The 4 questions executives should be asking about their organization's business resilience
Investing in innovation, rather than cutting IT, has been shown to boost business resilience during, and especially after, downturns.
With economic uncertainty seemingly a fact of business life these days, organizations are honing their financial resiliency practices to weather these uncertain times. By proactively preparing now, organizations can improve their ability to stay financially resilient during the months ahead.
One area of particular interest is smart technology investments, rather than the historic practice of cuts.
In previous recessions, many organizations deprioritized IT under the mistaken assumption that technology was simply a cost center. However, an organization’s success during a recession hinges on their ability to provide value to customers and quickly pivot based on customers’ needs and changing economic conditions. With on-premises technology, organizations struggle to process the amount of data necessary for personalized experiences or quickly innovate to solve new customer challenges. There’s also the expensive upfront capital investments inherent in a company owning its IT infrastructure.
In fact, one study by the Harvard Business Review found that organizations that invested in innovation, rather than cutting IT, came out of the late-2000s recession stronger than when the downturn started.
During a downturn, every financial move and decision is critical. By planning ahead now and taking advantage of opportunities with cloud technology, organizations can set themselves up for business resiliency going forward.
It’s a critical time for such investments, too, no matter the economic outcomes. Many organizations are already somewhere on their journey to cloud, though given the generally strong economy of the past decade-plus, they have not had to confront a traditional economic downturn in the ways their technology allows them to now. Furthermore, the pandemic, with its supply chain shortages and stock surges, has shown just how unpredictable the world has become.
So no matter what the next year holds, when it comes to building business resilience on the cloud, here are four questions leaders should be considering as they plan for the future.
Can you identify the right opportunities at the right time?
Customers’ buying patterns often change significantly during recessions. During the Great Recession of the late 2000s, consumers generally cut back on travel but made improvements in their outdoor spaces so they could enjoy staycations instead.
By creating processes, especially with the backing of data and AI services, organizations can identify recessionary opportunities. Powered with this knowledge, organizations can be prepared to take action quickly when market and business changes occur, as well as identifying new prospects both internally and externally.
Because of the challenges the public often faces during recessions, businesses that are able to quickly respond to consumers’ changing needs often gain loyal customers. By having access to real-time customer data, such as purchases, social media activity, and customer support data, companies can use analytics to get the insights needed to find new ways to provide value to their customers.
Do you understand your expenses and areas of unpredictability?
Business resilience during a recession requires knowing your expenses and identifying areas of unpredictability, so you can create as much certainty as possible. When leaders know what is currently happening, they can make the right business decisions both in preparation and when the unexpected happens. Organizations need a clear picture of their current projects and predicted costs to balance day-to-day needs with the cost-cutting that often happens during a downturn.
Do you know where you have a potentially high variance in your production costs or operating expenses? While planning for a recession, businesses should start by understanding their current expenses. Next, leaders should look for variables that can make either operating or production costs vary significantly. By collecting the right real-time data and using data analytics for business insights, leaders can quickly determine these areas of risk.
With cloud infrastructure, organizations can also use data to see areas for operational improvement in real-time and get insights on how to make changes that optimize costs. Data-driven decisions allow organizations to make the most impactful changes as part of their recession response to improve both operational efficiency and the employee and customer experience.
What happens if you incur a large, unanticipated bill?
Businesses that stay financially resilient during a recession are those that easily handle the unexpected. During a recession, financial surprises — such as human error or a large, unexpected influx of traffic — can create struggles when you may be least able to afford them. Rainy day funds are often a solution to unexpected expenses, though they can sometimes fall short of big expenses or the funds aren’t there due ongoing economic issues.
By using data analytics, organizations can evaluate their current areas of financial risk for such unexpected expenses. Leaders can then use data to determine areas of opportunity to either cut expenses or increase revenue to cover unexpected costs. To improve financial resiliency, businesses should prepare for all scenarios heading into a recession.
Can your technology respond to fast-moving recessions? Can it help spot opportunities, clarify costs, anticipate unforseen expenses, and forecast customer demand?
Can you forecast customer demand or your profit-and-loss outlook?
Because demand often ebbs and flows more frequently during downturns — just look at all the interruptions during COVID-19 — organizations need to accurately predict demand as never before, lest they risk having an excess or shortage of products, leading to overstuffed warehouses and waste or unhappy customers and shareholders. Demand can change quickly, especially in our one-push digital economy, which makes it important for organizations to have the processes and tools to see shifts in real-time.
By using data analytics on cloud infrastructure, businesses have the information and insights to make the best business decisions and correct financial risk calculations. Without knowing what to expect, organizations put themselves at a significant disadvantage to their competitors that have the ability to accurately forecast customer demand.
Investing in financial resilience
By all accounts, this economic moment presents an unusual and complicated environment for most organizations. Forecasts have been gloomy, but that’s also been the case for some time. Hiring continues to chug along, but then so is inflation in many areas. Political and environmental risks abound. Organizations are facing new and constant challenges in almost every corner and quarter.
Within those challenges lie opportunities.
Companies that continue their adoption of the cloud now will have the foundation needed to manage the ebbs and flows that are bound to come. Should a crisis come to pass, once it has passed, the organization will likely emerge even stronger — with the technology for continued success and innovation fully in place.