Four Mindsets to Avoid during a Downturn
While the current situation may not be as bad as it looked likely to be 12 months ago, the global economy is not exactly in hyper growth mode at the moment. Having experienced a number of downturns over the years here are four behaviours to avoid if you want your business to emerge from the downturn in a healthy state.
1. Using Gut Feel Rather Than Data
Data provides a good description of what has happened and provides trends. Well researched data will provide insight into what the best course of action is likely to be. It is, however, very tempting to ignore the data when it disagrees with either how you think the situation is or the course of action you would like to take. At which point, it is tempting to rely on your gut feel as to what to do. While it won’t be wrong in every instance, overruling what the data tells you rarely ends well.
If you find yourself in the situation that you are disagreeing with the data, I recommend two actions. First review what you were measuring – were you asking the right question in the first place? Secondly, undertake your own qualitative research. Talk to your customers (or get an independent advisor to talk to them) about the data. Listen attentively and they will give you further insight into the best action to take.
2. Hobbyism
Innovating your way out of a downturn is a great strategy. You may have resource ‘on the bench’ that can be used to develop new things quickly and cheaply. At the point at which the downturn ends you have new products and services to offer. However, until the upturn starts your new offers are unlikely to have much demand for them. The danger is that rather than having a highly disciplined development activity, the lack of immediate demand leads to too many initiatives being started and ‘pet’ projects being done rather than business critical ones.
New developments require even greater discipline during a slack period to avoid producing a series sketches instead of proper designs.
3. Culture Doesn’t Matter
You will, hopefully, have a culture in your organization that is part of your strategy for success. I make no suggestions at this point as to which type of culture is most effective, I merely assume that whatever one you have chosen works for you. Promoting and reinforcing your culture costs money. It is very tempting when money is tight to cut back on expenditure that supports your work culture. If, by way of example, you normally expect staff to spend time improving their skills and have made a cultural virtue of this, then the skills development activity has to be maintained. Cutting the wrong activities to save money will soon send the message to your staff that the values that your culture is supposed to underpin are not that important and a healthy culture can turn toxic fairly quickly.
4. This Time it will be Different
This one is dangerous because it is partially true. What’s true is the products and services available in the market and the causes of the downturn are different. How human beings react will be the same as always. A reduction in confidence leads to more cautious behaviour, leads to less money for new things, leads to risk avoidance behaviour until something happens to restore confidence – usually a realization that although the world has changed you are still in business and can afford a bit more risk.
Thinking that this time it will be different leads to delays in taking action because you are expecting people’s behaviour to be different when, in reality, human nature hasn’t changed.