Secrets of success in a recession

Dec 21 2009 by Brian Amble Print This Article

The world may still be mired in recession, but that's not to say that the crisis is affecting everybody in the same way. Although most companies have seen their growth and profitability stagnate, a new European survey has found that around one in 10 are bucking the trend and succeeding.

A new survey by ACE (Allied Consultants Europe), a strategic alliance of European management consulting firms, has found that while the economic crisis has put paid to growth for more than eight out of 10 companies, the same is not true for a small number of top performers.

The survey involved almost 600 companies in all sectors across nine European countries, around seven out of 10 of which are SMEs employing fewer than 500 people. Approximately 15 per cent of the companies are leaders in their industries; almost as many consider themselves as niche players; and more than half are amongst the top five market leaders.

Eight out of 10 of the respondents felt that their industry is suffering from the economic crisis with the remainder less, or not at all, exposed to the economic turmoil. And around six out of 10 feel they are just as much, if not even more, affected by the actual downturn than their competitors.

As a result, fewer companies feel they are in a position where they can outperform their competitors than just a few years ago. Two years ago, one in five of the companies achieved healthy growth Ė in fact, "significantly above industry average". But only half this figure expect this to happen in the coming two years.

So what is it that marks out this top 10 per cent? What are they doing that is helping them to achieve above-average market results?

The message that emerges loud and clear from the research is that one thing they're not doing is relying on cutting jobs and slashing costs. Instead, they are continuing to focus, invest and innovate in three areas: strategy, marketing and sales.

In terms of strategy, not only do top performing companies have more effective processes and planning tools, but they are four times more likely to have fast and flexible strategic processes than poor performers.

Critically, top performers are better at engaging their workforce by getting the buy-in and commitment of staff in change initiatives, and therefore better able to align operations to company strategy. They are also better at developing and employing new people capabilities.

Increasing customer intimacy and innovation are top strategic priorities for the majority of top performers Ė a clear differentiator from weaker players who tend to focus on operational excellence and cost advantage instead.

Another area that top performers continue to invest in is innovation. Far from cutting their innovation efforts, more than eight out of 10 of top performing companies are sticking to or increasing its pace, with a clear focus on developing unique or evolutionary products.

They are also concentrating on marketing to specific target groups and one-to-one communication and focusing less on the mass market as well as developing new pricing methods.

Finally, the report says, top performers especially are leading the way in managing their sales force more efficiently and increasingly focusing incentives on customer satisfaction, not just short-term bottom-line numbers.

Martin Binks, Director of the Institute for Enterprise and Innovation at Nottingham University Business School, said that tough times always had their share of winners.

"Recessions do not bring misery and market downturns for all businesses. They also create opportunities of all kinds for those most alert and best placed to realise these. Business failures may represent new market possibilities for survivors. Industry sectors vary in their vulnerability to falling demand. Perhaps most important, recessions force change, and those better prepared to manage change will prosper, particularly in recovery."