Article
Use essentialism to define your priorities in a downturn
Business essentialism can help your company gain ground and avoid losses in a recession
November 02, 2022
Article
Business essentialism can help your company gain ground and avoid losses in a recession
November 02, 2022
When you look at it in the simplest way possible, humans need three essentials (in some combination) to survive: food, water, and air.
You can survive a few weeks without food and a few days without water. But you’ll only last a few minutes without air. Our survival instincts, honed through tens of thousands of years of evolution, will always prioritize these three essentials above anything else. This is just the foundation. To thrive, you must have these essentials and a core sense of purpose–paired with a keen understanding of exactly what can help you fulfill that purpose.
In economic downturns, businesses may reach a point where it becomes necessary to also think this way: What is necessary for this company to survive? And then: What is necessary for this company to thrive?
One concept can help you answer these questions: essentialism.
Research from the Harvard Business Review shows that companies with multipronged strategies that focus on essentials were not only able to survive recessions, but in some instances were able to come out even stronger and with higher earnings while their competition struggled.
Departments are working through their own projects and priorities – sometimes siloed, sometimes overlapping – while also working toward their company’s overall vision. Products are in various iterative stages, and all of this is constantly being reviewed and revised to determine what comes next. Intentionally setting teams’ focus areas can help ensure the right projects and initiatives are being pursued at a given time, ensuring the work to achieve your company’s purpose and vision is able to be achieved outside of any additional “noise” that may interfere.
Embracing essentialism means cutting the noise. It starts by recognizing that a percentage of work being done is nonstrategic or just being done in the name of project completion. When pressures rise, this nonessential work should either be streamlined to finish in an adapted way or terminated. The next step is reorienting around what really matters and provides the most value.
“For organizations to truly be successful, they need to understand why they exist,” said Pablo Alejo, a managing director in West Monroe’s Product Experience & Engineering Lab. “Then, strip everything else away and figure out what that actually means: What do they do, and how do they do it?”
Putting it in terms of how humans survive and thrive, essentialism is the process of determining a company’s food, water, and air, and then focusing on these core priorities to succeed. For the sake of being essential, this insight will only focus on the air—the most precious commodity and the one that companies will (figuratively) die fastest without.
In a down economy, a company’s air becomes the highest priority. And essentialism means that all processes and procedures are singularly focused on this priority.
The first step for companies on their essentialism journey is defining their air. The answer doesn’t require a major introspection. Customers are your air. Customer experience will always dictate business success and is the essential focus. It is unsettling when it feels like the air is leaving a room. If it ever feels like your business is no longer focused on customer experience, you should similarly feel like something is wrong.
This customer-first mentality is a core concept not only from an essentialist perspective, but for any company developing a digital operating model and aiming to ensure digital agility across the entire organization. Most (92%) of companies in West Monroe’s 2022 Be Digital Research said they are effective at putting the customer at the center of everything, but the real question is how this is put into action.
Companies need a clearly established vision to make progress and eliminate noise. This vision defines who they are and what they do. Regardless of economic conditions, customer experience and operating norms should be aligned to this vision. “Focus on the essence of the business, clarify the vision, and have a constant, relentless conversation on how you achieve that vision,” said Erik Brown, a senior partner in West Monroe’s Product Experience & Engineering Lab. “If there isn’t a clear vision, different groups within the organization will find ways to keep themselves busy, but this won’t drive value.” Through a unified, clear, and compelling vision developed with the customer experience in mind, companies can embrace the core of essentialism because they can more easily identify what is absolutely necessary—and pivot to increase margins and drive value when needed without completely changing their vision.
In a down economy, it will be difficult–if not impossible–for companies to maintain all of their plans for product development and enhancement. Instead, focus only on the products or enhancements that are of the highest importance. Who dictates what is important? Your customers. Customer loyalty is the backbone of the customer experience, and there is no room for missteps. According to West Monroe’s 2022 Be Digital Signature Research, nearly two-thirds (63%) of consumers say they will switch to another company if the customer experience is lacking. The good news: more than half (56%) of companies say their top drivers of product development are expected and/or established customer need, and 75% say they heavily invest in the customer experience. Less promising, however, is a significant gap between what customers consider to be a top priority and what companies think are the top customer priorities. For example: 37% of companies indicated they believe personalization is a top priority for customers. In fact, only 17% of customers indicated this to be the case. In an environment where companies are operating with fewer resources, misalignment with customer priorities risks the air needed to survive.
