Written by Flux7 CEO and Co-Founder, Aater Suleman. This article originally appeared in Forbes.
As talk percolates of a potential downturn, a knee-jerk reaction for many companies is to tighten the belt, shrink budgets and re-evaluate staff resources. Yet, strategic innovation can fuel organizations through a downturn. Innovation combined with the business benefits a recession provides — like availability of great talent, cheaper operating costs and frankly, less competition — can provide just the right accelerant to retain or gain market share during a slowing period.
According to a 2009 study by McKinsey of both SMBs and Enterprises, only 16 percent viewed the last downturn as an opportunity to upgrade R&D and only six percent saw it as a chance to hire people who otherwise would not be available. With competition not seeing these strategic opportunities to upgrade in a downturn, it’s clear why, “just 60 of the largest publicly-traded companies in the U.S. and Europe — ended up as winners after the last big turn” according to Gartner.
Strategy is Critical
Regardless of how you execute — M&A, new talent or technology, or some other means — the key is to remain strategically focused on long-term gains that you can seed now and harvest later. For, in a downturn, many organizations prioritize near-horizon innovation efforts, leaving long-lead opportunities unspoken for. This is a clear opportunity to sprint ahead of the competition, especially in areas where your competitors will need to make that same long-lead investment after the downturn ends.
While you will undoubtedly need to evaluate how to implement a long-term strategy based on more immediate demands and market shifts, keeping one eye focused on the horizon will help you remain strategic. Indeed, while the right strategy for your business depends on a wide variety of factors, here are a few places to begin assessing what to address in order to take advantage of a potential downturn.
Start with a strategic roadmap review. Seek to identify projects with the greatest positive impact and with the least amount of risk. I recommend an apples-to-apples total cost of ownership exercise to analyze each project’s relative cost and benefits, comparatively ranking each. Have the courage to kill zombie projects and re-allocate the resources to new projects. While we have a proprietary framework we use for our analysis at Flux7, there are many industry models available.
Once you’ve identified your prioritized projects, establish clear KPIs and success metrics for each project. Working in an agile fashion, it’s important to set milestones that are reachable within defined time-box periods to help the team identify any barriers to success as quickly as they emerge. In this way, the team can simultaneously be accountable for project outcomes, flexible to meet challenges as they arise, and actively monitor project TCO to ensure it doesn’t balloon unnecessarily. Moreover, as some projects may be experiments or tests, KPIs can act as go/no-go gates where project viability, sunk costs, and other factors can be actively monitored.
In addition to business-specific projects, strategic upgrades of technology and technology-related processes are common investments in a downturn as added automation can help free human resources while providing teams with the tools to experiment more, fail fast, and measure results quickly and accurately. Thus, allowing teams to develop experimentation processes that are more likely to identify failure, hone successes and create business-impacting outcomes faster — all with greater team productivity. Said another way, automation can fuel iterative improvement that leads teams to greater success.
Whether you adopt DevOps, an Agile mindset or another lean approach, seek to optimize processes. This is a great opportunity to revisit team dynamics and optimize workgroup processes to ensure healthy communication and collaboration so that teams are in sync and working closely to optimize productivity.
Above all, be agile, flexible, and open to change. If you establish a lean foundation and keep it as your true north, you will be able to effectively react to change while maintaining a spirit and culture of innovation.
Ali Hussain and I co-founded Flux7 in 2013 while the market was still recovering from the Great Recession. Employment rates wouldn’t return to pre-recession numbers for another three years (May 2016). Yet, we found like-minded organizations who were interested in applying automation to traditional IT processes to free valuable operational and development resources for more strategic work that would help IT transition from being a cost-center to generating revenue for the business.
What I learned in those early days is the power of innovation. It can spur results as big as a new patent that can help a company defend an innovation for years, or as small as a new user experience that draws customers closer to the business.
Some of the world’s most iconic companies — from GE to IBM and Disney to Microsoft — have their foundation in a recession. While you don’t need to start a new business to accelerate out of a downturn, strategically placed bets on innovation can help your business leapfrog the competition and harvest dividends that pay over the lifetime of the business, creating a virtuous cycle of experimentation and innovation that creates larger and larger benefits with time.