3 Ways to survive, 1 way to win
It’s “R” word time.
It’s not a word we at CultureCraft often talk about. But in recent weeks, LinkedIn and other outlets seem to be pushing leaders to use it as the guiding factor of their business reality. Of your business reality. The “R” word is of course:
Recession.
Here’s what we’re not going to do: we’re not going to spend your precious attention discussing whether we’re in one, on our way to one, or some other thing.
Because whether we’re in one or not is the LEAST valuable use of your time.
Hear that again. THE LEAST.
Here’s what we do know: business is contracting. Layoffs are happening. Stock prices are dropping. All signals of a recession-like economy.
What matters is what you as a business owner or leader are going to do in these times. And that’s where we’re here to help.
CultureCraft consults businesses every day on going through big transitions – turnaround, mergers, new products, new service areas.
Turns out, the businesses that thrive in recessionary economies are remarkably consistent. According to Harvard Business Review*, firms that cut costs quickly are the least likely to flourish after a recession.
Hear that again. THE LEAST.
In fact, aggressive cost-cutting ends up converting downturns into vicious cycles—virtual dystopias where businesses cut back, there’s less money in the system to spend, consumers (the same people who are your employees and vendors) spend less money, and then businesses go under.
We’ve seen those actions and consequences first-hand and watched recently as so many brands flirt with the line of no return.
But it doesn’t have to be that way.
a multiverse of options
HBR distilled four key ways for businesses to engage a recession. Let’s talk about what each one means for your marketing.
Prevention-focused: If your first response is to hunker down and survive, you may want to do a gut check. As we mentioned above, this group are the least likely to thrive post-recession. Big cuts to marketing and R&D hit you where you need it most: engaging the public and leading your category.
No one knows when a recession ends, but you’ll surely get there flat-footed by focusing on the defensive.
You can’t build a future by holding on to all your best ideas. Or your dollars.
Positivity-focused: “Recession is a state of mind,” they say. Some firms choose to accelerate through constrictive environments as if the risks weren’t there and the glass was 2/3 full.
Everybody loves an optimist, except recessions.
Risks do shift and moving forward blindly as if nothing had changed makes you Red Riding Hood wandering into a den of wolves.
You can’t market your way forward as if nothing has happened. Targeted, strategic marketing is more critical now than ever.
Pragmatic-focused: The end of the world gets brighter for businesses that know how to mix offense and defense. Finding ways to cut waste in the budget is great. But then pivot and pick your growth investments at the same time.
Where will you invest in new opportunities? How will you expand your market? Pragmatic businesses will shift strategically from low-impact investments to ones that lay the groundwork for where they want to be post-recession.
Remember you’re playing the long game here, and you’ve got to play to win.
what makes a recession
Despite what the headlines might imply, there is no apocalypse boiling. There never is. Economies go through expansions and contractions, using the colander of down markets to strain clarity that creates new futures.
Some of the most integrated pieces of your world were borne in a recession. Google’s dominance came out of the dot-com bubble. Target’s now beloved grocery-focused “Super Target” was an expansion built out of the late 2000s recessionary environment.
Fundamentally, recessions do a very important economic job: they move money from low-performing assets to high-performing assets. Granted, they do that VERY inefficiently and there is always collateral damage. But the flow of a recession is the movement of money.
The contraction we’re experiencing now is—in part—due to too much money from VCs funding unsustainable projects and the massive expansion of free money through federal policy. That money has run out of good places to land and is now contracting.
This is GOOD NEWS. No dystopia to be found, but there are new risks and new tensions.
If the flow of money is shifting so dramatically then one question emerges:
How do we make sure that when the shifting settles, your business is in the flow? How do you become a Target and not a Staples? A Google and not a Netscape?
positioning for the future
I mentioned four different options businesses take in a recession and I know you are a careful reader and have noticed we haven’t given #4:
Positioning-focused: Strategically, the floundering Target of today only marginally resembles the intensely focused Target of the post-recession era. But back in 2008, Target knew that it wanted to move beyond big-box pseudo luxury to become the one-stop resource for all things home. And so, they introduced SuperTarget – producing nearly 4x growth in its stock price for the next decade.
Target had a position they knew they wanted to play in the marketplace. That position was driven, often, by a radical understanding of the customer AND a focused understanding of their future state.
Positioning is the KEY activity when the flow of money is shifting.
Hiding is the least effective choice, and yet many of your competitors will put themselves at risk by cutting their growth budgets going into 2023. What they will find is the money won’t be able to find them, because they’ve abandoned their position in the marketplace.
But not you. You—like all leaders in the CultureCraft community—are here for the future.
So what’s a CEO to do?
Well, if you’re clear on where you’re positioned now, then this is easy: allocate resources internally and with partners who know how to elevate and accelerate that position.
If you’re not clear (and if you didn’t immediately have an answer, then you’re not clear)
· You’ve got to redirect your flow of money.
· You’ve got to move from tactics to strategy.
· You’ve got to move from sales enablement to brand.
· You’ve got to get MORE focused and LESS scattershot.
· You’ve got to get closer to the customer and farther from the VCs (at least mentally).
And if we may be so bold, some of you need to trust the flow and book a call with us.
If nothing else gets done, we can help you know what your next step is and how to find yourself thriving when the dystopia ends, and the future begins.