At its core, business mirrors evolution—it is survival of the fittest. In an economy that is uncertain and unpredictable, it is more important than ever to ensure your company can survive.
This is especially true today, given the recent Brexit vote and its potential impact on the global economy.
After the vote, financial markets around the world immediately nosedived. The British pound plunged against the dollar. And business investment has shriveled due to the heightened uncertainty about the economic implications of Brexit.
The Brexit vote came at a particularly bad time for the global economy, which was already reeling from a slump in China and rout in the oil markets. The U.S. oil and gas industry has shed more than 100,000 jobs since oil prices began tumbling in late 2014, according to data compiled by Bloomberg. Worldwide, more than 265,000 oil and gas jobs have been lost, according to Airswift, a workforce solutions provider for the energy industry.
Not only is this a predicament for those now unemployed—it is a problem for all of us. Oil companies are in a weaker position to repay debt they took on after the Great Recession, which is putting an even greater strain on our financial institutions and on Wall Street.
A good thing gone bad
But that’s the nature of business: one day brings feast while the next brings famine. That’s why all companies must learn to read the signals to know when it’s time to eat and when it’s time to go on a diet. In fact, to withstand market fluctuations, businesses must properly decipher those internal cues during times of abundance, so they are in a better position to weather the storm during times of distress. When the macroeconomic environment is strong, there are ways to mask bad business decisions. However, once things turn, those bad decisions are magnified.
Take the tech sector. While the oil industry was cutting a quarter million jobs, the tech sector added just as many. But the easy flow of venture money in Silicon Valley led to an epidemic of runaway valuations for so-called unicorns. These billion-dollar valuations were based on short-term opportunity not long-term fundamentals—leading to a swift rise, but just as rapid a fall.
This is where a modern enterprise resource planning (ERP) system might have helped—both for the companies and their investors. These systems offer a comprehensive way to identify and track growth opportunities in real time, so that businesses can respond to internal and external changes with confidence—and so they can act in the best interest of their customers, employees, and investors.
One of the best ways companies can insulate themselves from the downturns in the broader market is to put in place a flexible ERP system that allows the business leaders to make sound decisions based on deep and reliable insight into both financial and operational performance.
For example, the ability to tag financial items with non-financial business context can help map performance to individuals or particular projects or markets. Traditional ERP systems—usually limited to looking only at financials—might point to a single business unit as a poor performer, when deeper operational analysis might reveal other inefficiencies that mask an otherwise high-margin product. Or if indeed a tired product is to blame, leadership can more quickly close the corresponding business unit and reinvest the budget in ones with better all-around fundamentals.
A bad thing turned positive
During economic downturns, news of corporate layoffs is often splashed across the headlines. Take Intel, which recently announced its plans to terminate 12,000 employees, or more than 10 percent of its workforce. While this is bad news for Intel, it could be could be good news for other companies in the tech sector. When the economy is booming, it can be hard for high-growth companies to reach their full potential due to a lack of available candidates for all their openings. Layoffs at large enterprise companies can me a boon to smaller companies looking to expand.
Again, the right ERP solution can trace performance to employees and identify the areas to grow and the type of role a company should be looking to fill. This is why it’s important to monitor and analyze your business during the good times, so you are prepared to pounce when opportunities arise during lean times.
Large enterprises may have the luxury of riding out a rough patch, but if SMBs are not in a position to deliver on growth goals, they can get wiped out. A slowing economy doesn’t have to be a bad thing; sometimes it can help companies grow in a way that is just right for them. By looking at where the next dollar should be invested and understanding the facts behind the decision, smaller companies can deploy a more rigorous decision making process to get through tough economic times.
Data-informed decisions and long-term operational excellence
Right now I’m seeing CFOs with their heads down, completely overloaded with simple execution. Neither I nor my peers see that changing anytime soon. We’re all very concerned about what’s happening in the market on a day-to-day basis. Having access to more financial and operational data will ensure we can continue to grow our business in these volatile times.
Today I’m looking at my business differently than I did a few months ago when the macroeconomic environment was stronger. Agility is paramount, and data is our compass. History might tempt us to hold back as things slow, but I’m focused on initiatives that will allow us to outpace our competitors and grow faster than the market. Software helps me analyze the hunt in a way my naked eyes cannot. In today’s hyper-competitive business environment, you need every advantage to reach the top of the growth pyramid. After all, it’s better to eat than be eaten.
Author: Robert Reid
