10 Reasons Why You Must Think About Recession


Accentuate the Negative

We’re often told to ‘accentuate the positive’, great advice, but there might be some downsides, especially in the uncertain and volatile world that we live in today.

One very real downside is that just looking at the positive can stop us from seeing the totality of the real world that surrounds us which is an essential characteristic of creating a mindful or ‘high reliability organisation’ (HRO).  Therefore, following this thinking, I’m going to accentuate the negative, with the sole purpose of presenting a positive platform for the innovation, resilience and mindfulness.

The 10 Reasons

So, as the title of this briefing suggests, here are my 10 reasons (and there are more!) why you should consider now, as part of your strategy process, the implications for your business of a financial downturn and the emergence of a very low or zero growth world.

#1:  Resilience: The process of considering this type of future will help to build resilience and, in the world ahead, ‘resilience’ could be a far more important word that the word that has driven business thinking for as long as I can remember, and that is ‘growth’.  A great first step in building resilience is the consideration of key business uncertainties. Consideration, of and answering, ‘What would do if?’ questions is far easier in the calm before the storm.  Decision biases and rushed, flawed thinking abound in the heady days after a crisis breaks. Having a clear plan, even just a thought-through outline, could put you steps ahead of the completion if we hit a financial downturn and its aftermath.

#2:  HRO Building:  It starts a process of challenging received wisdom and assumptions, another essential step in the process of resilience building and the creation of an HRO organisation.  After consideration of the impact of a zero growth world, you may wish to consider a broader future set of scenarios that embrace a wider range of key uncertainties that the business community faces right now, such as the scenarios you will find in my briefing here.

#3:  Bandwidth: The prospect of both recession and a prolonged period of very slow growth is a real global concern that’s consuming an increasing amount of bandwidth or ‘conversation time’ in economic circles. Voices have been growing steadily since the publication of Robert Gordon’s and Larry Summers’ pivotal ideas. Additionally, the title of the IMF’s April 2016 World Economic Outlook report says it all, ‘Too Slow For Too Long’. Voices in the ‘bandwidth’ are now warning that without major changes in policy we are on the edge of another financial precipice.

#4:  End of a World Order: It could herald then end of one world order and the beginning of another. This is particularly true if we look at recent ‘populist’ decisions and emerging scenarios for the West.

#5: It’s Systemic: If you take a look, for example, at the World Economic Forum’s latest Global Risk Report, you can gather a clear view of the systemic implications of a financial downturn.

#6:  New Assumptions: The systemic domino effect will undermine most, if not all, of the assumptions that most strategies are either consciously or subliminally based upon.

#7: The Old Recipes Won’t Work: This time it could well be for the long-term if thinkers such as Robert Gordon are right. A common approach to economic downturns is to freeze headcount and cut budgets, usually in sales, marketing and training and to ‘batten down the hatches’ until the storm passes. These approaches just won’t work; rather the danger is that these actions will create an organisation incapable of change and rapid adaptation.

#8:  Behavioural Shifts: It could have a fundamental, long-term, potentially multi-generational impact on customers’ behaviours. The behavioural implications of the experiences of repeated economic shocks and downturns are one of the key points that underpin the secular stagnation and ‘hysteresis’ arguments.

#9:  New Opportunities: Seismic shifts are great opportunities for innovation. A relevant example can be found in one of the pieces of research that really has stuck in my mind from the Great Recession, being the concept of ‘experiencism’ put forward by John Qulech. The idea is that in times of hardship we may well see a shift away from materialism and virtual interaction towards ‘experiencism’ or the value of experiences (as opposed to the possession of material goods) and face–to-face interaction.

#10:  The Cultural Shift: The changes in processes, offerings and, more importantly, organisational culture that are needed to succeed in a zero growth world should not be under-estimated. Just take, for example, the reorientation of a new business hungry salesforce in a period of zero economic growth where the emphasis may well change from new client acquisition to client retention.

The main point of course is that bad news, the negative, if considered in a proactive manner, can have really positive outcomes from building a resilient leadership mind-set through to the development of frame-breaking new offerings ahead of the competition.

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