Recessions are an economic reality. They are also difficult to predict. The question isn’t whether there will be another recession, it’s when the recession will hit. The truth is, nobody knows when the next recession will occur. You can listen to all the different experts, but until a recession happens, it’s all just speculation. With the current situation, it is essential that recession planning is a major 2020 activity. This preparation will help ensure your organization thrives in the next recession.
The Revenue Growth Maturity Model is a tool developed by SBI to help its clients identify the probability of making their number. The 5-level model provides stage-appropriate strategies to accelerate revenue growth. As your organization moves up the maturity model, the probability that you make the number increases. Companies that reach Level 5 accelerate revenue growth faster than their industry and their competitors.
Market-leading CEOs (defined by SBI as companies level 4+ on the Revenue Growth Maturity Model) treat recession planning much differently than their peers. These leaders have plans in place and the ability to quickly shift to execution when the next recession ultimately hits. While most companies focus on surviving a recession, market-leading CEOs view a recession as an opportunity to widen the gap and set themselves up for continued growth during recovery.
There are three Go-To-Market (GTM) strategic approaches that CEOs can leverage to grow revenue organically. But not all of these strategies are viable options during a recession.
- Market Expansion
- Market Share Gain
- New Market Entry
Market Expansion Drives Growth in Good Economic Times
The US GDP is expected to grow 2.1% in 2019. Most industries are growing, while some are significantly outpacing the market. During times of economic growth, CEOs position their organizations in growing spaces to maximize the return for their shareholders.
This strategy is not applicable during a recession, and CEOs need to have a secondary strategy in place to ensure that they are poised for growth during a recession.
Market Share Gain Is Key to Growth in Any Marketplace
Inside a sector, companies can increase market share through innovation, strengthening customer relationships, smart hiring practices, and acquiring competitors. An organization can increase market share in a growing, stagnant, or even declining marketspace.
In a growth economy, this is often the least likely strategy to be implemented, but in a recession, it is the most compelling. Leaders of organizations that are ‘Defined’ or above on the Revenue Growth Maturity Model can be successful in executing strategies that help grow market share.
New Market Entry Provides Growth Opportunity in Recession
New market entry is often considered the most complex and riskiest option. In a recession, expanding into a new market can be an effective way to leverage your core business for growth. This strategy is a viable option for market-leading organizations and creates the opportunity to develop a competitive advantage when compared to lower maturity competitors.
CEOs of ‘Managed’ and ‘Predictable’ organizations will be able to leverage this strategy in a recession where ‘Defined and ‘Implemented’ organizations will likely be unsuccessful. CEOs who successfully implement this strategy do significant research prior to the selection of a new market entry strategy. This level of research and understanding is foundational to justify the investment required to deploy new go to market capabilities.
There are five key areas that need to be addressed before deciding to enter a new market:
- Define the market – Consider customer demographics, location, and common needs of your target customers.
- Market analysis – Develop a deep knowledge of market growth rates, potential barriers to entry, forecasted demand, and competition.
- Prioritize and select markets – Markets should be prioritized based on strategic fit and your organization’s ability to serve them.
- Access internal capabilities – Take a hard look at your organization’s internal capabilities and access the best strategy to enter a new market (build, buy, partner).
- Define market entry strategy – Once the target markets have been identified, you will need to determine the level of investment required to reach the desired outcomes, whether that be organic investment or acquisition(s).
By understanding your company’s journey on the Revenue Growth Maturity Model, you can access how your organization currently ranks in terms of revenue growth capabilities, as well as chart your path to your ideal future state. This knowledge is priceless when it comes to recession planning.
A recession may be looming, but there’s still time to position your organization for success. Businesses that are proactive in managing their go to market strategy will be set for success, regardless of when the next storm comes. For more assistance with developing your 2020 recession plan, take the Revenue Growth Maturity Diagnostic, or come and visit me and my colleagues in The Studio.
How Can SBI Help?
SBI conducts in-depth market research and partners with business leaders to develop strategies that enhance performance and drive results. Through evidence-based agile methods, we create actionable procedures that, once embraced and adopted, make your business better. We tailor our benchmarking methods to each client, so they achieve increased revenue growth and lasting success.