Recessions are a time to rethink your strategies

Recessions are cyclical – they are as predictable as the seasons, the only difference being that the cycles vary in timeline, duration and severity. 

The shape a particular recession takes will have different impacts on an economy depending on these factors. It could be a "V" – a sharp, fast and deep decline from which the economy comes back to growth relatively quickly – a "U", or even a "bathtub" – a slower decline, and the recession lasts over a longer period before it gradually runs out of steam. 

For many years, economies globally – not just in New Zealand – were strong. Low inflation and historically low interest rates coupled with surging house prices and a growing economy led to a long period of growth in most major countries. NZ followed that trend.

But the world then experienced a perfect storm: a global pandemic, when it didn’t slide into recession, it simply stopped. 

When it restarted, global supply-chain issues and surging consumer demand led to high inflation, which has been sustained. This, combined with a damaging war in Ukraine, has tipped much of the western world into economic chaos.

In NZ, the economy only recently slipped into recession, but it feels as if we have been in the grip of a severe slowdown for some time. Plunging property prices, increased bank and mortgage rates and declining consumer confidence and purchasing behaviour have knocked many Kiwi businesses.

What’s the best strategy and approach in times like this?

Here are a few guidelines – not exhaustive – on how to steer a business through a recession.

Strategy

Now is the time to take a deep look at your business strategy. Where do you want to be in 2026 and how will you get there over the next three years? The WHY, WHAT, and HOW. 

This is not about short-term tactics but about your longer-term vision and goals. 

In the global financial crisis (GFC) of 2008-09, many businesses closed their doors and stood still, but many also emerged with a new model. They were the winners. 

For example, Groupon identified a strategy around vouchers, giving cash-strapped consumers the opportunity to save money on simple day-to-day things like eating out, and going to the supermarket. This long-term vision led to a multibillion-dollar global business.  

It is widely accepted that business leaders and executive teams who focus on looking forward, preparing, and investing for the future come out of a downturn running. They grow fast and grab a leadership position, in contrast to their competitors, who stagger out. 

Where will your business sit in the next 12 to 18 months?

Opportunity

Based on the Groupon analogy, now is a great time to look hard at where the opportunities lie. It may be a perfect time to pivot some part of your business. 

During the long months of covid lockdown, it was interesting to see the number of established enterprises in Europe and the US that quickly transformed their business models to adapt to the new world they found themselves in – not just how they operated, but also how they applied their skills in new ways – for example, moving from a product business to providing "added value" services, and embracing new sales channels.  

New businesses and emerging trends come out of recessions. Take the explosion of dotcoms after the GFC – startups that are now giants and global leaders. Airbnb and Uber, too, have been game-changers. And today, we have the breakthrough of artificial intelligence. 

Look at your business model and see if you can positively pivot some aspect into a new market – new customers, new offers and even new locations. It may be easier than you imagine.

Pricing

Look at your pricing structure. It’s not just a question of raising prices in a reaction to inflation. Look at where you make the highest margins and see if you can tweak these while leaving other prices untouched. 

Increasing your prices may have an adverse effect on the volume of business you do; could you actually cut prices below those of your competitors to gain market share? Or adopt a blended approach, depending on your different audiences and their specific drivers?

'Change is the new normal'

We all find change difficult, but now is the time to look at how to do things differently or to do different things. 

Try to look at your business from a fresh perspective; what’s working well and what could be changed? 

The mantra "change is the new normal" applies to every industry and every business. Change is here to stay. It is not a choice but a necessity for long-term survival and growth. How will your business embrace change? 

In the coming weeks, I will be sharing my experience across different dimensions of change.