It is hard to read business articles today that don’t prescribe resiliency and agility as a way to survive unforeseen market shifts. I wanted to try and understand what that really means for a company weathering the storm of disruption in 2020.
A study was undertaken by McKinsey in 2019, reviewing 1,100 publicly traded companies. The study traced the performance through the last economic downturn and found only 10% performed significantly better than the rest. The commonality in this leading group was the ability and readiness to strengthen their balance sheets by cleaning up nonessential budgets and accrual accounts thereby freeing up cash flow to reduce debt. As well, they had the correct data in place to be able to make decisions with confidence.
One Way To Increase Capital Ahead Of A Downturn…
In one case taken from these high performers, a leading global manufacturer took decisive action before the last downturn to reposition its balance sheet to be even more competitive in the medium to long term. The company refocused its portfolio by divesting certain businesses and product lines less relevant to its core and focusing its capital on the prioritized core product lines. It also took some tactical steps to improve liquidity by accessing the capital markets early enough to obtain favorable terms before a credit crunch hit. The result was a substantial increase in capital that helped the company more effectively withstand the recession and improve its competitive position relative to its peers.
… And Another Way To Position For Recovery From A Downturn
In 2020, several more examples could be found. Three global manufacturers of well-known B2B and B2C brands and products reported earnings in Q3. Two had breakout years with significant growth and earnings well above the market. The third underperformed the market. The earnings reports made clear that the two that pivoted capacity quickly from plants in industrial sectors were able to satisfy increased demand from residential sales of DIY products. Both credit strong analysis and communications as central to the success of the decisions they had to make.
Having a strong cash position coming into the recovery curve means that you can afford to fund growth. Many companies will struggle to fund or secure finance as the market recovers. One outcome for companies with access to funds will be attractive mergers and acquisition opportunities and often at below-market valuations.
Involve Your Finance Teams At The Product Level
The importance of finance in building resilience and making agile decisions is important. Finance needs to be a stronger partner at the product level providing analysis and details for stronger, more effective decision making. Deciding to reduce inventory can be a mistake without the analysis of the demand for the products they go into, for example.
Strategic goals must support the overall performance of the business. Finance teams need to be in the strategic planning sessions and provide the data analysis so business decisions can be made, executed, and tracked for performance.
Easier said than done, especially in organizations with critical data running on different systems. The reluctance of teams to change the status quo can be difficult to work around. Digital transformation has to be central to deliver effective projects. Working with the right partner to scope and architect solutions of value that can scale as your business grows is central to this success.
Why Partner With Gerent?
Gerent LLC has been a partner to manufacturers in designing digital transformation and integration using Salesforce for over 12 years, with almost 1,000 projects completed successfully. Gerent’s work includes undertaking projects as complex as connecting multiple business units utilizing different ERP systems into a common platform to simple data migrations – presenting the team with one version of the truth.
If your strategic goals are measurable, they can be built into Salesforce and tracked in almost real-time. Your team comes together to check execution and determine adjustments as market conditions change rather than spending time updating reports prior to every meeting. Simply hit refresh and collaborate cross-functionally.
Gerent’s process is robust and generates the least disruption to your business; existing technology is not disturbed but simply interconnected.