As the threat of a recession looms, many tech companies around the world are cutting back on expenses. According to McKinsey, 81% of leaders expect a recession. Even large companies like Meta, Google, and Amazon have been in the news recently for laying off employees due to uncertainty.
In addition, boutique banks that have traditionally focused on tech startups are also feeling the pinch. Silicon Valley Bank, which has lent over $212 billion to tech companies, recently collapsed, followed by Signature Bank shortly thereafter. This “banking contagion” has caused panic, with experts warning that this is just the beginning.
Here are 5 tips to keep calm in an economic storm
1. Continue to invest in research and development
In today’s competitive business landscape, investing in research and development is crucial for sustaining innovation in products and services. This investment can lead to new revenue streams and help maintain a competitive edge, particularly during challenging times. Rather than slowing down during disruptions, companies should use this time to accelerate their progress and outpace their competitors with confidence and optimism.
Research has shown that businesses that maintained or increased their investments in innovation during a recession experienced up to three times more growth compared to industry peers for a period of up to five years after the recession. This enabled them to leapfrog over their competitors in many cases.
2. Target responsible growth to thrive
Achieving responsible growth requires striking a balance between economic profitability and social and environmental responsibility. To ensure long-term sustainability, companies should prioritize investing in employee training and development, establishing strong partnerships, and maintaining a focus on sustainability. This approach can enable businesses not only to survive a recession but to emerge stronger from it.
In addition, creating an award-winning workplace culture that fosters innovation is crucial. Companies should encourage continuous learning and development among their employees and cultivate a collaborative and rewarding environment that values teamwork and trusted relationships. By adopting these practices, businesses can better navigate economic challenges and overcome obstacles.
3. Diversify revenue streams
In any economic situation, expanding into new markets or developing new products and services to reduce reliance on a single market or product is a smart strategy. According to McKinsey, leading companies achieve better performance by pursuing a balanced approach that includes growth, margin improvements, and balance sheet optionality, instead of focusing on only one of these areas.
As the global business economy increasingly prioritizes customers, organizations should focus on their client base when diversifying revenue streams. Companies should not only secure new customers but also engage existing ones by offering products or services that provide extra value.
Diversifying revenue streams can help companies mitigate the risks of a downturn in a particular industry or market and maintain their growth trajectory.
4. Build resilience with data
Organizations should consider various metrics when evaluating the value and return on investment of new projects or initiatives. This includes short- and long-term capital investment, anticipated savings, impact on existing resources and team, and expected productivity and time-to-value gains. It is essential to rely on data when making financial decisions.
According to Gartner, investing in the right digital initiatives at the right cost can help companies build a long-term competitive advantage while blunting the negative effects of economic pressures in the short term. To stay ahead and succeed, companies should take an offensive approach with digital initiatives.
In today’s business landscape, companies are cutting their workforce while maintaining productivity levels. To achieve this, organizations should facilitate faster system connections and quicker access to information. Integrating different systems and automating core processes are crucial for accelerating business growth and success.
5. Focus on connection
Strategic partnerships are crucial for companies seeking to navigate economic uncertainty. By partnering with other companies, businesses can access new markets, leverage complementary technologies, and drive growth. Recently, SnapLogic improved its Partner Connect program, resulting in over 100 partners certified in turnkey solutions in nearly 20 technical, functional, and industry categories. Strategic partnerships can create new opportunities for revenue generation, but it’s critical to build the right ones.
When building strategic partnerships, the most important question to ask is, “Who will be the best partner for us on a long and uncertain journey?” While many in the venture capital business are well-connected and experienced, not all know how to build a durable company, especially in such an unpredictable environment. Choose partners that offer support and guidance to navigate future twists and turns.
Originally published at 'Business d’Or' on April 27, 2023
