The COVID pandemic disrupted human lives and global supply chains. Life came to a standstill for months on end across the world. Governments responded with unprecedented relief measures. Some sectors like logistics, hospitality, and entertainment were particularly badly hit. The stock market nose-dived for a few months but smartly recovered, led by the IT sector. The banking and real estate sectors were decimated in the last financial crisis. This time round, from 2020 to 2022, the global impact of the COVID pandemic directly impacted lives.
Every few years, there is a downturn. Recessions, ups, and downs are integral to our lives. Businesses that have learned to adapt to these events thrive and grow, and others struggle. Some even perish. Some key strategies adopted to navigate downturns are:
- Cost reduction
- Diversification
- Focus on core customers
- Operational efficiency
- Financial management
- Innovation and adaptation
- Marketing and communication
- Long-term planning
Consulting firms routinely advise companies to integrate certain operation management frameworks that will help them improve operational efficiency. Some popular frameworks consultants recommend are Lean Six Sigma, Total Quality Management (TQM), Activity-Based Costing (ABC), Zero-Based Budgeting, Value Stream Mapping, Outsourcing and Offshoring, and Just-in-Time.
Technology companies, conversely, recommend corporations leverage automation and digitization to bring costs down and increase operational efficiency. Automation does help eliminate manual and repetitive tasks and helps reduce both time and cost. Digital workflows and robotic process automation (RPA) help streamline processes, minimize errors, and increase productivity.
Downturn Navigation Model
Downturn Navigation Model
Based on my experience in multiple business transformation and turnaround projects, I have determined that downturns can be navigated by constantly inter-playing between three core components of a business. These are people, processes, and technology. Companies will stay agile, financially, and operationally fit if these elements are placed on a continuous improvement path. The cycle requires to be nurtured by an organization with an agile leadership and change management support system.
Enterprises, over time, tend to form silos. Silos are averse to collaboration and sharing, both contributing factors to innovation. Technology tools that bring with them best-in-class tend to break silos. Each new technology introduction challenges the status quo. Resistance to status quo change is a typical feature of silos. Organizations, therefore, should bring change management teams alongside to ease process change and technology introduction.
When implemented with a cost-reduction model, the above downturn navigation model will help an enterprise navigate recessions and business slowdowns.
Cost reduction model
Here is the link to the cost reduction case study that provides operational details of spending reduction.