Cheer Up - It's A Downturn

My brother is a serial pessimist. He'll look out of the window on a bright summer's day, with the sun shining, not a cloud in the sky and say: 'It's going to rain soon, better stay in today."

Granted, like me, he's English. We have a certain melancholy about us that's baked into our DNA – the North Atlantic weather systems ensure a rain shower is never more than a few hours away. Australians, on the other hand, are quite different. British comedian Bill Bailey summarised the difference between Poms and Aussies thus. When an Australian is asked - how are you doing? Back comes an enthusiastic: 'Awesome'. Ask an English person the same question and the more common response is: 'Not too bad, all things considered.'

This cultural dichotomy plays out in business too, when it comes to dealing with economic downturns, but transcends cultural boundaries to exist more in the heads of those facing the impending crisis – wherever they live. We're either eternal optimists or pessimists. But both can benefit from a bit of self-reflection and planning to ease their concerns.

There's daily coverage on the news platforms telling us we're in an economic downturn and to expect the worst. And there's been a blizzard of papers and free advice offered by the consulting community. Yet, a quick Google search on 'economic downturn advice' returns a mere 25 million suggestions here in Australia, with bizarrely Queensland Governments' advice taking the top slot. Well done guys - awesome SEO performance!

Nestling on the third page of this search is an HBR article that really provides some remarkably simple advice. Written in 2019 – before the pandemic, they set out the criteria for companies that survive and thrive in recessions. Their research looked at a broad range of enterprises across various industries. The one thing they had in common when it came to continued success in a downturn was – preparation. They'd taken time to work through scenarios beforehand to determine the best course of action to ensure they didn't suffer from the 'rabbit caught in headlights' response when things got tricky.

More recently, PwC has advised enterprises to consider getting the simple things right rather than embarking on wholesale change: how will your customers behave; how will competitors behave; what do you need to do well to minimise the downturn's impact on your business? First, understand the impact – then dissect your business to work out what changes are needed to tune the operation to fit the circumstances. They end their advice by reminding us that it's the talent in the organisation that has the capacity to turn every challenge into an opportunity. Invest in training and development, and you're giving yourself a competitive advantage and a better chance of survival.

And for those wanting more hands-on help to understand when they need to act and how there are tools and frameworks they can apply to help them. Sydney-based firm Kinetic Consulting has defined five dimensions to determine the severity of a downturn as it relates to your organisation. Then they bolt on their own Business Downturn Calculator? that calibrates the severity of a downturn on your enterprise and then categorises four levels of response based on your scores. For example, the lowest range of scores -5 or 6- suggests you have 3 months to make a few minor tactical changes/ Whereas a score in the highest range -16 to 20 – recommends a 'pivot' within 3 weeks. So much like earthquake or hurricane warnings, responses map to severity.

Kinetic Consulting's CEO Joe Tawfik observes, 'Cashflow rules supreme in any market downturn.' He argues that preserving capital and making sure the operation remains a going concern is paramount. Concentrating on both revenue and costs builds resilience.

Paul Scott is General Manager of Evergreen Digital, a provider of learning management solutions for Microsoft users.