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Businesses should invest in getting to get out of a slump

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Why businesses should invest their way out of a downturn
  • 7 months ago

It’s tough times, and all indications are that they’re about to become more difficult. If businesses can invest and grow to the point of being able to come out stronger from the recession.

For many businesses, the times are difficult in the present. Rising energy prices, problems getting raw materials, and – if they are available, cost increases are creating economic anxiety.

The pressures and strains of deciding what costs can be passed to the customer as the company has to pay are at the top of the list of issues. Very few industries are immune to the ‘cost to live’ demands.

Businesses should invest in getting to get out of a slump

However, a downturn in the economy can provide opportunities and a threat. Businesses with financial resources are advised to think about the possibilities for growth and transformation so they can come out of tough times more resilient. There are a lot of alternatives, and an intelligent approach and a clear plan will pay off in the future.

Do you want to hunker down or look towards the future?

It may be difficult to choose whether to invest or invest when the bad economy and the outlook isn’t much better. However, the reality is that, as Carlo Maria Cape, CEO of BIP, tells IT Pro: BIP informs IT Pro: “History has shown us repeatedly that after a crisis, there’s often a period of growth. Therefore an economic downturn can be a great time to boost market share.

James Berry, Director of the UCL MBA, expands further on this subject, stating that three elements can help businesses make the right choice, broadly referred to as ‘timing “, market”, and “business“. He says that a business’s goal is to make the most profit in the short term but may be doing this at the cost of long-term growth. He offers one example of this “If you have a sale of your company or an IPO that is planned for the long or medium term making investments now to ensure an effective growth path instead of immediate profit is more important.”

The market strand is about determining what the state of the market will be. Growing, stable, or shrinking. If you know this, the business can determine the best place to invest its money. He said, for instance, “If markets are expanding, then investing resources to gain market share right now might be the best choice.”

The business strand is the last. A fair evaluation of the company’s distinctive strengths will be beneficial. “If you have the assets that let you expand into new markets, then investing in the growth is more sensible,” James Berry says.

What is the best place for money to Where should the money be?

If the answer is “yes” to investing, how can a company choose when to apply the funds to get the most benefit? Digital transformation is usually an initial choice; using the time between meetings to concentrate on processes in the back end or finding new ways to analyze and gather data are both popular investment strategies. Automating back office functions, as an example, is one of the areas that are gaining popularity, as is the current shift to cloud computing.

Darren Ling, director of the practice of partnering at the change consultancy Proteus provides a few words of caution. He told IT Pro: “Digital transformation must begin with an understanding of the business outcomes. In many cases, it begins and quickly turns into a technical challenge. Connecting the agreed-upon business results with the requirements to be changed across the entire operation of the company is crucial knowing not just what needs to be changed, but also how and what amount.”

A word of caution comes from Berry, who warns that investing in digital transformation could “often hinder productivity and require the company money in implementing”. It’s generally recommended to invest in these projects as you’re making a change, ” he adds.

Ling warns against thinking too much and advises companies to “understand your initial goal “enough” without wasting valuable time worrying regarding today”. Make a quick decision to concentrate on the next day, Ling says.

Investment return is a key factor.

“Where to invest your money is different for each business and is dependent entirely on your goals for the future,” says Maria Cape. “It’s easy to get sucked to invest in technology that is new or the things you see your competitors are doing.”

The main point is to avoid digital investments without clearly defined reasons regarding desired outcomes (ROI) or the return of the investment (ROI). It could be that the development of innovative product offerings, combining with other companies, or focusing on clients or networking might be profitable after the tough times have ended.

Ling suggests that companies should be focused on their desired outcomes. “For most decisions, the solution is to establish a clear goal that can be achieved with rapid testing of the market, continual development through iterative processes, and adaptive short-cycle planning,” Ling says. He also suggests the “fail quickly” method that can provide an opportunity for learning to the company even if the idea does not succeed.

Maria Cape was also clear about the importance of outcomes Maria Cape was also clear about the importance of outcomes, telling IT Pro: “When looking to invest to grow it is essential that businesses take a long-term view of their results rather than just looking at tactically for quick gain.”

The bottom line is that a recession could be as good an opportunity to make investments and expand. In certain circumstances, it may be better than one where the company is swimming in crystal clear waters. This is particularly important when you’re focused on your primary tasks effectively. The key to success is knowing the business you run, knowing your market, analyzing your future, plan do the work, and focusing on the goal.

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