9% of Companies Emerge from Recession Stronger -- Here's How
What can companies do to emerge from a recession stronger than ever?
HBS researchers Ranjay Gulati, Nitin Nohria, and Northwestern University's Franz Wohlgezogen studied 4,700 companies during the last three recessions. And what they found was this: The thriver-survivors were best at orchestrating a delicate balance between cutting costs to survive today and investing to grow tomorrow.
"The most successful reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets. Their multipronged strategy ... is the best antidote to a recession."Specifically, they cut costs not by slashing headcount aggressively but rather by improving operational efficiency. They also were bigger investors than their rivals in developing new business via investments in R&D, marketing and in plants and machinery.
Who didn't do as well?
- Firms that cut costs faster and deeper than rivals had the lowest probability -- 21% -- of pulling ahead of the competition when times get better.
- Businesses that invested aggressively more than competitors had only a 26% chance of becoming leaders after a downturn.
- An astounding 85 percent of growth leaders entering into a recession stumbled out the other side.