The media, public markets, and even the U.S. Federal Reserve have created a tidal wave of uncertainty. Yet despite their “confidence”, prognosticators and market analysts can’t say much with confidence about its timing, severity, or relative impact across industries. Recession readiness should not be about “placing bets” on which way the market will turn and how it will impact your organization. Instead, the smart money lies in recognizing immediate efficiencies within the go-to-market system, allowing firms to easily (even if temporarily) adjust their value creation model to maintain, if not accelerate, growth through a recession.
Our experience shows a number of common actions when companies fear declining demand. While they are common, these actions most often end in regret for the growth setbacks that follow. And our recent polling of CEOs and their leadership teams indicates they are heading down this same path. Here we cover the four most common of those mistakes and what actions CEOs and their go-to-market leadership teams can take instead.
CEOs are seeing a shift in investor priorities, with more emphasis on earnings now and less on growth compared with a year ago. Managing earnings is more controllable than growth, leading CEOs to commit to the bottom line and prioritize cutting expenses.
Cost-management plans might be easy during uncertainty, but these plans typically lack clarity on how to maintain, much less accelerate, growth during a recession. Knowing where to redirect investment to drive near and longer-term growth.
Do be declarative about your value creation strategy across the leadership team and Board. For many businesses, this will mean shifting your value creation thesis, even if temporarily, to factor both top and bottom-line objectives through a downturn.
Those who drive execution against highly focused growth bets will remain on their front foot during times of uncertainty. SBI research shows that CEOs are slowly shifting their growth approach from more risky, innovative ones (i.e., committing to new products and markets) to more focused models (i.e., committing to narrow sets of proven, existing products and markets). In our estimation, this shift is happening too slowly.
While agility might feel like the safe approach, it often slows decision-making and obscures focus. In our one-on-one CEO interviews and SBI’s CEO Growth Forum meetings, we found those who committed to a focused growth plan through 2020’s market uncertainty far outpaced the growth of those who elected to adopt a more agile growth posture.
Do establish focus and clarity, driving relentless execution against your growth plan. Stay the course.
Only 30% of CEOs see demand accelerating into 2023, and just about as many see it slowing. In anticipation of slowing demand, go-to-market leadership typically looks to reduce expenses in marketing, sales enablement, and customer operations, believing those activities don’t have a quick enough impact on revenue. They also think the opportunity and actual costs of replacing sellers are too high.
Simply put, these actions fail to solve for commercial capacity and have a dramatically negative impact on sales productivity. And they can have serious consequences when demand accelerates, with cold and empty pipelines unable to quickly re-engage customers who are ready to buy. Which is the bigger risk: having enough sales capacity to address demand or getting that demand in the first place?
Do protect sufficient expenses to keep customers and prospects engaged, even with declining demand and cost-cutting measures. Successful go-to-market teams help and guide customers, at scale, through challenging times by:
There is always resistance to cutting sales reps in downturns. This sentiment is even stronger after two years of tight labor markets when teams have been clamoring for added headcount to continue to prop up growth. So, it makes sense that leadership feels opposed to reducing commercial headcount.
However, headcount isn’t always the best way to think about commercial capacity. It’s the most convenient but also the most expensive. In reality, headcount is often a crude and ultimately non-strategic way to think about sales capacity. Answer questions about how sellers are spending their time and if they are using it wisely relative to your growth strategy.
Do take a back-to-basics approach when making headcount decisions to accelerate commercial productivity. Growth leaders may ultimately be able to increase productive capacity through a re-org event. Make decisions with the right information.
Market conditions are certainly changing, but don’t lean into the hype from forecasters who have never run a business, let alone yours. You’ve been here before. Uncertainty is no stranger if you were the CEO of your company two years ago. Don’t make the four common mistakes; rather, continue along your growth journey and drive decisions, focus, and productivity that align with your value-creation strategy. Do this, and you will emerge as a frontrunner in your market when the volatility settles.
To download SBI's latest research, No Regret Strategies for Uncertain Times, click here.