If you’re in Western Australia (WA), today was an absolute $hit storm. This included:
- The ASX plummeting.
- Organisations enacting their pandemic plan (shutting the hatches and going into hiding).
- Oil price wars kicked off.
- AUD to USD exchange rate dropped.
- The sixth confirmed cause of COVID-19 in the state believed to be the first human-to-human case here.
- Toilet paper shortages continued (the most annoying and least logical of all of these).
- Westpac’s Chief Economist Evan officially called the ‘recession’.
For those playing at home, that is a BAD day.
Hold your apocalyptic horses…
Before you start bolting the hatches to your organisation (business) and going into survival mode faster than a Doomsday Prepper at the first sign of chaos, let’s look at the facts.
For those who read the whole d@mn piece before posting headlines on social media, you would have also seen Evan (Westpac) say:
“That growth profile constitutes a technical recession but given the expected recovery in the second half of the year it is much more realistic to characterise the situation as a “major disruption” to growth rather than the style of recession that Australia has experienced in the past,”.
And if you’ve lived through the GFC (I’m sure most of you have), you’ll know it was an absolutely critical part of growth for a number of companies. My corporate life had a pretty heavy inflection point during the GFC. I lived in the U.S. and was on the frontlines in a Fortune 500 top 5 company. It was a mess. But we doubled down on growth, invested in our people, products and tech; and we absolutely smashed it. That company is still a top-performing corporate (globally) years later.
Don’t believe me when I say that doom scenarios don’t crush high-growth companies (with a plan)? Ah, let’s let the figures do the talking.
What can we learn from previous doom and gloom scenarios?
An analysis by researchers, Bain and McKinsey (some heavy hitters) of the GFC found some shocking stats:
“…during the recessions of 1980, 1990, and 2000, 17% of the 4,700 public companies they studied fared particularly badly: They went bankrupt, went private, or were acquired. But just as striking, 9% of the companies didn’t simply recover in the three years after a recession—they flourished, outperforming competitors by at least 10% in sales and profits growth. The top 10% of companies in Bain’s analysis saw their earnings climb steadily throughout the period and continue to rise afterwards. A third study, by McKinsey, found similar results.”
Not good enough?
Just before the tech bubble burst, an up and coming company moved to position itself for the war ahead (concerned about liquidity at the time). They doubled down on growth by getting as liquid as they could (selling its bonds to get a hold of cash to invest back in growth); betting heavily on themselves. That little known tech company outgrew all of its competitors (several of which died during the bubble burst) and grew to a global company you might have heard of: Amazon.
So what do we do?
You have three choices in the current economic context:
- Run away and hope you can find somewhere to run to (never run away from a storm, it doesn’t end well)
- Bolt the hatches and hide from the storm until it’s over
- Double down on your business and push forward with a plan
I’m going to assume, based on the previously mentioned facts, that anyone still reading isn’t interested in option 1 or 2. So, door number 3 it is.
Great. So to survive, door 3 means:
- Getting your team on the same page. The team and everyone in the business has to own this new reality. That means transparency across all levels. A hospital famously did this years ago when it faced funding cuts and layoffs, only to have employees creatively problem-solve their way out. Their efforts meant not a SINGLE job was lost and they turned things around. Get your team on the same page and rally them around the criticality of it all.
- Scenario planning for options. When you get your leadership team together and start tackling scenarios, you’ll have dozens. Of those dozens, many will mean the death of the business. Ignore those. Focus on the ones that will keep you alive and invest in them. No point in staring death in the face and throwing in the towel.
- Selecting a scenario and enacting those plans. Once you’ve chosen a scenario, get stuck in. Push forward and own what that means for you and the team. Increase your frequency of communication and meet no less than weekly. Think of this as controlled burning e.g. you wouldn’t set a fire and leave it for a month. Control the burn and focus the narrative. Make sure everyone knows where we’re going and their role (specifics!!!) in the plan. Aggressively manage this.
- Investing when everyone turns off the tap. When everyone else is turning off their marketing, training and technology, that’s when you need to invest in it. The cost of marketing drops, talent is readily available and technology becomes much more accessible. If you’re positioning for growth and building market presence/dominance while your competitors are hiding in their bunker, you’ll be unstoppable. The findings by Bain and McKinsey also found that those who grew during the tough economic patches often grew to a point their competitors couldn’t catch them! See you later, suckers!
- Bracing for the rough patches. While you have to do steps 1-4, you should still put resources aside for the inevitable rough patches. Creditors will fall over, customers will pay late, people will lose their nerve. Bake that into your scenario planning and put the resources aside to whether it.
Having seen this first hand in dying and growing businesses alike, I can assure you it works when done well and fully committed to.
When you look back at this time how will you feel about your plan, investment in your business (people, tech, strategy) and the actions you chose?
Remember, it’s only door number 3 at this stage. The other options aren’t for growth businesses.
You’ve got this.