Photo by Julita / Pixabay.
Where are we? It’s a question companies across the country are asking themselves these days, and certainly one we hear from our customers and clients.
In early 2020, the US economy began to show cracks. The work was tight. The yield curve that had inverted last summer began to reverse. The nation felt the effects of the trade war with China. And the inevitability of a recession ending the long US expansion has been hotly debated.
The Covid-19 pandemic then hit and caused a severe supply and demand shock from an economic point of view. After this initial shock, further disruptions came in the form of Delta and Omicron Covid variants and the Russian invasion of Ukraine. The results of these ongoing disruptions have included disrupted supply chains, product shortages, the highest number of vacancies on record and the highest inflation in 40 years.
After initial slowness in response to the threat of inflation, the Federal Reserve has been raising interest rates at an accelerated pace since March to curb price growth. However, returning to a more smoothly functioning economy will take time – and some pain.
Global reach, local impact
For individual companies, this complex combination of domestic and global events and forces means three things have happened: costs have increased, labor has become scarcer and more expensive, and the cost of capital has increased.
The resulting margin squeeze has confused and panicked many business owners and managers. When these three basic components—the components that drive business success—are out of whack, what do you do?
The answer is the sum of many actions, but it starts with taking a step back and realizing that at a high level this is actually business as usual.
The economy has always experienced ups and downs, booms and busts, recessions and prosperity. In every decade of the last century there have been major events and trends in which many companies have failed and others have prospered. And through all these times, companies that have made it have adhered to a few key principles.
First, staying close to your customers, your suppliers, and your employees is crucial. talk to them Be open and honest. Find out where they are struggling and what they need. It will probably be a little different than it was three years ago.
Instead of just promoting your product or service, connect with customers and build real relationships. If you start talking, keep it up.
Then find out your competitive advantage. Listening is the first step. Next, you take the information you learn and adapt it to your organization.
Can you address some of the needs you hear about from customers and prospects by adding real value to what you already offer? How can you adapt, be it through internal operations, management, partnership development or others?
This is how you determine and sharpen your competitive advantage – in your industry, in your area, with your competitors. It often means listening in ways you’ve never done before and devising ways to differentiate yourself through an unfamiliar lens.
That doesn’t mean that every company should undergo dramatic change. It means businesses need to take a fresh look at what their customers and potential customers need right now, and be open to changes they might never have thought of.
manage operations
Companies that do well in a volatile economy have a better chance of making it through. This is a time to re-evaluate, re-evaluate, and re-align strategy and tactics. Question processes and procedures, especially with regard to the customer needs you have identified.
Ask yourself: Are you looking at order sizes? Can you minimize shipping costs? Is it possible to make it easier or faster for customers and suppliers to do business with you? Is it time to optimize your delivery channel or narrow down your offering?
Remember that details are less important when things are going well. But now every detail counts.
Don’t overlook employee processes and relationships. What environment do you create for the employees? Regardless of the industry, companies with limited ability to attract and retain workers will suffer. Where can you increase your competitive advantage in hiring and retention?
Chuck McKay. Contributed photo.
Even out the noise
Things can only get worse before they get better. But they get better. Inflation will fall. The demand-supply balance is restored. In the meantime, business owners and managers can put their heads down and follow the best practices that separate good deals from bad deals.
There will always be riots and noise. It’s your decision whether you want to do it or not. You can turn down the volume and get to work, operating in a different economic environment than we’ve all been used to.
This allows you to see how your business survives and thrives. And you’ll put yourself in a much better position to deal with the next economic shift…because we all know it’s going to happen.
Chuck McKay is Vice President of Corporate Development at Mitsubishi HC Capital America, a Norwalk-based provider of customized financing solutions for a variety of industries including work vehicle/transportation, clean technology/mobility, manufacturing, construction, IT, human resources and healthcare.
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