The next two years is a make or break period for companies, and the way business leaders respond will determine winners and losers for the next decade. Deloitte’s UK Chief Executive and Global Chairman, John Connolly, explains how.
It’s been a tough 12 months. Few businesses have been untouched by this recession – for many, it has been tumultuous. And while for most the sense of crisis has now subsided, market conditions continue to be challenging. Some of the statistics are being seen as evidence of strengthening in the economy, both here in the UK and globally, but the signals remain mixed and any early recovery is likely to be fragile.
As the recession unfolded, organizations inevitably focused on the short term – on actions to secure financing, manage cash and control costs. In this environment, close attention to day-to-day trading will remain a priority. At the same time, many companies have now stabilized their business position and performance sufficiently to begin to think about the future. Uncertainty as to the timing of a return to growth remains a key factor in that thinking. But it also needs to address a growing recognition that the future business climate will be different as the recession – and in particular the consequences of the financial crisis – provoke medium-term structural change in the economy and our markets.
Companies are starting to ask themselves some fundamental questions in the light of this structural change: questions about their positioning, the needs of their customers and their business model. The winners of tomorrow will be those whose leaders have the vision and conviction to capitalize on the turbulence created by challenging markets while establishing competitive advantage for the medium term.
While the recession has presented enormous short-term challenges for many, its medium-term implications are equally profound. Now is the time for companies to address this strategic agenda and to respond with a level of boldness, commitment and urgency that these changes demand. How companies act over the next 24 months could drive their performance for the next decade. Winners and losers In buoyant markets, most companies prosper. Given recent analysis by researchers at Deloitte, our contention is that, in times of economic downturn, business returns tend to spread. We have looked at the spread of shareholder returns in the FTSE100 during the last three recessions and growth periods. What we found demonstrates that, in buoyant markets, most companies perform within a relatively narrow range. In recessions, however, the range of performance broadens hugely.