Inevitably, after every recession the economy grows again. Research by Bain & Company, Harvard Business Review, Deloitte, and McKinsey shows that the best companies continue to grow their EBIT during a recession and also accelerate faster after it when compared to other companies (see Figure 1). Let’s take a look at what the winners do differently to accelerate their profitability during and after a recession.

Figure 1. “Winning companies accelerated profitability during and after the recession, while losers stalled” (Source: Bain & Company).

7 KEY ACTIONS TO ACCELERATE YOUR PROFITABILITY DURING AND AFTER A RECESSION

 We’ve integrated this research material to generate a clear picture of the 7 key actions you need to take for success.

 1. CREATE CLARITY OF DIRECTION AND ORGANISATIONAL ALIGNMENT

How do you want your company to look and run in three to five years from now? And in one year? What are the vital few strategic initiatives to focus on? Make sure your leadership team is committed and fully aligned.

2. UNDERSTAND YOUR STRATEGIC AND FINANCIAL POSITION

Mapping out your plans depends on your strategic and financial position

(see Figure 2).

Figure 2. Mapping out your plans requires an assessment of your company’s strategic and financial position (Source: Bain & Company).

3. FREE UP “CURRENCY”

This is not about blunt cost cutting; the focus is on aligning your spending with your vision and strategic initiatives. Zero-based Alignment / Budgeting is a good way to select and make lean  those activities that are fully aligned. The “currency” you free up can strengthen your balance sheet and support your investment agenda.

4. RETAIN YOUR CUSTOMERS

 Retaining your customers is so much cheaper than acquiring new ones. The margin impact is significant. Explore ways to help your customers through the downturn and strengthen your relation with them. And be sure to focus on the right customers.

 5. PLAN FOR VARIOUS SCENARIOS

 Nobody knows when and how a downturn will unfold and when the economy will start to grow again. The winners have developed various scenarios, and they know how they should act in each scenario. This allows them to move quickly and decisively.

6. ACT QUICKLY AND DECISIVELY

Winning companies act quickly and decisively, both in the downturn and particularly in the early upturn when the opportunities start to arise. They have already created the “currency” to invest.

7. EMBRACE TECHNOLOGY

Not all companies have been equally aggressive in adopting new technologies. There are many opportunities here for improving efficiency or generating more value and thereby gaining a competitive advantage. The current COVID19 pandemic could well be an important catalyst.

 

This means that you have to be prepared for an economic downturn to come out as one of the winners. It should be noted that in these key actions, there is, in fact, no difference between being prepared for an economic downturn and running a business for continuous and maximum success. This picture is consistent with one that emerges from one of our other articles “How to create value in Industrials?”.

 

CHALLENGE

Leading manufacturer of customised precision parts

  • Complex production process comprising multiple process steps across various pieces of equipment.
  • Product quality is made by the first process step, but can only be determined at the last.
  • This feedback cycle (i.e., the production cycle) needs to be quicker to prevent production losses.

Reduce the production time by 50% from 4 to 2 weeks.

The company is highly skilled in Six Sigma, which had already helped them to reduce the cycle time from 11 to 4 weeks. However, the traditional Six Sigma suite of tools could not help them any further.

APPROACH

  • The first action was to analyse the production with process mining: Huge variations in takt times between workstations were uncovered.
  • Workstations were recombined to rebalance the takt times: A consequence was that the heartbeat of the subcontractor’s process had to be synchronised.
  • Further, the available time for preventive maintenance increased.

CHALLENGE

Global chemicals company

  • Supplies products to a wide range of industries: raw materials, additives and process aids.
  • The various global operations coordinated their own Order-to-Cash efforts, which led to processes looking very different.

Create an overview of the all the Order-to-Cash processes:

  • Map the different process variants.
  • Identify the root causes for difference in lead time between different processes.

APPROACH

  • The actual Order-to-Cash processes from each of the regions were visualised with process mining. This included all the variants of each of the processes. The event logs from the ERP systems were used.
  • From various viewpoints (cycle time, performance, organisation) the processes were analysed:
    • For the various bottlenecks and rework loops, root causes were identified.
    • In a next step the best practices were used to improve each of the processes.

CHALLENGE

The handling of received invoices at a manufacturer of metal products was a paper-intensive task that required a significant amount of worktime among fulltime employees each month. Human error happened and were in some cases  costly. Further, there was some concern about fraud. Additionally, slow processing of these invoices caused several delayed payments and resulted in expensive fines. While the processes involved are largely rule-based, invoices sent by various companies often differ in their format. As a result, in order to automate their processing, the company needed a solution for reading and utilising unstructured information.

SOLUTION

With a combination of patented visual-recognition technology and optical character recognition (OCR), our robots scan, digitise, and validate key data from invoices – and then automatically upload it to the invoicing platform. This way, finance and accounting departments were able to offload this repetitive task from full-time employees to software robots while expediting the handling of this paperwork.