Arun Muthukumar
"History never repeats itself, but it does often rhyme"
- Mark Twain
Little did Messrs Twain and co. know that recessionary rhymes would dance together thrice in a century. If a global phenomenon occurs thrice in 23 years, its prudent for enterprises to recruit a Chief Recession Officer 😉
Or maybe they already have, sans the glory (or doom, whichever way you want to look at it) that accompanies the title.
If you haven’t guessed it already, you, my dear reader, are the Chief Recession Officer.
Rhymes and Reasons
If Twain was urged to rise from his grave and dissect the rhymes that accompany recessions, strong patterns would emerge.
“Education consists mainly of what we have unlearned” or something to that effect
These patterns have weighty implications for L&D (Learning & Development) teams. They are spread across external (customer originated) and internal (organization originated) changes. These patterns have stood the test of time.
Consequently, these changes alter L&D mental models. New strategic maps in an altered landscape lead to a new operational blueprint; it is a L&D imperative to match the steps.
Pattern 1: Resilient companies will explore new market edges and it is the HR opportunity of the decade
Business models follow an S-Curve.
Wriggly, squiggly curves that determine if a business is a decade long wonder or an enduring beast that becomes a centenarian.
S-Curves are natural progressions. Failure does not occur if a company hits an S-Curve. Failure is a result of companies being unable to explore new S-Curves in the same market (source)
S-Curves is the central, uncontested law of innovation. A tenacious entrepreneur finds and exploits a market opportunity (Netflix launching entertainment delivery by mail). It is followed by another entrepreneur latching onto the opportunity and creating a compelling competitive advantage. The cycle follows an ‘ebb and flow’ till the opportunity fades away.
As the name suggests, the curve takes an S shape.
Towards the fag end of the S-Curve, HR teams find themselves working in a saturated talent environment. It does not invest in talent development simply because of unjustifiable financial rewards. At this stage, companies learn to do more with less talent owing to cost pressures.
Recessions accelerate S-Curves. Reduced sales and heavy discounting squash the curve faster than previously imagined.
Worse, the curve does not retain its shape because of a myriad of factors. Consumer preferences shift to the new post-recession order, technology gets outdated & research in R&D slows down.
So, who survives the S-Curve crush?
High Performance companies are operating at the ‘edge of markets’. Edges expose new strategic winds and tuned-in companies exploit them to stay relevant. The most opportune time to exploit an edge is when the first industry leading business shows signs of innovation tapering. Apple, a PC maker, successfully exploited the edge available in music distribution and turned its renaissance into a story for the ages (source)
Winners are High performance companies who pursue ‘edges of markets’
Edges are the peripheral market opportunities, sometimes exposed to open eyes and ears. When they aren’t exposed, an empowered top and middle management explores the deep ends of their markets to discover hidden opportunities.
These opportunities come in many avatars depending on the industry. This includes new product lines, an emerging service gap, or venturing into altogether new markets.
An example of a perfectly executed edge strategy is Intel. Their transition from memory chips to microprocessors to Atom mobile chips is a prime example of avoiding the S-Curve pitfall.
Recessions are the right time to operationalize edge strategies. If you find yourself in an organization that is deliberating its next power move,could we say you are in the middle of a decade’s HR opportunity?
By their design, S-Curves create situations that develop new competencies and capabilities to change an organization’s strategies. Due to these alterations, they need to make key changes in the composition and size of their workforces. The amount and kind of change needed to adapt to the shift is one that HR could lead and make valuable contributions to. Who better to realign the strategy, talent and competencies of an organization than the HR function?
L&D (Learning & Development) Imperative : Huddle with the CXOs and derive key shifts that are likely to transpire. They might not have the full vision right now, but early indicators may have started to take shape.
Include your team early on. Communicate clearly and often. Gen Z in your team would be key to a better understanding of some emerging roles, with no historical precedent of required skills in your business environment. For example , “community managers”.
Start building early versions of your talent management plans, so that when the new strategy is finalized, you are already in step.
