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How to emerge from downturns as a winner

How to emerge from downturns as a winner

Many CIOs will take the normal approach of cutting discretionary spending, delaying starting new projects or cutting back on recruiting. It’s time to take a contrarian view, writes Andy Rowsell-Jones of Gartner

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The current state of uncertainty won’t magically disappear

Andy Rowsell-Jones, Gartner

Economic uncertainty is top of mind for New Zealand executives. Global trade tensions and other factors are impacting organisations’ ability to take a long-term view on strategic capital investments.

Many large-scale investments will be put on hold, as nervous CEOs and CFOs look for ways to rein in spending across their organisations. 

CIOs are increasingly being asked to optimise costs while being asked to fund growth and innovation. Many will take the normal approach of cutting discretionary spending, delaying starting new projects and/or cutting back on recruiting. 

What they should be doing instead is taking a contrarian view. Invest smarter, free up cash from unwanted assets and use a downturn as an opportunity to get ahead of the pack and emerge as a winner. 

Similar to skiing or motor racing, it’s in the turns – unexpected changes in context that force decisions – that the best performers take risks and make moves. They brake at exactly the right point and then accelerate out of turns instead of simply pushing the brakes of risk aversion and hoping. They trust their abilities to take different risks that lead to higher performance. They don’t take chances and trust their core capabilities. They have practiced and are uniquely prepared to win.

Credit: Gartner

Enterprises can prepare by strengthening their core, focusing on three key areas

Andy Rowsell-Jones, Gartner

Failing to take chances in the turns results in stasis or loss. For some businesses, missing the opportunities may take them out of the race completely, if not immediately. On the other hand, those that take risks without proper preparation will struggle to make up ground once left behind. How you exit the turns likely determines your long-term destiny.

What it means to win

Economic turns are common in business and most executives have survived several. But, there are many other types of turns that may appear without notice, such as major security breaches, systems outages or radical changes of direction. Others may appear from unexpected directions outside your industry, such as geopolitical, environmental, social or competitive factors. 

Winning in these turns has both economic and existential goals. Companies that win produce healthy margins and are first-to-market with innovations. 

Winning also creates excitement for employees. When it pays off, risk is exhilarating. Employees that witness and participate in enterprise agility will have a higher morale and sense of purpose. Executives that take risks and move the organisation forward are positioned for greater leadership opportunities.

Many leaders prefer not to make big moves until the signals are clear or look for ways to weather the uncertainty. Neither a wait-and-see approach nor defensive cost cutting, however, will power winners through adversity. The current state of uncertainty won’t magically disappear. 

Enterprises can prepare for the turns by strengthening their core, focusing on three key areas:  

1. Strategy

Prepare to act confidently amid uncertainty. The nature and timing of investment, acquisition and other business decisions made during turns matter greatly. Gartner data from the last global recession shows executives regretted acting too slowly and investing too little. 

For a healthy core, strategy must be agile, clear and actionable by all. It must be adaptive to allow the IT organisation to sense and respond to changes in the business context as they happen.

2. Cost

Winning enterprises have an ongoing cost management discipline and practice cost optimisation, as opposed to cost cutting. They will prepare for a turn by having three IT budgets prepared — best case, worst case and most likely case. They’ll know ahead of time the moves they need to make if and when the environment changes. 

Protect innovation funding for long-term success, even as the cost hammer drops. Gartner’s research shows that companies that excelled through the last downturn retained at least 5 to 7 percent of their IT spend against innovation/transformation projects.

 3. Talent

Healthy, high-performing teams are essential to winning in the turns. Gartner’s research on digital dexterity and high-performing teams shows the importance of combined business acumen and ability to act. Cultivate this in your teams, but also among your peers.

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Invest smarter, free up cash from unwanted assets and use a downturn as an opportunity to get ahead of the pack and emerge as a winner Andy Rowsell-Jones, Gartner

Enterprises that take successful risks in turns have powerful executive committees that distribute decision making and action taking in an atmosphere of high trust.

The turns present an opportunity to revamp your playbook around hiring, development and performance management. When a downturn occurs, the best talent wants to be on a winning team and are more likely to move companies during this period. Use this opportunity to reorient talent programs and services to align with the company’s future direction.

Consolidation strategies, which are common in economic recessions, help people work more broadly so they can apply a wider range of skills on a highly prioritised, efficient basis. Centralised organisational structures with resource pools and centres of excellence are the norm in such a context, and agility is worth investing in for future needs.

Andy Rowsell-Jones is a distinguished VP analyst at Gartner in the CIO and executive leadership research team. He will be presenting on how CIOs can win in the turns at Gartner IT Symposium/Xpo 2019 on the Gold Coast, 28-31 October.

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Tags strategyrisk managementchange managementbusiness continuity planningGartnerC-Suitedigital economyanalystEconomicsdisruptiontalent managementceo and cioCIOS and the boardAndy Rowsell-Jonesleadershipgeopolitics

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