Most Companies Are Less Prepared for a Downturn Than They Think; Few Have Done More Than Basic Cost Cutting. A New BCG Report Suggests Six Ways to Win in an Economic Downturn

Over 80 percent of U.S. business executives think their companies are "better prepared" for a downturn than their competitors are, according to a recent survey by The Boston Consulting Group (BCG) -- even though few have taken any measures beyond basic cost cutting. But there's far more that companies can do to capitalize on a downturn and emerge stronger than before, says BCG in a new report titled "Winning in a Downturn: Six Actions to Take Now."

Complacency is risky. "A major downturn can fundamentally change the dynamics of an industry," notes coauthor Reinhard Messenböck, a BCG partner. BCG research shows that after the last recession, 30 percent of companies that had been among the top ten players in their respective sectors dropped off that list, and fewer than 10 percent of those that dropped off ever made it back. The reason is simple: a downturn magnifies relative strengths and weaknesses.

Six Winning Actions

According to the BCG report, companies that survive and thrive during tough economic times build advantages in three critical areas: mindset, preparation, and execution. "They manage the downside potential, but they focus on the opportunity to make major competitive gains," explains Hal Sirkin, coauthor of the report and a BCG senior partner. The report explores six actions that companies should take to come out ahead:

--  Assess their risk
--  Sharpen their downturn radar
--  Get in shape -- now
--  Create a prioritized action plan
--  Think countercyclically
--  Be ready for the unexpected
    

Despite the warning signs that tough times may be on the horizon, most companies don't adequately plan ahead, often reacting to a downturn by embarking on a costly, damaging cycle of doing too much, too late, and too randomly. By avoiding this cyclical overshooting, companies can prevent harmful, excessive cuts during a downturn -- and useless and costly spending in an upturn.

"The key to winning in a downturn is to act sooner rather than later, before the narrow window of opportunity closes," notes coauthor and BCG senior partner Udo Jung. "Companies in strong operational and financial shape have greater freedom to make strategic moves when times get tough."

To receive a copy of the report or arrange an interview with one of the authors, please contact Eric Gregoire at + 1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 66 offices in 38 countries. For more information, please visit www.bcg.com.