Marina nervously tapped her fingers on her office desk. In front of her lay the performance reports of her company for the past quarter. The numbers looked good – exports had increased by an impressive 18%. But Marina knew that uncertainty lurked behind these encouraging data.
As the second generation at the helm of a family business with 75 employees and an annual revenue of 8 million euros, Marina felt the weight of responsibility. She remembered how her father had led the company through the 2008 recession. Back then, like many others, they had laid off many good workers and drastically cut inventory. That decision had cost them a slow recovery when the market began to stabilize.
“I must not repeat that mistake,” Marina thought, recalling lessons from the past. But how to act in a world where challenges are becoming increasingly complex? Fluctuations in demand were becoming more unpredictable, raw material prices were rising, and finding qualified workers was becoming increasingly difficult.
Marina knew she had to find a balance between caution and courage, between preserving the business and preparing for future growth. She picked up her tablet and nervously surfed the web, seeking any advice. “Maybe other entrepreneurs have similar experiences,” she thought, opening LinkedIn. Her eyes were drawn to an article titled “Recession 2008 vs. 2025: A Chess Game in Times of Recession: How to Smartly Lead a Business Through Uncertain Times”. Intrigued, she began to read…
Now, let’s return to reality. A couple of weekends ago, we were in countriside in the vineyard under the scorching sun of 32 degrees Celsius, picking grapes while the sound of a chainsaw preparing firewood for winter echoed in the background. This image perfectly captures the moment we’re in – we’re still reaping the fruits of economic growth, but we’re already preparing for the colder days ahead.
Export Growth – A Good Sign or a Warning Signal?
Recently published data from the State Bureau of Statistics shows a surprising 18% growth in Croatian exports in July compared to last year. At first glance, this is fantastic news. However, as Marina, the protagonist of the story at the beginning, knows well – behind these numbers lies a complex reality that we face daily.
I don’t want to be a prophet of doom, but truly, the time to prepare for a crisis is during the good years (or quarters). Want more data?
A Change in the Wind
The latest McKinsey research sheds additional light on this situation. According to their data, as many as 53% of business leaders expect a recession in the near future – an increase of an incredible 15% in just 3 months! These data force us to ask – are we ready for what’s coming?
In a recent LinkedIn poll, entrepreneurs shared their strategies for navigating the upcoming recession:
- 38% – Diversifying products/services and markets
- 28% – Investing in technology and automation
- 22% – Optimizing inventory and supply chain
- 12% – Reducing workforce and cutting costs
At first glance, these results show that most business leaders are taking a proactive approach. However, as someone who went through the 2008 recession, I can’t help but feel a slight concern. Back then, many, faced with recession, began drastically reducing inventory and laying off workers. Although this looked like a wise decision in the short term, in the long run, it led to problems and missed opportunities when the market began to recover. It only means that we should always be ready for success. After all, the sun always comes out after the rain.
When we talk about tactics, such as cutting inventory, the easiest inventory to “optimize” is what sells best. This can cost you time when switching form recession mode and catching the recovery train, as well as taking positions and markets after the crisis. Marina and other advocates of this tactic need to be particularly careful and wise.
What to Do Then?
Instead of seeing cost and inventory cutting as a game with an axe, we should approach it like a chess game. Every move should be well thought out, looking several steps ahead. Here are some strategies that can help:
- Smart optimization: Use data for more accurate demand forecasting. Marina should review her forecasting processes. What methods does she use and is she maximizing her data for demand prediction? Optimizing portfolio and inventory structure is key – which products do her customers really need?
- Investing in technology: Automation and digitization can reduce costs in the long run. Marina should identify bottlenecks in production. Can education and targeted investments in automation increase her company’s flexibility?
- Diversification: And not just suppliers, but also business and markets. This is especially important for small and medium-sized companies like Marina’s, which may depend on a few key clients or markets.
- Human resource management: At a time when many are thinking about layoffs, consider accelerating the process of introducing new employees. Can you offer more competitive conditions to ensure a stable team? Have you adapted the onboarding process for foreign workers already?
- Collaboration with suppliers: Improve relationships with key partners. Marina should consider shortening payment terms for her most important suppliers, thereby ensuring the stability of her supply chain.
What’s crucial to remember is that preparation for a crisis begins during the good years. If you’re just starting to think about this now, you’re not too late, but you need to act quickly and smartly.
There’s no universal solution, but I believe that with smart decisions and timely reactions, many companies, including Marina’s, can emerge stronger from this crisis. The key is to actively manage changes, remain flexible, and look long-term.
Several Moves Ahead
Remember, while amateur chess players might only see 1-2 moves ahead, the best chess grandmasters can predict 5, 10, 20 moves ahead, sometimes even more. They don’t just see further; they evaluate positions faster and more accurately, understanding the key elements of each scenario. In the business world, this translates to a delicate balance between caution and preparation for future growth.
Like a grandmaster in a complex position, you may not always be able to see 20 steps ahead in your business. Sometimes, the market complexity will limit your foresight. However, the key is to continually assess and reassess, adapting your strategy as new information comes to light.
Don’t be an amateur and let current uncertainty paralyze you into making only short-term, reactionary decisions – that’s like an amateur chess player thinking only one or two moves ahead. Instead, use this challenging time as an opportunity to develop your business. Reassess your processes, optimize operations, and position your company for future success.
Remember, even in the most complex business “positions”, there are always strategic moves to be made. Your goal should be to cultivate the ability to recognize key elements in your market, much like a chess grandmaster identifying crucial aspects of a position. This skill will allow you to make more informed decisions, preparing your business not just for survival, but for growth in the face of uncertainty.
P.S. If you find this article interesting, useful, or relevant to your colleagues, I would really appreciate if you could share or repost it. Thank you in advance!