Emerging Leaner, Stronger, Fitter from the Recession

Hamish McRae considers how businesses are responding to the challenges of recession in his Economics Life piece in the Independent this morning. Drawing on a new report from management consultants Arthur D Little he considers some of the strategies that businesses are adopting given the special nature of this downturn. Improving hygiene, fitness and building muscle ahead of the recovery figure prominently and there is a fascinating graphic illustrating some of the priorities of firms at this unusual time.

“Businesses that do survive the present harsh climate will emerge in much better shape. All downturns speed up the process of structural change in the sense that things that were going to happen anyway happen much faster that they would have done. But the speed of this one has been so extreme that the world is cramming a decade of such change into a year or 18 months. As a result a lot of firms that still appear weak right now may emerge in rather good shape when demand returns.”

Improving hygiene: Actions to cope short-term with the implosion of confidence and collapse of demand e.g. rationalising operations and cutting overhead costs, turning fixed costs into variable costs: 80-90 per cent of business respondents are giving these actions very high or high priority.

Fitness: Keeping talent on board is a very high or high priority for 82 per cent of respondents. Maintaining R&D and innovation expenditures is a very high or high priority for 67 per cent of respondents.

Muscle Building: preparing for the world to come beyond the downturn, for example building stronger relationships with regulators or a high priority to preparing for the low-carbon economy

Arthur D Little Prism magazine