Learn from the success stories from the Great Recession of 2008.
"Bad companies are destroyed by crisis, Good companies survive them Great companies are improved by them" –Andy Grove, CEO of Intel in 1994
There is no debating it; the economy is in crisis. The impacts of COVID-19 are everywhere. The only real debate is will the recovery be V-shaped or U-shaped.
With the reality of the economic crisis at hand, perhaps it is time to look back and learn from those "great" companies that improved during our last crisis, specifically the Great Recession of 2008.
Who are these great companies? They are the less than 2% of middle-market companies who were able to double their revenue coming out of the Great Recession from 2009 through 2012. These great companies are "Growers."
As you start to plan your path for the post-COVID-19 recovery, what can you learn from them to help prepare your company to have similar results?
The Growers from the 2008 Recession
In "Pathways to Growth: Game-Changing Performance Strategies for Middle Market Companies," (http://tiny.cc/pathwaystogrowth) the National Center for the Middle Market found that less than 1% of companies that grew from 2006 to 2008 were able to come out of the Great Recession strong and double their revenues from 2009 through 2011. They call these companies Sustained Growers. Sustained Growers grow incrementally in most years and are most likely to survive and thrive.
Similarly, less than 1% of companies that struggled from 2006 to 2008 were able to double their revenue from 2009 through 2011. They call these Breakout Growers who found rapid expansion after the trigger event.
Both types of Growers succeeded by "creating infrastructures and culture to keep them strong through the inevitable bumps on the road ahead."
Their research with CEOs of middle-market companies found that these Growers outperformed the Non-growers on eight well-established dimensions of Management: Talent, Innovation, Corporate Vision, Investment Management, Market Expansion, Product & Market, Internal Processes and Partnerships.
They also found that the Sustained Growers placed more importance on five of those areas: Talent, Innovation, Corporate Vision, Market Expansion, and Internal Processes.
So, what does this mean to you? Where should you start?
I would suggest you start with execution across all facets, as across the board the Growers outperformed the Non-growers.
Then, I would suggest you take an in-depth look at the areas where the Sustained Growers placed more importance than the Non-growers.
Execution of Your Vision
When asked about factors that impacted their success, Growers spoke of the "fulfillment - or execution - of their vision as opposed to external factors that either hindered or buoyed performance." Non-growers focused on external challenges (losing a major customer or changes in the needs of the market) and organizational challenges.
With a strong and well-aligned vision, the company is able up to execute, and that is what Growers did. They excelled and outperformed Non-growers on all eight dimensions of Management. Having a strong vision and understanding of your core strategy is extremely important, but even more so during a crisis.
Being able to have the entire company lined up and executing together towards a shared vision is a powerful thing.
What should you do? Three yes-no questions can help you find out.
Do you have a well-defined core strategy, vision, and purpose that leads your organization?
Do you utilize an entrepreneurial operating system (like EOS or Scaling Up) to help drive execution across the organization?
Do you utilize an entrepreneurial strategy system (like Growth Strategy Labs' Effective Growth Strategy) to prioritize and focus your growth efforts?
If you said yes to all three of these, great news, you should be in good shape to be one of the growth success stories coming out of this crisis. If not, look at each question you said no to and identify the first thing you need to do to get your answer to a yes.
Now let's move on to those five areas where Sustained Growers placed more importance than Non-Growers.
Importance of Talent
In the report, Talent is the first dimension identified where Sustained Growers placed more importance than Non-Growers, and this is not a surprise. Across my conversations with CEOs at INC 5000 companies, investing in Talent has been a standard theme.
For any company to grow, it is necessary to attract, develop, and retain the employees who support and drive growth. For the Sustained Growers, the three Talent areas they performed best at were retaining talented employees, keeping the workforce engaged, and ensuring a skilled workforce.
How are you doing at valuing the importance of Talent and executing on the top areas?
Attracting, developing, and retaining talent is essential if you want sustainable growth.
Importance of Innovation
Innovation is a core foundational component of growth regardless of the time. In times of crisis and emerging from a crisis, Innovation can and should be an even more critical component of growth.
Research from Innovation Economist Christopher Freeman found that innovations "not only accelerate but bunch up during economic downturns only to be unleashed as the economy begins to recover."
Needs change and emerge. Customers take advantage of the opportunity to leverage new technologies and approaches. Are you ready?
In the CEO research, only two areas of Innovation rated at 50% or above, having a process for moving ideas to evaluation and decisions, and partnering with internal sources to bring ideas, identify opportunities and connect with technologies.