If a company is seeking direction on product development from an essentialist perspective, they need to have a pulse on what customers want and need most in the given moment and near term. Having a sustainable, consistent customer feedback loop through service and other operations can provide insight on how to best prioritize should you need to pivot.
If a leader used the above information to focus on product development from an essentialist perspective, the first priority for any available resources would be security enhancements, followed by simplicity, followed by data access.
It’s important to consider that customer priorities may change in a downturn too. If spend is tightening at your organization, chances are customers are limiting their spend as well. Customers may be more focused on products and services that save them time or money—or that help them to become essentialists in their own lives or work.
All of this to say, product development in a recession requires a relentless focus on what the customer needs and is willing to pay for. Make it your business to know your customers best and understand their highest priority–because no matter what that is, it should also be your highest priority. Investing in customer feedback can provide a lifeline and prioritization guide as you streamline your focus, trim the ‘noise,’ and continue providing strong employee value.
Companies that have processes in place for efficiently gathering customer feedback at every stage of product development are better equipped to identify trends and act quickly when necessary. Anything that is not contributing to a customer-focused decision-making process, while nice to have, is not essential.
This starts by determining what companies need to know about their customers in order to make confident, informed decisions. A major component of this is shifting focus away from key performance indicators (KPIs) and instead emphasizing customer performance indicators (CPIs).
This is not to say that company performance just falls to the wayside. Rather, it is analyzing company performance by focusing on what is important to the customer. When properly developed, CPIs help companies understand what customers care about, why customers are making the decisions they make, and what is driving their opinion of a company’s products and offerings.
“In a recession, you have a limited number of bets you could make,” said Alice Huang, a senior data science manager at West Monroe. “This means you have to be clearer than ever on the information necessary to decide which direction to go in.”
Customer performance indicators enable companies to benchmark measurable metrics that are important to the customer, not just customer focused. At first glance, Net Promotor Score seems like a CPI, as it is focused directly on customer loyalty. But would a customer care about your Net Promotor Score? Probably not. Some examples of CPIs include:
For companies without this foundation, now is the time to develop an agile process for gathering data and generating customer-centric insights. Overhauling or inventing data collection methods may seem like a tough task, especially when resources are strained. But the alternative–continuing to make decisions without a focus on customer priorities–leaves the door open for significant risk.
Developing these insights reinforces the role data can play to provide context in real time around which to make decisions. If companies are forced to cut back recruitment efforts or–as a worst-case scenario–make staffing reductions, data literacy is an area that should be considered essential for everyday operations, hiring, and upskilling. Equipping employees across every function of the organization to make decisions based on data can help shift from simply trying to survive into thriving. This is also the time to ensure that the various data sources flow cleanly into one organized place and are easily comparable. Implementing an inefficient process at a critical moment is a pitfall that should be avoided at all costs. As we’ve discussed, the stakes are higher for product development during a recession. In a perfect scenario, the right decisions are made the first time, and this is validated by data. The reality is that may not always be the case. Sometimes, data analysis will show that the wrong decision was made, that resources have been wasted, and that a pivot is necessary. These are not moments to panic or make knee-jerk reactions. Rather, remember that companies with a customer focus in their data and analytics are better able to pivot when necessary.
Every company hopes to navigate a recession without having to cut costs–in resources, in talent, in any way that has a major impact. Unfortunately, cost cutting cannot always be avoided. Above all else, take steps to safeguard the areas that directly impact the customer experience. Customer loyalty can be fickle. If cuts need to be made, start by focusing on areas that could potentially be optimized before they need to be obliterated. In some instances, these optimizations may uncover opportunities that could benefit your essential functions.
For companies that need to shift, the reorientation could potentially free up bandwidth for employees to focus on areas that provide more value to the company and to customers. Note that cost optimization strategies tend to take more time to implement. While these levers may not need to be pulled immediately, this is an area where it will pay off–literally–to be proactive.
An essentialist mindset isn’t the only way to prepare for a recession. But it is an effective approach for companies that need to refocus, prioritize investments, or update their recession plan. The real threat? Doing nothing. Not preparing for a downturn at all is a recipe for letting the economy control your circumstances versus making proactive decisions that insulate your business from factors outside your control.