August 17, 2022 2:47pm
INVESTOR PERSPECTIVE: Strategic Planning for a Pending Recession
We are facing much economic, political, financial and trade uncertainty. While different countries and industries lag or lead recessions at different times, there is real potential for a future recession to impact your business. As you move into your next strategic planning cycle, it is a good idea to strategize with recession planning in mind.
Some CEO’s, Presidents or Leadership Teams may take the attitude that “planning is a waste because it will not turn out like we planned for anyway.” According to the Association of Strategic Planning, during the Great Recession of 2007-2009 research found organizations that used strategic planning to make critical decisions were better able to pursue growth opportunities during the crisis (new products and services, new market expansion, new operations capabilities, etc.) and were more prepared to adapt and remain flexible to adjust to changing economic conditions (taking out operational costs, right sizing, delay big projects, etc.)
Embracing strategic planning is an opportunity to plan for both offensive and defensive strategies to minimize disruptions while continuing your growth trajectory. More emphasis on scenario planning, trends analysis and voice of markets/customers will strengthen strategic thinking throughout a crisis. Scenario planning helps plan the ‘what if’s’ and allows responding more quickly because triggers and strategies are identified in the planning process.
Additionally, making a stronger prioritization of resource utilization and investment is critical as financial pressure can mount. Making sure budgets, as well as people and capital plans are investing in the resources that will protect and grow market share is critical. This may include how your processes need to change to protect supply chain challenges; which new or existing products/services need to be adapted or improved; pricing to protect margins; a labor market squeeze; and to protect cash. Helping your team determine what is most critical to protecting and growing your business in the short and long term is helpful for decision making and being agile.
An offensive and defensive planning maneuver is to perform a deep analysis of your market and customers. This may be through an 80/20 analysis or other means, but ultimately understanding your market segments, your customers and your value proposition is critical. Which are the customers that drive gross margin dollars to support your business, and how do we adjust value proposition and processes to keep them sticky and grow, or eliminate those that are resource hogs and contribute little margin?
To succeed post-downturn your company will benefit by investing a few days to select your strategies carefully and adjust your model accordingly, while defending your positions – cash, market, and customer value propositions.
Rachel Friend is Principal of right angle results, llc. She brings 25+ years of strategic planning experience with public, privately held and non-profit organizations of all sizes and lifecycles. For help with your strategic planning process and facilitation, or if you would like a fresh perspective of your business, please contact Rachel Friend at 502-777-5399 or [email protected].