A lot of people talk about recession readiness as having a plan to cut costs—from operating expenses to headcount. While those preparations are certainly important, an equally important part of recession readiness is creating the ability, and willingness, to invest.
In other words, not just playing defense—but offense.
A Harvard study shows that companies that cut too deeply during recessions have the lowest probability—21%—of pulling ahead when times get better, while companies that swing the pendulum toward investing have only a slightly better chance, at 26%, of becoming leaders post-downturn. The best recipe: Companies that employ the right combination of defensive and offensive moves have the highest probability—37%—of emerging as leaders.
What is “the right combination?” The Harvard study cites a lot of examples. The point is, you need to invest as part of your recession strategy—and you need those investments to pay off. In a downturn as unique as this one, you only have so many bets to make. ROI is critical.
Companies that employ the right combination of defensive and offensive moves have the highest probability—37%—of emerging as leaders.
The struggle we’ve found when working with clients on their investments—whether large or small—is quantifiably defining and measuring value, or the “financial return” part of ROI.
At West Monroe, we have spent the last several years building a culture around quantifiable value and championing the one definition of value creation that matters most to clients—financial return. Here are three examples of what I mean by consulting ROI:
These examples aren’t meant to boast about how great West Monroe is. They’re meant to demonstrate a level of commitment to value creation that, frankly, we don’t see at the forefront of the consulting industry. It’s something that makes us a different kind of consulting firm, one that isn’t just focused on generating hours of billable consulting time. We are committed to delivering real, measurable competitive advantage. Think return, not burn.
That brings me to our new brand promise revealed a couple weeks ago that, while cooked up and refined long before this pandemic hit, resonates now more than ever: Undeniably different, undeniable results. We’re not different for the sake of it. We’re different because that’s what gets you results—results that make an impact.
Why are we so invested in results? Because you are. Our clients told us that the ability to create value is the most important thing to them when working with a consulting firm, and one aspect of consulting they continue to score lower across all the firms they’ve used. In fact, it’s three times more important than any other attribute buyers use when selecting a consulting partner to lead a program or evaluating the success of a strategic investment.
Value can be a funny word. Anyone who has bought a house, a company, or even a website domain, knows there are various approaches to valuation. What matters more to determining value: the market conditions? Tangible assets? Historical or proforma EBITDA? All in, value can be subjective as hell.
We’re trying to flip that script. With every client story we publish, we publish the measurable results. With each new qualifying proposal we send out the door, we expect our people to include and commit to the expected financial ROI.
As we’ve focused more on financial return, some have asked me whether value can be intangible, too. My response is challenging them to think differently. While it’s difficult to measure the value that comes from “intangibles” like teams who work well together, speed and responsiveness, or “fun” and engaging work, we’re committed to assigning tangible value to these otherwise intangible things. Because the tangible value exists—it just requires a commitment to define it and measure it.
In today’s post-pandemic environment, value is more important than ever. ROI is more important than ever. None of us have the luxury of time or resources to spend money that doesn’t generate something in return.
Now is the time to challenge yourself on value. What investments do you need to make to succeed in the post-pandemic world? What return do you expect on those investments? Start there and expect your partners to do the same.