How Business Design Can Help In Economic Downturns
Be it in the news, articles online or conversations with clients and partners — the scenario of an upcoming recession is being viewed as more and more likely. Either because it has been too long since the last one, or because some internal early indicators are sounding the alarm. Most people seem in agreement that over the next two years there will be a major drawdown in economic activity and trade, despite record-high corporate profits and order books at the present moment.
The question that most are pondering now is — what can I do to be ready? How can I take action now, in order to be prepared when the time comes? And how can I do that, without slowing down the good times, while they last? It’s by now a common recommendation to invest anti-cyclical and pick up market share in times of crisis, when everyone else is cutting spending and retreating. Yet how can you put yourself into that situation, where you do not get overwhelmed by public and shareholder sentiment, and have a plan you can be confident in to turn such a major challenge into an opportunity for improvement and growth?
How can you not only survive, but actually thrive in times of economic recession?
Mapping Opportunities For Growth
We work with our clients across their two key transformations: Transformation 1 — Repositioning today’s business, and Transformation 2 — Creating future businesses (Dual Transformation). Our strategic tool of choice, when starting a new engagement and needing to create a pipeline of transformative initiatives, is the ‘Opportunity Map’.
By using a combination of methods from the Design Thinking and Lean Business toolkits, our teams work closely with the employees and customers of clients, to not only understand the current processes, but especially to identify the jobs to be done, needs and pain points of the various people involved. This enables us to identify a variety of initiatives that would impact the organization by improving its current operations to drive efficiencies and savings, enhancing customer experience or creating new value propositions and lines of business.
These initiatives are then further analyzed with the client’s project sponsor and key stakeholders to check their potential to drive business impact as well as their feasibility and implementation complexity. Those can vary drastically from organization to organization. Following that, our teams create the Opportunity Map, which is a strategic decision making tool that clearly lays out all the qualified initiatives across dimensions of business impact, cost and timeline, creating a prioritized list to work off of for the short-, mid- and long-term. A beautifully simple and very impactful strategic tool for organizations in need of orientation in a VUCA world.
Opportunity Mapping For Recession Scenarios
There are multiple ways in which an Opportunity Map can be utilized in planning for a recession:
Cost Management & Efficiency Gains: The most straightforward question is always how to reduce cost and increase efficiencies, to be able to reduce expenses and weather the storm. Here typically organizations would then only look at the short-term opportunities, as it has to be fast. With that context in mind, the teams can prepare an Opportunity Map focused on the likely impact on the order books and connected cost improvement opportunities.
New Business Models: Another way to look at a recession is as an opportunity. Most companies are retreating, so it is a great time for expansion with the right plays. While the core business of an organization might be impacted together with the rest of the global markets, new offerings have the chance of becoming relevant. An Opportunity Map could be created by identifying the needs that suppliers, partners and customers typically display in a recession, their associated behaviors and the areas of value that emerge as a result. As everyone is scrambling to find opportunities to reduce cost, an organization might be able to extend and/or reframe its traditional offering into a new one.
Mixed Scenarios: Recession in one business may pose an opportunity in another. Major corporations run many lines of business, some will likely experience a decline in sales, while others have the opportunity to actually increase their sales and market share. Hence the creation of a mixed scenario that sees efficiency plays in recession-prone business units, with strong investments in innovation and customer experience in recession-resistant business units is likely the most impactful view to take. By combining the Opportunity Maps from several business units with the business experience of senior management at the client organization, strong and weak scenarios emerge, that can be acted upon immediately once they actually emerge.
Failing To Plan Is Planning To Fail
While no Opportunity Map is perfect and no plan is either, it is still important to be prepared for a variety of scenarios to at least have the options at that point readily available. Creating the plan once a recession hits is too late — an organization will miss the best opportunities along the way and will not be able to seize the moment for potential growth and expansion.
With the process and tool we have created, combining best practice of methods from Lean Business and Design Thinking, executives will have the decision-making tools needed to confidently engage in various directions and create real impact for their organizations to not only weather the storm and survive, but to actually thrive and emerge stronger than before.
MING Labs is a leading digital business builder located in Berlin, Munich, New York City, Shanghai and Singapore. We guide clients in designing their businesses for the future, ensuring they are leaders in the field of innovation.