REVISE:  Plan And Implement Change In The Downcycle

In Mistake #1 (M1), we shared the importance of understanding your industry cycle and those of your clients and choosing whether to rise with the tide, to seize the opportunity to grow, gain market-share and enhance your capabilities or slowly sink to the bottom.

This brief, builds on M1 and explains why it is advantageous to develop and implement your plans during the downcycle in order to create a stronger foundation for your future, even if it ”feels” to soon to do so.  Why? Because opportunities are like sunrises, if you wait too long you will miss them.

The second mistake – Timing – is tied to M1, in the fact that some people wait until they ”feel better”’ about their future before they start planning for what is next. The gloom of a recession and its uncertainty often creates a false belief there is no point in planning because you can’t see the light at the end of the tunnel – so you wait until you know what you are facing!

Recession and Recovery curve with emoticons above the line and the titles Down Drag Release & Recover

What business owners often forget is that a recession is a natural part of the business cycle, ergo you know a recovery will eventually occur.  Mistake #2 (M2) is a matter of timing your actions before a recovery begins and before the owners and employees “feel” all is right with the world again.

Since no one knows what type of recovery lies ahead (i.e.  V-U-W-J-L), many naysayers argue against planning, claiming predictions are rarely on the mark – so what’s the point?  Well, that might be true, however; most plans either require pivots or evolutions along the way.  At a minimum, businesses should run through a few scenarios to get an understanding of what they must do –  to be where they want to be – given a slow and long (L-shaped) or fast and short (V-shaped) recovery as well as what triggers implementation of those plans.

Irrespective of their origin (i.e. financial collapse or pandemic), every recession has four phases, each phase influencing human behavior, which in turn impacts the economy.

The four phases of a recession are:  The Down, The Drag, The Release and The Recovery.

Morphii Representing the Down Phase of the economic cycle

[1] The Down phase is when the crisis or the recession is happening. People ”feel it” but seldom is it reported in the news as fast as it is actually happening.   People are anxious and nervous in the “Down” phase because they don’t “know” how far, how fast and for how long it will last before the economy bottoms out.

Morphii representing the Drag phase of the economic recovery

The Drag phase is that final stretch to the bottom of a recession. It can be short, as in the case of a ”V-shaped” recovery or more prolonged in the case of an “L-shaped” recovery, the longest and most painful drag which includes a deep dive and a slow-long path to the recovery.Companies that hunkered down in the hopes of a short recession, find they need to close locations, release staff and make deeper spending cuts to survive…the pain drags on.

Morphi Representing the Release Phase of the economic cycle

The Release phase, typically a short phase, comes at the end of the Drag. As individuals begin to “feel safe” again and start to return to their prior social and economic behavior, the grinding feeling that occurred during the Down gets released and the more positive energy enables the Recovery to begin.

Morphi representing the Recovery phase of the economic cycle

The Recovery phase is the return of confidence in the future, as the economy and consumers return to a cycle of growth spending.  It is noteworthy that 30% of the recovery often happens at the beginning of this phase.

How the 4 Phases of a Recession Manifest Themselves in Business

Decision making during the Down phase, especially those that require cash, is emotionally challenging for most people.  However, the time you ”feel good” about your future, any advantage you may have had to leap-frog your competition will be lost.  Worse yet, savvy competitors most likely will have leap-frog you.

Showing a Reactive approach waiting too late to grab the recovery

To take timely advantage of marketplace opportunities and to capture market-share requires a “growth mindset” that allows you to plan and invest in your business, enabling you to capture growth to propel you beyond where you were prior to the downturn.

As counter intuitive as it may seem, making investments and other strategic decisions to propel yourself forward despite your fear is the right thing to do. 

It is not easy, and mistakes will be made, but it is imperative to your success.

Benefits of Planning During the Downcycle

There are many benefits of planning your strategy during the downcycle including:

    • It is cheaper to invest in a down market because your competition is retreating;
    • You may more readily add to your capabilities because talent is more available as a result of competitor cost cuts and reductions in workforce;
Showing the impact of a proactive approach to planning and grabbing the recovery
    • Investing in the required infrastructure ensures you are prepared to rise above the tide and get a jump on your competition before the next boom (similar to the investment strategy) ”buy-low” and ”sell-high”;
    • You will be competing for resources if you try to execute while the rest of the economy is in recovery mode; and
    • Planning during the downcycle positions your business to execute your plan the minute you see signs of recovery – otherwise it will be too late.

While you may achieve some benefit from executing and investing later, you will have lost the early-mover advantage that propels companies ahead.

The key message in M2 is to have a strategy in place, invest in and implement changes ”down the curve”, understand and embrace the uncomfortable feeling you may be experiencing and not wait until you ”feel good” about the future.  These choices will make the Recovery faster and more enjoyable.  Plan today for a better tomorrow.

If you want to get ahead of your competitors and build your plans to Thrive and ensure you don’t lose ground just press the lets connect button.

Our next brief Mistake #3: is all about Asses Your Personal & Business Risk Tolerance.

[1] Morphiis used with permission from Vizbii Technologies, Inc.

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