Pattern 2: Consumer spending skews towards durable and long lasting products
What’s common between Lego and Toyota?
Both increased their market share during recessions by acknowledging a consumer reality for downturns; in a recession, consumers prefer spending on products with a demonstrated history of durability and longevity.
This is the fundamental principle behind Toyota and other Japanese car manufacturers outselling their American counterparts. During the recession of 90s, buyers pivoted to cars with a reputation for endurance.
Instead of contracting, Japanese vehicle production in the US increased during the recession of the 90s. Source: Rocketsource
18 years later, Lego UK confirmed this hypothesis by increasing it’s market share to 4.1% in the second quarter of 2008’s recession, up from 3.2% a year ago. Mattel, the Goliath of the category, slumped by 19% in the corresponding quarter.
Their secret?
Investing in new product lines that were sturdy and lasted longer. As compared to the softer Barbies and Kens, Lego relaunched ‘Power Miners’, meaty and indestructible chunks of plastic and rubber. Naturally, consumers gravitated towards them.
Lego Power Miners
Learning Imperative : Distill the “long-term vs short term” benefits of your product and service lines. Orienting customer experiences to educate them about the long-term durability of your services is a foundational strategy to combat recessionary environments.
This process begins with a current state audit of the strength of ‘perceptions and articulations’ of long-term benefits within your customer-facing teams.
Pattern 3: Routine-Cognitive jobs climb the ‘analytical ladder’ post recessions
Routine-cognitive jobs are the most ripe for an upending post a recession. We conclude this from a seminal research conducted by Brad Hershbein, economist at the W.E. Upjohn Institute for Employment Research, & Lisa Kahn, associate professor at the Yale School of Management.
Which jobs are classified as routine-cognitive?
Jobs characterized by a fairly consistent set of activities that do not involve higher order thinking or creativity. Clerical and accounting jobs are good examples.
(On the other hand, repeatable processes in manufacturing and operations are classified as routine-non cognitive)
Another telling conclusion from the research was that routine-cognitive jobs exhibit only moderate increases in layoff risks and no relative employment losses.
Instead of getting canned, these jobs entail high degrees of an upending towards an analytical framework of operations. They appear to become relatively higher-skilled and more productive.
(The authors define ‘analytical’ as an orientation towards “research”, “data”, “decision” and “solving”).
New technologies (read AI / ML) enter routine-cognitive business processes and improve net productivity across functions.
Learning Imperative : Initiate a systematic audit of all routine-cognitive jobs in your business processes. Align with the line managers and evaluate if they have an upskilling plan for these roles.
Map the degree of analytical prowess in these roles right now. Debate and discuss the future analytical state of the roles with the line managers. Identify the technologies that should find their way into current business operations.
Finally, devise a crack team that plans for change, identifies impacted individuals, runs pilot implementations of new technology, identifies with a test group, compares productivity gains vs control, documents the findings and builds a change management thesis for the top management.
There is no dearth of empirical research on post recession business strategy. However, during the compilation of this literature, we found the lack of compelling research on the impact of a recession on talent management frameworks a gaping hole in the pursuit of L&D progress in these times.
We hope you find this endeavor helpful. If you would like to share your feedback, please email us at arun@getrapl.com
Author Spotlight
Arun Muthukumar is a dynamic entrepreneur, and founder & CEO of RapL, Inc. He has significant global experience in the field of edTech and SaaS applications. His passion is to empower people and organizations through effective adoption of technology.
Arun brings decades of global experience in information and communications technology. He has also pioneered e-learning solutions at Cisco Systems and in his earlier startups. He worked on edTech projects for the New York school system, the Ministry of Education in Thailand, and IIMs in India. Arun was awarded the Path Finder and President’s Gold medal at Bell Labs in Boston, USA for his work on optical networking.
Arun has an MS in Computer Engineering from the University of Kentucky (USA), and a B.E in Electronics from the College of Engineering, Anna University in Chennai, India. Arun is passionate about travel and sports. He loves playing competitive Badminton and Tennis.
