A series of economic, financial and technological shocks are currently battering the global economy, creating waves of uncertainty, fear and disruption. The price of crude oil (WTI) has dropped 60 per cent in the last two years to about $45 (U.S.) per barrel; real GDP in Canada decreased 0.1 per cent in Q1 of 2015, and we may now be in a recession, while China inflamed the currency wars a few weeks ago when it devalued the yuan, further accelerating the flight of capital to the U.S. dollar. The volatility of major equity markets has increased significantly recently as the Dow Jones Index initially dropped 1,000 points on Aug. 24, only to bounce back and end the week higher than before. From a technology perspective, innovation, driven largely by information, is causing significant disruption to existing industries (as I pointed out in my May 2015 article in The Globe and Mail).
While business cycles are a normal part of life (there have been 22 recessions in the U.S. since 1900), many businesses are woefully unprepared for these shocks and will pay the ultimate price in the months and years ahead. As Milton Friedman articulated, they will become victims to "the tyranny of the status quo" by thinking it was safer to stay the course, rather than adapt.
People who follow my blog will know that I am a strong proponent of adaptation in business while concentrating on the three pillars of people, products and processes.
During these uncertain times, here is what you need to remember to thrive:
People: Your employees are likely feeling a strong sense of fear and uncertainty now, so channel your inner leader and stay fearless. Control your emotions by focusing on what you want to achieve, while communicating the need for change and adaptation. Then, visibly demonstrate that you have the courage, strategy and perseverance to lead them, and the company, through tough times.
Products: Use this period of uncertainty to expand your market presence into new areas, while your competitors may be pulling back. Cut back on non-core (i.e. non-customer-focused) expenses, so you can redeploy your capital to sales, marketing and new product development. Follow Warren Buffet's maxim, "I get fearful when others get greedy, and greedy when others are fearful."
Processes: Good systems are the backbone of any great company. Keep them strong and adaptable by learning how to: identify, select, build, iterate, sustain and imbed. Execute immediately. Consider adopting systems based on lean thinking principles which enable low-cost, innovative and fast ways to deliver value to your customers.
This period of turbulence will likely get worse before it gets better. However, great fortunes are created by the bold during difficult times – use the next few months to adapt fast and shockproof your business, so you can ultimately expand and dominate your sector.
Eamonn Percy is the President of The Percy Group Capital + Business Advisers, a business performance improvement firm helping leaders overcome obstacles to sales, margin and cash flow growth, through executive coaching and professional education. He is a regular speaker and columnist on the topics of leadership, innovation and entrepreneurship. Subscribe to his free weekly newsletter, Growth by Design.
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