After shrinking in the first half of the year, the US economy reported a significant growth in Q3, and yet, a 2023 global recession is still in the cards. Prior to these results, the sentiment among big corporate CEOs in the US was almost unanimous: a recession is coming in the next 12 months.
Should a recession come, however, some leaders point out that businesses have an advantage on their side this time. An advantage built with sweat and tears during previous recessions, as well as the global-scale crisis that ensued from the COVID-19 pandemic. Resilience.
After two and a half years of tremendous uncertainty and disruption to nearly every aspect of our personal and professional lives, we learned to count our losses and adapt, to see the opportunities hidden in a crisis, and to reinvent ourselves. So, when it comes to business strategy during recession, tapping into the knowledge and skills we gained from recent crises is key.
“I’m expecting the fallout from COVID-19 to fundamentally change the way we lead our business over the next five years +, with almost as many asserting that the crisis will have a lasting impact on our customers’ needs and being flexible in every circumstance. But for sure the crisis will create significant new opportunities for growth from our business perspective. And for sure the ICT sector is on top of it since it is the main tool to diversify, transform and re-invent other businesses worldwide,” Fabiola Duro, CEO of INNVEST / Innovation Management Academy Albania (IMAA) shares with The Recursive.
Whether we have already been in a downturn or we are headed for a recession depends on what indicators you are following. Top executives seem worried. But they are also more prepared to deal with disruption than ever before. And how CEOs tackle an upcoming crisis will trickle down into our economies and societies with outsized impact.
So, to get insights on their business strategy during recession, The Recursive asked tech CEOs from Southeast Europe about how they plan to navigate a potential downturn in the following months. A key message emerged, which Fabiola Duro summarizes in the following way:
“A crisis is composed of two main components: one is representing danger and the other opportunity. Particularly, innovation is in crisis and more critical than ever.”
Core elements of a business strategy during recession
#1 Maintain business continuity and focus on strengths
Business continuity means maintaining the organization’s essential functions during a disruption. Having a business continuity plan in place is thus the foundation of creating resilience in the company.
“As a founder and CEO my vision on how to navigate the downturn in the following months largely will be focused on maintaining business continuity,” Fabiola Duro says.
An essential step in this planning is to identify critical business functions. What does this mean in practice? Boyan Ivanov, CEO and co-founder of StorPool Storage, provider of a fully-managed data storage solution, explains:
“With market turbulence, uncertainty, and tough times ahead, the one thing to do is to refocus on the things that work and spend your efforts on these. So, this means saying “no” to mostly everything else and, in some cases, even closing initiatives that are just a “distraction” or have a low ROI. As the saying goes: “if you chase two rabbits, both will escape”. Focus on one thing, the one that is core and works better than the rest.”
On this, Emiliyan Enev, Co-founder and CEO of ReCheck, which helps companies leverage blockchain solutions for the Web3 era, shares: “Our simple strategy is to create more value for our partners and customers. We focus on the essentials – the most significant pain points we can solve most efficiently.”
A focus on strengths can help companies reach their growth objectives even during times of economic uncertainty.
“Following continued investment in business productivity and digitization, whilst building upon the strength of our platform in terms of deliverability, robustness and global reach, we have been able to achieve sustained growth across both business expansion and sales, whilst keeping costs under control,” Silvio Kutic, founder and CEO of global communications platform Infobip shares.
Gabriel Dombri, CEO of Tapptitude, a product studio that partners with funded startups and established brands to build mobile-first products that improve people’s lives at scale, adds: “Our focus is really about investing more in the areas where we’re really strong and clarifying more of what really matters for our culture, no matter how ugly things are outside. And we start this from our mission to help committed entrepreneurs build and scale products that help other people do better in their lives.”
#2 Double down on effectiveness and avoid waste
The process of narrowing down the focus to the company’s core functions and main strengths comes hand in hand with minimization of redundancies and waste, as well as a search for efficiency of business operations. This is something all CEOs agree on when asked about their business strategy during recession.
Consider advertising, for instance. “The cost to reach the right audience is higher and it matters more than ever what kind of firepower you have in your lead generation actions. During a downturn, the right value proposition matters more than before, and getting that story heard is critical. So, we’re doubling down on this,” Gabriel Dombri reveals.
He further explains how these dynamics can present an opportunity for companies:
“In a downturn, the money will move slower, the focus on performance will be higher, and the avoidance of waste will become a stronger trend. In our view, this changed reality is a great opportunity for companies that have a great delivery engine and a solid culture to have a greater impact. And also for other companies out there, where the opportunity is to change a bit their approach, be nimbler, waste less, take out the fluff from their processes and really focus on survival first. Survival first has been our mantra and our angle of approach when working with pre-Series A startups. Today, this focus is more relevant than ever.”
“Fearing the future does not help. Pragmatism, on the other hand, can. From the cash flow perspective, it is essential to be properly funded and have a good runway ahead,” Carmen Sebe, CEO of Seedblink, a pan-European network and tech powered investing platform, adds.
#3 Keep the team culture strong and your people motivated
Leading an organization through a downturn essentially boils down to how you lead the people that form its heart. Your team is your most valuable asset, so you will want to address their needs and expectations as you go together through more turbulent times.
“The cost of getting and keeping a great team is higher and it will still grow in the following months. We are now in this tricky space where the team’s location has almost disappeared as a company cost advantage, even in places like CEE. But at the same time, we know how valuable our team is and highly we’re focused on investing in strengthening our culture and keeping our great people,” Gabriel Dombri says.
What could this look like in practice? Stoyan Mitov, Co-founder and CEO of Dreamix, a software development company that provides custom end-to-end product development, shares that they are looking to boost their employees’ sense of belonging and motivation by offering them a stock option plan.
#4 Stay flexible and find new business opportunities
Another element of a business strategy during recession echoed by multiple CEOs is staying flexible as customer behavior shifts and finding new ways to tap into market opportunities. Don’t put all your eggs in one basket holds more true than ever in a downturn.
“It is a very dynamic landscape with many transformations going on simultaneously. As a result, businesses experience challenges that are a product of unique trends in consumer behavior, macroeconomic instability, and convergence of technologies. ReCheck strives to be agile and responsive to emerging needs in these turbulent times. We are determined to provide levers for unlocking new opportunities and generating new revenue streams. Furthermore, the solutions should be super easy to implement with a great user experience. This is extremely important for our domain – web3 products,” Emiliyan Enev from ReCheck explains.
“We are targeting different clients, from startups and scaleups that rely on funding to more stable businesses in fintech, healthcare, and logistics that are profitable and revenue-generating in the tens of millions of dollars,” Stoyan Mitov from Dreamix shares.
Fabiola Duro from INNVEST adds that adapting the core to meet shifting customer needs is essential for her company, as well as identifying and addressing new opportunity areas being created by changing circumstances.
“Identify what alternative revenue streams could be leveraged both now and in the future,” Carmen Sebe from SeedBlink advises. She also adds another imperative: accelerating product and service development.
“We’re increasing our investments in the BizDev departments, as we believe that downturns also provide great opportunities, as many of our competitors will struggle,” Mitov reveals.
At the end of the day, companies will want not only to survive but to build a foundation for post-crisis growth, which can only be achieved if the business strategy during recession builds on new opportunities for development, while the market moves slower.