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Strategies To Win During Slow Down

The magnitude and shape of a cost transformation will vary depending on your starting position, but the approach should keep out costs while you put the pedal to the metal coming out of the curve.

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I was reading an interesting report of Bain & Company recently on what companies need to do during an impending slow down.

“With the current economic expansion now more than 10 years old, long by historical standards. Signs of overleverage in the corporate sector, combined with geopolitical uncertainty—including the China–US trade war, Brexit and economic instability in some European countries—suggest the next recession is not far off” states their report predicting an impending Global slow down. 

It is during the times of slowdown that the Corporate Leaders need to make early moves before their options get limited and make structural changes to ensure that their Organization stays ahead of the curve.

Bain’s study of 3900 Organizations based in US during the previous cycle of recession has some startling revelations:



While for us in India the CAGR might look very conservative, one needs to contextualize it to the GDP growth of US during this period and comparing it with India’s GDP growth during the same period


(Source: World Bank) 

“The number of US companies that substantially increased profits was 47% higher during the last downturn than during stable periods.  And 89% more US companies lost profitability in the last downturn vs. stable periods. No question, recessions can swing the future market capitalization of a company by billions of dollars. For two US companies with a similar enterprise value in 2007, for example, our Sustained Value Creators analysis finds that the winners’ average enterprise value grew three times that of the losers by 2017 (see Figure 3 below). That difference is worth $6 billion in additional enterprise value, based on the median for the companies’” says the report.




Quite fascinating isn’t it?

So what did these winning companies do differently from the ones that lost?

Losing companies

  • Indulged in extreme cost-cutting 
  • Cut R&D across the board
  • Scaled back on sales and marketing activities
  • Laid off valuable talent 
  • Ruled out acquisitions. 
  • Strayed outside their core business - Investing in the latest hot sectors and tools, praying for a winner. 
  • Some tolerated poor results during the downturn, waiting to see what would happen and by the time they took action, it was too late.
  • Bought the wrong asset or fell behind in product innovation.

Winning Companies

  • Moved deliberately to capture opportunities before the recession. 
  • Focused intensively on not just cost transformation, but also looked beyond cost.
  • Thought of a recession as a sharp curve on an auto racetrack—the best place to pass competitors, but requiring more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded). 

What specifically distinguishes eventual winners? 

Bain research reveals several key moves by companies that outperformed peers, in four areas: early cost restructuring, plus some combination of balance sheet discipline, aggressive commercial growth plays and proactive M&A

Restructure costs but don’t cut the muscle

Often, Organizations lose core assets, knowledge and/or competitive edge during cost cutting because of a multitude of reasons. However, it was observed that the winning organizations are extremely careful and mindful of this trade off. They accomplish the cost rationalization by ratcheting lower value processes and reducing the complexity of the processes.

Best cost reductions refuel the growth in the next business cycle.

Here’s an illustration, the neighbourhood departmental store could have fewer but faster moving SKUs over a MTO of a large chain and the possibilities are that the store managed to do this a quarter ahead.

Key take out for a few sectors:

  • Can Auto sector aggressively cull the low margin/ low value SKUs. Long tails don’t help the sector at all 
  • Can Print aggressively adopt data centric reporting to add credence 
  • Can Radio aggressively build digital footprint to stay relevant?

Put Financial House in order

Slowdown wreaks havoc on balance sheets. The winners manage the balance sheet as strategically as they did the P&L. They tightly manage cash, working capital and capex, all to create “fuel” to invest through the cycle. 

Many companies also divested noncore assets to further invest in the core business or explored new ownership models in typically capital-intensive industries. It may sound rudimentary but slowdowns are the time when deployment of each rupee matters. All the ratios learnt in Financial Management are critical. Making each asset work and leveraging on every rupee available shall have a significant impact on the future capability of the Organizations.  

  • Can Auto adopt Mega (and maybe Multi brand) Distributor outlet or a direct-to-home model to rationalise distribution costs and up efficiency?

Get aggressive by reinvesting selectively for aggressive growth

In the last recession, the strongest companies went on offense early, while many of their peers focused on survival and waited for the cycle to clear. Successful growth companies used a few common tactics to boost commercial growth.

They invested substantially in R&D instead of dialing back. They pointed sales teams to top priorities among accounts and prospects, as determined by the account’s all-in profitability and potential lifetime value. They realigned distribution by rebalancing the mix of current and new locations, or next-generation formats. They also maintained marketing while competitors cut back. And they focused on improving the customer experience, making it more simple and personalized through investments in digital capabilities.

South Korean conglomerate Samsung took an offensive tack before and during the past recession. In 2009, Samsung doubled-down on R&D investment, while competitors aggressively cut costs in that area, with a fourfold increase in patents filed in the US and construction of four types of R&D centers, each with a defined product focus and investment horizon. Samsung maintained marketing investments, bringing in senior marketing execs from other consumer companies such as L’Oreal. A marketing strategy that rebranded Samsung as an innovative company helped position the first Galaxy smartphone, released in 2009, against competitors such as the Apple iPhone. Samsung also divested and streamlined noncore, low-performing subsidiaries, in order to reinvest capital into its core businesses.

Pursue proactive M&A

For the well-positioned, slowdown presents a window to use M&A to reshape the portfolio of businesses. Acquirers can buy new product lines, customer segments or capabilities at lower prices. 

Others exit businesses that didn’t fit strategically in the company’s future, after identifying legacy assets that no longer figured in the emerging business model. Lying low and waiting for the tide to recede is not going to help any Organization.

Steps to take now

Every Organization enters the slow-down from a different starting point, so the right plan hinges first on knowing where the company stands in both its strategic and financial positions. All companies fall into one of four basic positions of this Bain’s chart as mentioned below that will determine the shape of the cost program and additional strategies to pursue


To quote Tom Holland – Partner, Business Transformation at Bain…

  1. Start with the end in mind. What do you want the Organization to look like at the end of the downturn and three years after? A future-back approach that defines the desired end state helps you know exactly where to invest—the customer segments to target, the value proposition and the digital technologies supporting the business. A clear plan lays out specifically how the business will outperform competitors through and beyond the downturn.
  2. Stress test the P&L and balance sheet. Model the 2019–2022 P&L, cash flow and balance sheet through turbulent scenarios, including negative market growth, lower prices and higher unit economics, for your company and against your competitors.
  3. Identify M&A targets early. Map out a proactive M&A plan that includes add-on acquisitions, divesting noncore assets, and potentially big moves with large-scale peers. That way, you can pull the trigger when the time is right, as opposed to reacting—and missing the opportunity.
  4. Manage costs, now. A smart cost program starts early and focuses on sustained changes, instead of cutting muscle or trimming across the board. 

The magnitude and shape of a cost transformation will vary depending on your starting position, but the approach should keep out costs while you put the pedal to the metal coming out of the curve.

Epilogue: Some portions of this article quotes Tom Holland verbatim to ensure that the essence of the message is not diluted.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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Satyanarayana Murthy YVS

Armed with Engineering, Business Management academic background and an alumnus of IIM-B, he has had the good fortune of working across varied roles starting from Manufacturing, Sales, Channel Management, Distribution, Brand, Marketing and PR, Business Strategy and Business Management across diverse sectors from Engineering, Oil & Gas and Media. Currently, he consults a few Start Ups and MSMEs besides working on an Analytics Media Tech and Luxury & Lifestyle Market place start up

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