How to win (going in and) coming out of the impending recessionNov 10, 2022
“You cannot overtake 15 cars in sunny weather, but you can when it’s raining.” (Ayrton Senna)
Recession may be the best time to grow your agency.
Like it or not the economy is about to look really nasty. For our clients. For their customers. And for many agencies. BUT… if we get it right we can win in this most difficult of times*.
So, how do we do that?
- Understand our options… How can we respond to the recession?
- Understand the consequences of those choices
- Understand the action required
- Do it
1) Understand our options
Option 1: Be Defensive - Wait and watch
This option involves being cautious, hunkering down, battening down the hatches as we attempt to survive the storms ahead. (Scenario planning, obsessive focus on efficiency, lots of spreadsheets and generally turning stuff off or down).
All this is done in the hope that a) we survive and b) people will still want to work with us in the calm after the storm. However, the research says this does not work (see later).
Option 2: Be 100% Attacking and Aggressive - the gambler’s choice
Go after more business… big time… invest heavily in sales and marketing… ignore the downside… This is high risk and not for the faint-hearted. The research says this does not work (see later).
Option 3: Be Attacking and Defensive - lean in and welcome the challenge
Take all the defensive moves, as in Option 1, but also lean into the storm and grab the opportunities. The research says this does work (see below).
2) The Consequences
Research from McKinsey, The Emerging Resilients shows the following:
- Option 1 defence-only postures tend to lead to average company performance
- Option 2 offence-only stances deliver a mix of occasional wins plus some catastrophic failures
- Option 3 attack and defence is the best option.
The best leaders and companies are ambidextrous.
They are prudent about managing the downside while aggressively pursuing the upside. This seems to be true in every previous recession.
3) The Action Required
What to do?
The current business environment requires that agency leaders get their act together in three critical areas:
You have big decisions to make so make them. But make them based on facts rather than opinion or guesswork (The old F-O-G Index of Facts, Opinion and Guesswork). Do the analysis and make potential scenario decisions.. Be rational, not emotional. Have these conversations ahead of the crisis.
What services and headcount will we cut if… sales are down… say:
Which clients are…
- High risk?
Get back to understanding the strategic environment:
- How good is your agency?
- What is going on in the market?
- What is going on in the industry?
- What is going on for clients and target clients?
- What are the political, economic, social, technological, legislative, and environmental (PESTLE) forces at play?
Your mindset, belief, confidence in yourself and ultimately your abilities, are a fundamental part of the resilience required.
Yes, you need to ask yourself loads of questions to make sense of the insights but at some point, you need to commit to a course of action (or a series of options).
- Do we believe in ourselves and our values?
- Have we done the heavy lifting, the research, to give us confidence in our mix of offensive and defensive actions?
- Have we fully considered the consequences of some of the offensive actions (eg M&A activity, change of value proposition)?
First, you flail, then you decide and then you act. Take massive action. Speed and decisiveness are the names of the game.
“Agile business units responded better than their non-agile units to the shocks associated with the COVID-19 pandemic by measures of customer satisfaction, employee engagement, or operational performance.” (McKinsey, 2022)
So, what do we mean by agile?
Agile organisations are designed to be fast, resilient, and adaptable (see An operating model for the next normal: Lessons from agile organisations in the crisis (McKinsey and Harvard Business Review Research)
Don’t be daft! Combine some clear defensive decisions with a willingness and enthusiasm to lean into the recession.
You clients need help. They need to understand what their options are and yet they are probably too close to the coal face to get the perspective you can offer.
There is an opportunity for agencies to help their clients to navigate the future. This may require being more consultative rather than delivering at a purely tactical level.
Get on the phone. Book in some lunches and coffees. Start talking to clients about how they are seeing the future. Have the tough conversations but also offer them the support and guidance that they are probably not getting elsewhere.
You and your agency need to understand that you need to be defensive and offensive (ambidextrous) and that you can prosper in these difficult times (Yes, it is a mindset thing!).
Clients need to understand that they also need to be defensive and offensive (ambidextrous) and that you can support them on that journey.
Onwards and upwards!
* Strategic courage in an age of volatility (McKinsey, 2022)