Concerning the first, research has shown that the process for making a decision more important than the analysis itself by a factor of six. Do you have a process for moving ideas to evaluation and decision?
The fuel for an Innovation process is ideas and opportunities. From my experience, most companies have 80% of what they need already internally. Do you partner with your team to get their ideas into your Innovation decision process?
Innovation is key for growth, especially in disruptive times. Find a way to get as many growth ideas into a process, define them at a high-level, score them objectively, and then decide on which ones it makes the most sense to focus. Building capabilities in innovation is critical to creating sustainable growth.
Importance of Corporate Vision
While much of this was covered earlier, it is always worth re-emphasizing the importance vision and culture have on a company's ability to grow.
For the Sustained Growers, there are many areas they are strong with respect to vision. Number one in the CEO research is a Management Focus on Growth. Management with a growth focus, who communicate their vision clearly, inspire action across the organization.
Building on this, they enable a strong culture with common core values, a culture that signals openness to ideas and acceptance of experimentation.
It is pretty simple. Have a vision of where you are going. Communicate that vision clearly through the organization to get your entire organization rowing the boat together. Build a culture around common values. Be open to ideas, test your ideas, learn, and adjust.
Do you have a focus on growth? Are you open to new ideas and experimentation? These are essential extensions of your vision and culture and a key to attaining sustainable growth.
Importance of Market Expansion
The reality is that every market has a limited number of potential customers. As you successfully grow your business in a market, at some point, as the market reaches saturation, growth slows. Being able to seamlessly transition growth from one market into an adjacent market is a critical skill to attain sustainable profitable growth.
For the Sustained Growers, they were very strong at adding headcount and expanding into new domestic markets and customer segments.
It is great to see the expansion to new domestic markets and customer segments showing well, as these are perhaps the two best paths to find new growth curves for lower middle-market businesses.
If you have succeeded in growing in a specific geographic area, find nearby areas that look and feel similar and expand. Through in-store and search traffic, you can discover from where, outside your local area, your current customers are coming. Perhaps that data can suggest where to expand.
If you have succeeded in growing in a specific customer segment, find other segments that look similar. Start by looking at your existing customers and playing the "one of these things is not like the other" game. Are there customers from outside your traditional segments? If so, talk with them, you may have found a new segment already in your customer base.
Growth is inevitably going to slow; identifying new growth curves in new domestic markets and customer segments is critical to sustaining growth.
How well do you do at identifying and starting new growth curves?
Importance of Internal Processes
Strength in Internal Processes may be the best proxy for your company's ability to execute consistently. Having a great vision, strong innovation capabilities and ideas for market expansion are not worth anything if you cannot translate them into action and execution.
The Sustained Growers had many areas where they were strong across all aspects of the business. These include agility in decision making, financial health (access to capital and new technology), increased sales and marketing capabilities, streamlining core processes, and strategic planning.
Increasing sales and marketing capabilities seems natural for a growing company, as does financial health.
The one that sticks out is agility in decision making. If you look across Innovation, Vision, and Internal Processes, you start seeing a clear growth method. Source new ideas from across the organization (Vision and Innovation). Have a system for quick decision making (Internal Process and Innovation). And have a willingness to test ideas and experiment (Vision).
What is your growth method? How do you source new growth ideas, evaluate them, and test your assumptions through experiments? This is a core process for attaining sustainable growth
The reality is that we have been through tough economic times before, and we will go through them again after COVID-19.
Being able to have your organization executing against your vision is critical to growth in regular times, and especially during a crisis. If you are not doing this well, there is no better time than now to start.
Get to work defining your core strategy, vision, and purpose, communicating it across the organization and inspire your people.
Start defining your organization's operating system. Read Traction or Scaling Up. Consider engaging with a coach or implementor to help you build your operating model to execute.
Decide to make growth strategy an ongoing part of your business through an ongoing strategy process and a system like Effective Growth Strategy.
Then look at the five areas the Sustained Growers placed more importance than the non-growers and ask yourself two questions for each:
Talent: How well do we do this today? What is the first thing we should do to improve this? Innovation: How well do we do this today? What is the first thing we should do to improve this?
Vision: How well do we do this today? What is the first thing we should do to improve this?
Market Expansion: How well do we do this today? What is the first thing we should do to improve this?
Internal Processes: How well do we do this today? What is the first thing we should do to improve this?
I would suggest that for many companies, being bad, good, or great in a crisis is as much about how they respond to the crisis, as it is how they were before the crisis.
You can do this. You can learn, grow, adapt, and change. You can get ahead of the curve and emerge from this crisis stronger. ------- If you liked this post, sign-up to see more!