Management

This Is What Companies That Survive Recessions Do Right


Following the 2008 financial crisis, a lot of companies were forced to adjust to a dramatically different business climate. Several thrived by resisting the customary corporate reflex to contract, defying convention by carving out unusual courses instead.

We studied nine successful companies over a three-year period, up to September 2013, and compared them with dozens of less-successful ones to find out why they prospered as others struggled to survive. Here are the seven things that enabled these companies to flourish:

Making Life Easier
It’s generally believed that in a down economy, customers want cheaper products, so companies should strip down their offerings accordingly. This approach ignores customers that value products that make their lives easier. During the downturn, customers continued to buy Green Mountain Coffee (GMCR), with its single-serve brewing machines. People also kept flying Alaska Airlines (ALK), which bucked industry norms by offering more leg room, continuous on-demand entertainment, and power outlets at every seat—in sharp contrast to the cost-cutting measures at other airlines.

Shopping Anywhere, Anytime
When the economy heads south, companies try to cut expenses by selling off parts of their distribution system or by closing down branches. Some, however, made their goods and services more accessible, combining physical and virtual outlets so customers could research, order, and take delivery of products whichever way they wanted. To that end, Macy’s (M) made it easier for consumers to shop across physical or virtual channels, and Ford (F) encouraged dealers to build bigger and better-located dealerships.

Spending Surgically on Big Data
Countless early Big Data initiatives have failed. One survey found that 44 percent of Big Data projects were scrapped. Rather than trying to use data analytics everywhere, successful companies took a targeted approach, selecting a few areas that made a big difference to revenues and profits. Huntington National Bank (HBAN) used reams of customer data to fine-tune processes, train sales people, and improve customer relations, resulting in more than three-quarters of its customers using four or more financial products—twice the industry average.

Bringing Innovation to Cost-Cutting
Even when a company thinks it is efficient, there is always an additional 10 percent of costs it can squeeze. Successful companies look for ways to reduce spending creatively; putting their savings into areas they know will pay off. Although Dublin-based Ryanair (RYA:ID) is known for charging passengers for practically everything, it also stands out for innovative saving ideas, such as flying planes at slower speeds to cut on fuel consumption and selling advertising space inside and outside the airplane.

Investing Aggressively During the Downturn
Continuing to invest during the downturn can spur growth. In one sense, that’s not surprising: Companies have more cash on hand than ever before. But rather than stockpile that cash, these companies—Verizon (VZ), Ryanair, TJX (TJX), and Volkswagen (VOW:GR), to name a few—have consistently reinvested in their businesses. Volkswagen, for example, has out-invested most rival car manufacturers in China and has committed to investing a further $25 billion through 2018. VW is now the No. 1 selling car there.

Mastering Mundane Operations.
You might think that thriving during economic downturns requires companies to rethink their strategies. We found that the best companies have a laser focus on doing an exceptional job at executing strategies. They pay much more attention to critical components of their operations—activities that may often appear to be mundane—than their peers. Alaska Airlines, for example, took that approach by employing its fleet to capacity, aggressively tracking how full each of its flights were and redeploying planes to get the balance right.

Leading With Clarity and Commitment
Executives at these companies establish concrete milestones to gauge progress toward goals. To achieve these metrics, they inspire employees not only with motivational messages, but also through incentives such as wage hikes, union cooperation (grudgingly), and investment in developing talent. This approach is as crucial as improving processes and deploying new technology. We’ve seen strategies clearly communicated both internally and externally at Macy’s, Alaska Air, VW, TJX, and others throughout the downturn. Though this may sound like a platitude, management must treat employees and business partners with respect and dignity if they want superior performance and occasional sacrifice during tough times.

These seven practices are of equal value for businesses grappling with disruptive competitors such as Amazon (AMZN) or Netflix (NFLX). Companies that master their operations and get right what matters to customers can not only remain competitive, but also win the brutal game of market share that is the long slow climb toward economic recovery.

Crawford is Chief Executive of AlixPartners. He can be reached at fcrawford@alixpartners.com.

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Companies Mentioned

  • GMCR
    (Keurig Green Mountain Inc)
    • $128.3 USD
    • -1.83
    • -1.43%
  • ALK
    (Alaska Air Group Inc)
    • $42.74 USD
    • -0.80
    • -1.87%
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