‍What business leaders need to focus on in an economic downturn

‍Rocketing inflation, falling productivity, reduced investment, and, most recently, uncertainty over the stability of the financial markets as a result of the collapse of Silicon Valley Bank are shaking confidence in the business landscape. The CBI suggests that the UK faces a "lost decade" of growth if action isn't taken urgently.  

Businesses across the spectrum are entering a cycle of reductions, cost-cutting and optimisations due to the economic downturn, with many dubbing 2023 as 'the year of efficiency'. This has led to an onslaught of redundancies, with particular casualties in the tech sector, such as Meta, which has recently announced an additional 10,000 job cuts.  

If businesses want to focus on efficiency this year, they must not only look at optimising their external spend but also focus inwards on their operating models. It's also a time for bold moves, transformative actions, and innovative thinking.

Look in the mirror  

In an economic downturn, there is increasing pressure to deliver results. While many businesses, in the first instance, cut costs by reducing headcount, something deeper must happen to ensure a business runs efficiently. Therefore any company needs to rethink how they invest available cash and ensure operating models, structures, and capabilities are the right ones for these challenging times. Such an assessment takes honest reflection, especially on how the business performs operationally and seeing where actual efficiencies can be made.  

Following staff redundancies, marketing expenditure comes next under the scrutiny of many CFOs. As AdAge rightly puts it - "the right marketing strategy combined with brand innovation can often be the difference between success and failure during an uncertain economy." Although blanket-cutting investments into brand innovation might yield short-term efficiencies, they can often lead to significant long-term missed opportunities.  

More profound thinking about how marketing dollars are distributed, evaluating marketing agency ecosystems, and tightening processes will likely deliver on both fronts, short and long-term.  

In-house or not

One of the critical discussion points in many marketing organisations is the topic of in-housing some or all of the services traditionally provided by marketing agencies. In-housing has been around for some time, but with the increased desire to optimise costs, exploring this topic is more relevant than ever.  

At Alchemists, in collaboration with ISBA and CvE, we recently conducted a survey into the State of Inhousing in 2023. Our discovery found that 60% of respondents said they plan to in-house more of their marketing activity this year. This natural reaction from businesses indicates a greater desire for control over certain operations.

Assessing what capabilities can be outsourced and which can be in-housed can be a rather daunting task, and some measure of external benchmark or advice is often needed. Especially as we also found a significant discrepancy in expectations of efficiencies achieved through in-housing versus reality.  

Whether it's marketing departments or other parts of the ecosystem, businesses looking to re-evaluate agency models and structures must not jump in head first. A shift in models can be costly and may not work for everyone. Time and care are necessary to set the right foundations and continuously build on them.

Focus on your relationships  

In this climate, there is nothing more valuable than a strong relationship. Whether it's clients, agencies or partners, it's imperative to invest and work on building solid foundations to get to a 'trust' phase. Building the right foundations and relentlessly focusing on improving them and moving forward is the key to success. This takes a lot of time and commitment but reaps big rewards.

Focus on developing a concrete plan of how to get there (and how to understand and measure success together). Helping clients and partners navigate smooth seas with favourable trade winds is one thing - but navigating through a storm is quite a different challenge that tests the strength of your relationships.  

Stagnation is here to stay. But business leaders can navigate the choppy waters of an economic downturn and identify innovative routes to growth. By looking at their own ways of working, understanding the changing landscape of data and investing more than ever in developing strong relationships, business leaders will have the potential to navigate the headwinds with much more ease.