Economic Recession and Digital Transformation
For digital leaders, an economic recession is not a time to put off the implementation of business strategies. The benefits of digitalization span all aspects of an organization’s cost, capital, and employee value proposition. They will not wait for the recession to be confirmed before acting. They will prioritize resource trade-offs and develop a coherent narrative to drive change. This article will examine the strategies that can help organizations survive a recession.
Technology Companies That Survived the Dot-com Bust
While most dot-com-era technology companies failed, 48% of the ones that survived the crash are still going strong. Though they lost the majority of their value, many have found a way to adapt. Here are three tech companies that made it through the dot-com bust. All three are successful in their own ways, but how did they transform in order to adapt?
Amazon: Shifted from selling Books and DVDs to providing cloud computing services, while optimizing and tweaking their algorithms to meet consumer needs.
Adobe: Expanded and grew through acquisitions, focusing on the Internet cloud and marketing services, with digital subscription models.
IBM: Instead of selling computer mainframes and equipment, IBM shifted towards market research and IT consultancy to help business grow. By switching to a service frame of business away from products-only, they were able to create more sustainable revenue streams.
Many of these organizations did not turn over losses into profits immediately. These digital transformations took decades, however they were practical pivots of business operations. These shifts to adapt to digital change is vital to business survival, laying the foundation for sustainable business growth in the future.
Companies That Survived the Great Recession
The most successful companies of the 20th century were the ones that were able to withstand the economic downturn and thrive despite the challenges they faced. Many of today’s biggest corporations were established during the worst economic downturns and have since conquered these difficulties to become a renowned brand name. For example, 3M, a chemical manufacturing company, survived the Great Recession of 2008 and grew exponentially to become one of the world’s largest companies, producing over 60,000 different products under its various brands. Currently, 3M ranks 24th on Fortune’s list of the World’s Most Admired Companies 2021.
General Motors, formed in 1907 after the Panic of 1907, was an early example of a recession-proof business.In the years leading up to the Great Recession, General Motors nearly sank due to financial problems but was able to secure a government bailout. Today, the company is thriving in three markets. Its strategy is to focus on profitability and efficiency. By cutting costs and trimming non-productive parts of the business, it has become more profitable than it was in the previous decade. Moreover, the company’s forward-thinking corporate culture has allowed it to weather future crises.
Strategies to Protect Margins in a Recession
The first step in protecting margins during a recession is to reassess pricing and portfolio management. Companies often fail to account for the cost of volume when determining prices. In a recession, recovering costs through price increases is not sustainable. In addition, excessive pricing may harm the customer relationship and tarnish a brand. Alternatively, price cuts that don’t reflect cost reductions may result in competitive counterattacks and erode profitability.
Recessions can disrupt the supply chain. In a recession, businesses may face more supply chain constraints, geopolitical tensions, or a global pandemic. Meanwhile, inflation may persist during a recession, leading to the first stagflation environment since the 1970s.
Stagflation: A period of inflation with high unemployment rates and slow growth.
Companies should prepare for a deteriorating economic environment by adopting a range of effective strategies:
- Digital transformation to enhance the customer experience
- Consolidation of all digital assets across platforms
- Integrated marketing campaigns that provide multiple “touches” to the target audience
- Provide information, educational or informational value to the target market
- Build referral and loyalty programs
- Maximizing and consolidating talent—particularly in IT fields
- Meet the employee needs (i.e. Employee Assistance Programs, intangible perks, etc.)
- Recession-proof your business through preparation
Cloud-Based Services Are Easy to Deploy
While the traditional IT infrastructure is expensive and difficult to deploy, cloud-based solutions are inexpensive and relatively simpler to deploy., Cloud-based solutions can boost your productivity and improve your organization’s performance. The scalability and flexibility of cloud-based solutions make them ideal for any business and can be a smart choice for companies in recession.
Moreover, cloud-based solutions can be quickly deployed, which is especially useful in times of lockdown. Cloud solutions are usually hosted by a vendor and can be used on multiple platforms. Since cloud services are hosted off-site, you don’t have to worry about on-site infrastructure and equipment. These benefits make cloud-based solutions an excellent choice for companies struggling to stay afloat during the recession and digital transformation.
Strategies to Engage Customers in a Downturn
In a downturn, existing customers are invaluable. Even if sales have decreased, ignoring these customers can be costly. As a result, keeping up with your customer relations is essential. Even if your sales are slow now, they won’t remain that way forever. You must focus on nurturing and engaging your existing customers to get ahead in this challenging market. The following are some strategies to engage customers during a downturn.
Focus on personalized customer experiences. Customers appreciate businesses that recognize them and understand their needs. By collecting data about customers, you can deliver customized communications and services. Follow-up with existing customers after purchases can help create a deeper bond between the two of you and help keep them coming back. These strategies can help your business get through a recession and succeed in the long run. However, remember that these strategies will only work if your customer base is happy and loyal.
Delivering Quality Customer Experiences
Quality customer experiences are vital to a business’ survival in 2022. Modern consumers expect immediate, quality digital products/services at their fingertips. Many businesses that hope to remain competitive will require digital transformation to adjust to the changes in technology. You need talented IT staff who can quickly and efficiently implement solutions to drive technological change within your organization.
For your Staff Augmentation needs, MALTO Group has helped numerous organizations find the right personnel who can positively impact digital customer experiences with IT-specific solutions. We have established an extensive network of qualified professionals over 20 years, providing Staff Augmentation and Executive Leadership Coaching to help leaders to drive growth.