Three Ways to Thrive in an Uncertain Economic Upturn

Three Ways to Thrive in an Uncertain Economic Upturn
reprinted with permission from the HP Enterprise Center

Signs of a possible upturn are reenergizing businesses. However, this recession isn’t ending in a sharp economic upturn.

“We know that the fall has stopped, but we are not yet sure whether the economy is going to grow again fast,” said Olivier Chatain, assistant professor of management at The Wharton School at the University of Pennsylvania. Because consumers have lost money and are still worried about their jobs, “it’s not clear that demand will bounce back very fast.”

The hopeful outlook is overshadowed by a projected slow recovery riddled by ups and downs. So, businesses are struggling to adapt to a new normal: uncertainty. Experts offer advice in three key areas for operating in a hopeful, but uncertain, economy.

1. Staff up strategically
As business improves, consider hiring again–carefully.

“You can’t cut your way to the future,” said Mateen Greenway, a fellow at HP Enterprise Services. “You have to cut your way to survival and then rebuild your organization as you come out of the recession,” said Greenway, who is also HP Enterprise Services’ chief technologist for defense, security, government and healthcare for European, Middle Eastern and African countries.

Consider these approaches and alternatives for staffing up appropriately:

Use outsourced or temporary workers
Keep your payroll light. “I think there is a longer-term shift to temporary type of employment,” said Jim Miller, a fellow at HP Enterprise Services where he serves as a chief technologist to the automotive industry.

Automate back-office functions
Consider using some of the money you used to spend on people working on payroll, human resources or your internal supply chain to set up an automated system. “You can recreate the situation that existed before the recession,” Greenway said, “or you can automate and streamline.”

If you do rehire workers, first consider those you let go. It’s tempting to find less experienced and thus less expensive employees. Doing so, however, might result in “kind of a Pyrrhic victory,” Chatain said. In other words, you risk losing more than you gain. He recommends looking first at the workers you laid off. “You actually invested a lot in them. Trying to get them back could be a good idea.”

2. Spend wisely
It’s crucial to keep a close eye on spending but still be prepared for an increase in demand, experts emphasize.

Make your IT spending flexible for the next downturn (or economic upturn)
Some companies are looking at server virtualization, for example, as a way to make their IT spending go up and down with the company’s business. “It’s part of a movement to match the percent of IT spending to revenue, so as revenue expands and declines the percentage of total spend on IT matches that revenue,” Miller said.

Shift away from capital spending and toward operating expenditures
“This makes it easy for you to flex your capacity up or down,” Greenway said. If you go this route, though, be prepared to see your monthly expenses fluctuate.

Consider alternatives to new investment
Joint ventures can help manufacturing companies in particular expand their markets without investing in infrastructure. “It’s the fastest way to respond to an economic upturn and enter new markets,” Miller said.

3. Understand your customers
Your customers, whether they are other businesses or consumers, are scrutinizing their spending just as carefully as you are. Experts say to make sure you’re making the most persuasive case to them, consider these ideas:

Get to know your customers
“The differentiator is going to be service,” Greenway said. “Focus on the needs of the customer. Communicate better with customers. Make better use of business intelligence.”

Show how your products can help customers save money
For example, Chatain said that if the product consumes less power than its competitors, you should highlight that.

Look beyond your current customer base
“One consequence of this economic situation is that people may want to make an effort to change suppliers if they can,” Chatain said. You can take advantage of this to gain new customers.

Adversity and opportunity
The recession acted as an “acid test” for companies, said Chatain, showing them how they compare with their competitors. Now that you know how your company fared, how do you respond?

“I think it lacks ambition to say, ‘I want to go back to what I was before,'” Greenway said. “What I was before I ran into trouble” in the recession. Recessions often provide “the spark for companies to change who they are.”

“These kind of big, disruptive events like the recession offer the potential for people to redesign their organization,” Greenway said. “Times of disruptive change also generate new opportunities.”