Harvard Business Review - Global Recession: The Insights You Need from Harvard Business Review

1. Start by avoiding four mistaken ideas.
2. by Martin Reeves
3. Understand how habits have changed.
4. by Michael G. Jacobides and Martin Reeves
5. Now is not the time for differentiators to compete on cost.
6. by Michael Greiner and Scott Julian
7. Its about knowing how to reallocateand deallocateresources.
8. by Ranjay Gulati and Mark Wiedman
9. Three questions manufacturers should be asking themselves right now.
10. by Andris A. Zoltners, Prabhakant Sinha, Sally E. Lorimer, and John DeSarbo
11. How to think about your existing collaborations and the new ones you should seek out.
12. by James Bamford, Gerard Baynham, and David Ernst
13. Research shows that when firms reallocate their marketing budget, they have more success.
14. by Nirmalya Kumar and Koen Pauwels
15. Start by moving quickly but always with a plan.
16. by Peter Buchas, Stephen Heidari-Robinson, Suzanne Heywood, and Matthias Qian
17. How to stay the course.
18. by Daniel Isenberg and Alessandro Di Fiore
19. Understand the market and the needs of the consumer to stay in the game.
20. by Uri Adoni
21. Yes, its possiblewith a detailed plan of action.
22. by Claudio Fern ndez-Ar oz
23. Five steps for coming out of a crisis stronger.
24. by Richard G. Tedeschi

FINDING OPPORTUNITY IN ADVERSITY

by Martin Reeves

Most business leaders have little experience to draw on when managing their company through a recession. Even those with the longest tenures have only faced a handful of major shocks, each with different causes and effects (just think about the contrasting dynamics of the Great Recession and Covid-19). Lacking experience, they often fall back on intuition to guide their behavior. Unfortunately, evidence from past recessions shows that these apparently reasonable intuitions are often misleading and sometimes severely damaging. Four of these mistaken ideas crop up most commonly.

First, leaders often see recessions as temporary deviations from their companys long-term competitive game, so they set their strategic goals aside in favor of three short-term ones: survive, ameliorate damage, and prepare to get back to business as usual when growth resumes. In reality, recessions should not be considered a break from long-run competitive trendswhat happens during crises actually has a disproportionate effect on long-term success. Our analysis shows that although crises (defined as quarters in which an industrys total shareholder return declines by at least 15 percent) occur only about 10 percent of quarters, they account for more than 30 percent of long-run outperformance. In fact, two-thirds of companies that sustain long-term high performance also outperform during crises.

Next there is the intuition that all companies need to prepare for lower performance during a crisis. Lowering expectations in this way can become a self-fulfilling prophesy. Our research shows that one in seven companies increased both top-line and bottom-line performance in absolute terms during the last four U.S. economic downturns.

A related common belief is that what sector you are in largely determines performance in a crisis. This can lead to complacency or fatalism. In fact, a significant share of companies flourishes in every sector during crises, even ones considered as highly cyclical. Sector is not fate.

Finally, crisis strategy tends to focus on operational discipline and cost management above all else. This is understandable since cash-flow viability is a minimum condition for survival in harsh times. But the evidence is clear on where the competitive gains of superior crisis performance accrue. Growth and the expectations of future growth are the dominant drivers of outperformance in downturns.

While deep crises are rare, deviations from plans and trends are becoming more the norm than the exception. With rising turbulence driven by technological, economic, political, and social shocks, avoiding the traps of these four mistakes is imperative. Across all industries, todays market leaders lose their performance edge and fade back to average much faster than before. To succeed in the long term, we now need to build all-weather companiesbusinesses that dont merely survive crises but emerge from them in better shape than they started.

Leaders therefore need to design their companies not for optimality in good times but rather for resilience in the face of unpredictable shifts in the business environment. Resilience represents the capacity for organizations to resist or absorb shocks, recover from them, and thrive in new circumstances. This requires a broader tool kit than traditional risk management, which deals with insuring against specific risks that have known distributions. Companies now must be able to withstand a wide range of potential events, many of which may be fundamentally unknowable until they occur. And they must build resilient capabilities preemptively because by the time a shock hits it may be too late.