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Things that worked in the last recession (part one)

Strategic Planning Expert Robert Bradford

Strategic Planning Expert Robert Bradford

by: Robert Bradford, CEO, CSSP, Inc.

Thinking about the current recession, I couldn’t help but think back to recessions I’ve gone through in the past – and how clients succeeded (or didn’t) during those difficult times.

Several important concepts come to mind, especially about the importance of maintaining strategic discipline, but the first I’d like to point out is that your challenges will probably be driven by your strategy. Put another way – you will probably have challenges, but different strategies will lead to different problems during a recession.

If you are pursuing a specialty strategy, you are probably already seeing increased price pressure and declining volume. If you are pursuing a commodity strategy, you may be experiencing the same thing. The difference lies in how you are experiencing these pressures. With a good specialty strategy, you can give up margin and still have room for profit. With a good commodity strategy, you can give up volume and still keep your operation humming. If you have made the mistake of pursuing a “hybrid” strategy – a bit of specialty, and a bit of commodity – you are in for a world of hurt, because you probably don’t have enough margin cushion and you probably don’t have volume cushion, either.

Assuming you have been following the advice in Simplified Strategic Planning, you have a clear specialty or commodity strategy, though – and this means your adaptation to a recessionary environment should be simpler and more effective. If you are using the specialty strategy, you need to find a way to adapt your operation to a temporary decline in volume. If you are using the commodity strategy, you can maintain volume if you can manage past a temporary decline in your already thin margins. Obviously, this highlights yet another reason we tend to prefer specialty strategy – scaling a specialty company for lower volumes is much simpler than adapting a commodity company to even thinner margins.