Is Your Business Recession-Ready?

By: Jeff Rubingh, Director of Digital Experience & Innovation, and Chris Upham, National Director of Delivery Leadership

America can't seem to decide if it's in a recession. The two consecutive quarters of negative economic growth indicate we're already in one, based on the definition established by the National Bureau of Economic Research. But a strong labor market and steady consumer spending, despite inflation hitting a 40-year high, are causing economists to hesitate.

"To be clear, we are forecasting recession, but we do not have it starting until early next year," wrote Wells Fargo Securities senior economist Tim Quilan and economist Shannon Seery in a note following the release of the Q2 GDP figures.

In a report from CNN, 72% of economists polled by the National Association of Business Economics said they expect the next U.S. recession to begin by the middle of 2023. Still, academic experts and market participants continue to debate if a recession is unlikely or inevitable. As a professor of social and economic history at the Humboldt University of Berlin told CNBC, "We live in a period of multiple shocks – from Covid 19 over energy prices to political deglobalization – which make predictions extremely difficult."

Evidently, although the media and government have yet to reach a consensus on whether a recession lies ahead, there is significant concern and anticipation. While we cannot know how mild or hard a recession could be, business leaders can take proactive measures now to ensure their company is recession-resistant.

The Impact of Customer Experience In Challenging Times

Though at first glance, customer experience may seem like an easy place to start cutting costs, the benefits of a strong customer experience (CX) strategy can't be disregarded. A study of stock performance during the 2007-2009 U.S. recession revealed that CX leaders far outperformed other companies. When CX laggards lost significant value during the 2008 financial crisis (-57.0%) and the S&P 500 also took a hit (-16.0%), CX leaders actually made gains (6.1%).

Though customer experience has evolved significantly since that recession with the widespread adoption of mobile use and applications, the returns on investment in CX have continued to remain strong. A study of consumers and stock performance during the peak period of COVID's impact on the economy (2019-2021) found that companies with highly rated customer experiences drove greater shareholder value than their S&P index industry peers.

The study also found that companies with top-rated customer experiences saw their stock performance increase 45% between 2019 and 2022, while the companies with poor customer experience ratings declined 21% in the same time period.

Invest in your CX Strategy

Companies that invested in improving their CX reported increased customer loyalty (92%) and an uplift in revenue (84%) as a direct result. A recent study revealed that 58% of customers are actually willing to pay more for a product or service if they know they will receive great customer service. An investment in customer experience can be lucrative for your brand.

On the other hand, a poor CX strategy can be detrimental to your business - one in three customers say they will walk away from a brand they love after just one bad experience.

Every interaction that a customer has is an opportunity to excite them and build loyalty or lose them forever. During a recession, attracting and retaining customers is more vital than ever for your business to succeed. A high-quality customer experience makes buying funnels more efficient, and especially when the economy is unstable, you should aim to turn each of your business's visitors into a buyer.

Everything from application functionality to analytical insights that add value and personalization to customer interactions is an opportunity to improve CX. At all times, but especially in times of U.S. economic crisis, a strong customer experience strategy pays for itself.

Build an Agile Workforce

In challenging times, businesses need to be able to adapt to changes swiftly. Harvard Business Review reported that the COVID-19 pandemic proved just how vital Agile is to stay afloat during challenging times. Whether adapting to a geographically scattered workforce during a global pandemic, coping with unpredictable supply chains as a result of the Ukraine war, or reworking business processes to increase efficiency during a recession, enterprise agility is key to ensuring your organization's resilience.

Adopting Agile enables your organization to manage changing priorities, improve delivery predictability, increase employee and customer satisfaction, swiftly react to changes, and deliver with quality and reliability - all of which are key to success. By undergoing Agile transformation now, your organization will be prepared when a recession hits. By that time, you'll have embraced Agile best practices and started to realize the benefits.

Cut Operating Costs Via Automation

Getting ahead of the looming economic downturn is invaluable, and now is the best time to prioritize projects that will help cut costs down the road. The Institute of Robotic Process Automation (IRPA) estimates that by adopting automation, companies can reduce operating costs by 25-50%.

Investing in automation can not only help your organization cut costs before a recession, but also improve overall efficiency and quality. By automating low-value or time-intensive business processes, you can reduce errors while allowing your teams to shift their time to more impactful work, ultimately delivering greater value for consumers.

By adopting automation, companies can reduce operating costs by 25-50%.

Finding Balance - Avoiding Burnout and Layoffs

Now is the time to proactively plan for what your organization is actually trying to accomplish. However, in undergoing these changes, you want to protect your workers. When driving the implementation of the changes and investments listed above, placing the responsibility entirely on your employees can cause them to overwork themselves and ultimately lead to burnout. Employee stress is already difficult to mitigate during a recession - leaders should avoid exacerbating it beforehand.

However, businesses should also avoid overhiring now to prevent the need for mass layoffs down the line. Instead, companies may find it wise to seek support from an external team.

AIM Consulting has deep expertise in all areas of technology that organizations need to leverage to be successful, including enterprise Agility, customer experience strategy, and digital process automation. We have the capabilities to resolve your organization's challenges and achieve your most ambitious technology initiatives.

Take the steps to maximize your efficiency and quality now so your business can be resilient if and when a recession hits.

About the Authors:

Jeff Rubingh is the Director of Digital Experience and Innovation at AIM Consulting Group. His 25+ years of experience in the technology industry, combined with his keen focus on emerging technologies, enable him to help clients "discover the future" and make it real before their competition does.

Chris Upham?is the National Director of Delivery Leadership at AIM Consulting Group. He is a technology leader with 20+ years of experience leading project teams and software development staff to deliver high-value results in support of strategic initiatives. Upham is known for his skills in restructuring organizations to exponentially improve efficiency.