“In turbulent times, it’s tough for companies to know where to place their bets for both the immediate term and the long run.”
I recently came across this Harvard Business Review article from March 2010. While it may be a decade old, it still holds some interesting insights into the attributes and approaches of those businesses that weathered previous recessions successfully.
Through their year-long study of 4,700 companies, the authors found that businesses fell into four types:
Prevention-focused companies: those looking to reduce costs and risks
Promotion-focused companies: those who doubled-down on their existing projects
Pragmatic companies: those who cut costs in some areas and invested heavily in others
Progressive companies: those who invested in current efficiencies and future innovation
The figures paint a pretty stark reality of what happened to these businesses during and after the recessions in the 1980’s, 1990’s and 2000.
80% did not recover to their pre-recession level 3 years after the recession ended.
9% flourished, outperforming their competition by more than 10% in sales and profit.
“One combination has the greatest likelihood of producing post-recession winners: the one pursued by progressive enterprises.”
The article includes some compelling examples of companies that adopted different strategies to manage the recessions they faced, ranging from Sony to Microsoft and Target to Walmart. The data makes a strong case for which strategies worked best.
“Progressive companies stay closely connected to customer needs—a powerful filter through which to make investment decisions.”