’ll start to see the benefits — and feel company pride — as your business begins to lean into economic churn rather than balk at the idea.
It can be overwhelming to read the headlines today. Statistically, many companies might stumble and fall if we enter a lengthy recession. Nevertheless, many businesses will come out stronger. Make sure yours is one of the latter by overcoming recession fear and implementing disruptive measures to outwit the downturn.
Written by Terry Howerton.
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