The world economy went from bad to worse a year ago. Some companies adjusted well to the new reality while others struggled. But what separated the winners from the losers? And what have we learned going forward?
When the perfect storm hit the world economy a year ago, it caught a lot of renowned companies off guard. Many struggled, some even collapsed. And had national and global stimulus packages not been sent to the rescue, many more companies would have fallen victim to the crisis.
Now that business is starting to pick up again, it’s time to reflect on what we have learned from the crisis. If we don’t, we may wind up making the same mistakes. How can we prevent this from happening? In short, we need to focus on control, transparency and prudence.
7 of 10 professional services firms don’t know their business outlook a month ahead
Taking a closer look at the financial statements, we see that the companies most severely hit by the crisis were those that didn’t have a full overview of their business. They didn’t have the right business processes in place nor the necessary insight into their business.
This was most evident in the IT sector. Some companies were so devoted to growth before the crisis that they didn't have a clue how their core business was doing. They did not manage their order flow, clients, projects, or people properly. On the other hand, some companies were in complete control of their current and future business, allowing them to adjust in time to weather the worst part of the storm. Fortunately, Maconomy was among the latter.
Many knowledge companies were severely hit by the crisis. At the end of 2008, a survey conducted by Maconomy showed that over 70 percent of professional services firms were unable to estimate their billable resource load – and thus their revenue – more than one month ahead. They needed systems to run their business and many of them paid a high price when the crisis hit them.
The clouds are clearing
When interviewed, leading bankers and investors all say if they had acted on the knowledge available in their systems, they could have avoided the situation they ended up in. Apparently, the financial markets had all the data they needed. They just neglected to use it.
It’s been a bumpy ride for many firms in 2008 and 2009, but what enabled the winners to weather the storm? They had the right systems that provided them with all the data they needed to assess their business outlook correctly. And they used the knowledge to make the right decisions – in time.
The crisis may be fading away, but double-digit growth rates are unlikely to return anytime soon. We all need to prepare for a period without much growth – at least in the Western hemisphere. Therefore, more than ever before, we need to develop and reinvent ourselves to create a platform for new growth – based on control, transparency and prudence.