Surviving a Downturn:  Strategic Planning and other Critical Success Factors

We hear it all the time.  When the economy is down and businesses are troubled, we often hear, “I don’t have the time or the money to do strategic planning right now.  I’ve got too many fires burning.”

And yet, it is precisely when things are not going well that it is even more critical than ever to undertake a strategic planning exercise.  Why?  Because…

• It is critical that you completely understand the challenges, opportunities, realities and potential outcomes of your current situation.
• You need to make absolutely certain you are spending your time and resources on those activities that will improve your short term situation and also create the greatest long term pay off for your business.
• External circumstances in your market may be shifting; such as competitors changing course, losing focus or exiting, or customers’ needs and values evolving due to their economic circumstances (like wanting fuel efficient cars or energy saving appliances, for example).  These changes may create new opportunities for your business that you would miss if you didn’t engage in a strategic planning process. 

When profits are falling, companies tend to take one of two directions.  Either they panic and start cutting costs in all the wrong places.  Or, they take a step back, look at the big picture, and develop a positive sense of urgency about creating a winning strategy for the future along with the courage to take some risks to make it happen.

Critical Success Factors

With 30+ years of experience in owning, operating, and advising businesses through many economic cycles, we offer this advice to business leaders:

• It begins with attitude.  It is critical that you retain faith that you will prevail in the end, regardless of the difficulties, and that you confront the most brutal factors of your current reality.
• Know what’s driving your bottom line and protect it.  For example, get cozy with your best customers and make sure they are happy and loyal.  Make sure you are not spending too much time with customers who are not fueling your bottom line.  Another example is to examine your sales efforts and pipeline.  Turn up the heat on the channels that are producing profitable sales, and redirect or discontinue efforts that are not. 
• Be smart about costs.  Do not panic and postpone raises for your best people, cut training, stop advertising, or reduce your investment in research and development.  Instead look for creative ways to save money by asking yourself and your management team these questions:
  
  
1. What can we do to reduce the cost of producing and delivering our product or service by 25% without impacting our customer value proposition?
2. What can we do to run our business more efficiently today without impacting our ability to grow?

Positioning the cost cutting discussion in these terms should lead to innovative solutions that will help the business today and tomorrow while not demoralizing management and staff or reducing your value in the minds of your customers.  It takes a negative and creates a positive that will hopefully position your company to ride out the downturn and come out faster/stronger than everyone else.

• Know that it takes time to build a brand but that it can be destroyed or devalued very quickly.  For example, discounting your pricing or offering special promotions can very quickly send the message to your market that your product wasn’t worth what you were charging in the first place.  Keeping focus on your value and keeping your brand in the public eye will demonstrate to both current and potential customers that you offer real value, you are here to stay and that you are confident about your business.
• Engage in strategic planning.  Regardless of economic and business circumstances, every business should always have a strategic plan that is current and relevant, that drives decisions and resources productively, and that energizes the enterprise around a common and exciting goal.  The basic process for creating a strategic plan during a downturn is not different than in good times, but there are nuances to the approach that will improve the chances of creating a winning strategy during a downturn.  For a step by step process, please see our latest white paper, Strategic Planning in a Downturn, at our Knowledge Center library at www.vann-group.com.

If you have any questions about anything you’ve read here – or think you might benefit from the strategic planning expertise of the Vann Group, please contact: