Economists and business leaders are oddly alike, in their reluctance to use the R-word (by which I mean Recession).
Perhaps fearful of acknowledging its very existence, the conversation always falls back on meticulous definition and vague terminology, rather than the obvious fact that times are undoubtedly tough.
Whatever the official status, businesses are clearly under increased pressure to perform, primarily as the result of macroeconomic pressures, combined with once-in-a-generation pandemic aftershocks. To derive meaning from the mayhem, and to plot a course for recovery, most business leaders are looking to data and analytics to provide the answers.
But what solutions can (and should) data provide? The “should” part is easy to answer – common sense indicates the better we understand the situation, and our options, the better decisions we can make. The “what” however, is context-dependent and varies with economic climate, among other factors. Based on discussions with many local finance leaders, including Anson Mai at Fujifilm Business Innovation Australia, the following areas have focus right now:
- Cost Reduction: The first port-of-call in any downturn is often analysing operational data to identify inefficiencies in business processes, which then allows companies to eliminate bottlenecks and reduce costs. This typically involves optimising supply chains, production processes, and resource allocation to maximise efficiency and minimise waste. Equally, transaction data can help businesses accurately forecast changes in customer demand and adjust inventory levels accordingly. This prevents over/understocking, reducing carrying costs and ensures businesses can meet customer demand without tying up excess capital.
- Financial Planning: In a downturn, financial planning is paramount and cash flow becomes critical. Timely and creative financial analysis provides insights into cash flow patterns and can also assist in identifying areas where cash can be conserved or invested for better returns.
Similarly, businesses often need to make tough decisions about resource allocation and investment and rely even more heavily on the actual returns from different projects, helping businesses prioritise those investments that are most likely to yield positive outcomes.
Additionally, with recession often comes government intervention and clever analysis can assist businesses in navigating complex regulatory changes, accessing available support programs, and ensuring compliance with changing monetary policies.
“People have started discovering a new perspective. We have some people who have been in the business for 20 years who tell me they’ve never come across this level of insight”
Anson Mai
Head of Financial Planning & Analytics
FujiFilm Business Innovation Australia
- Targeted Marketing: By studying customer data, businesses can segment their customer base and tailor their marketing efforts to specific groups. This allows for more effective and efficient marketing campaigns, focusing resources on customers who are more likely to make purchases during a recession.
Likewise, data can help businesses determine the most effective pricing strategies during a recession. By considering changing customer behaviour and recessional market dynamics, businesses can set competitive prices that balance revenue generation with the critical preservation of customer loyalty.
“If we see a customer that has 10 machines on a floor, but employees are sending 80% of their jobs to just two machines, we can help them figure out how to relocate the other machines to get more usage, while at the same time knowing the high-usage machines will require maintenance sooner”
Anson Mai
Head of Financial Planning & Analytics
FujiFilm Business Innovation Australia
- Risk Mitigation: Rightly so, companies are often hyper-focused on risks during a recession. Analytics can assist in identifying potential risks that may arise during such times, such as supplier disruptions, credit defaults, or changes in market conditions. This enables businesses to develop relevant contingency plans and strategies to mitigate these risks, ensuring greater resilience in the face of economic uncertainties.
Further, closely monitoring competitors’ activities and market trends can help businesses identify new opportunities for differentiation and innovation, ensuring they remain competitive in a challenging economic environment.
- Employee Engagement: Finally, monitoring employee productivity, satisfaction, and well-being takes on heightened importance during a recession. By understanding changing employee needs and their financial concerns, businesses can implement tailored strategies to maintain a motivated and engaged workforce, even during challenging times.
So, there you have it. Recessions are hard on everybody and amplify the everyday pressures that all businesses normally face. A robust data and analytics capability can ease those pressures by providing companies with a greater understanding of what is happening, as well as affording an objective means for evaluating corrective options.
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