The Economist reported last month that a global recession in 2023 is inevitable.
A few years ago, we conducted a poll asking practice owners how they would likely respond to a recession. The poll asked if you would:
- Develop new markets (i.e. invest in marketing and sales activity) – 47%
- Increase operational efficiency (cut costs, i.e. facilities, consumables, frills) – 26%
- Enlarge asset bases (invest in new equipment) – 16%
- Reduce labour cost (i.e. reducing hours or laying off staff) – 11%
The best response to a recession for private healthcare companies is a combination of three moves
A study reported in the Harvard Business Review (HBR) broke down the combination of these responses and revealed which firms performed best. They studied 4,700 public companies, breaking down the data into three periods: the three years before a recession, the three years after, and the recession years themselves. They found that a specific combination of offensive and defensive strategy resulted in a near doubling of results against rivals.
Two offensive strategies to beat a recession
The two offensive strategies are:
- Develop new markets (i.e. invest in marketing and sales activity)
- Enlarge asset bases (invest in new equipment)
One defensive strategy to outrun a recession
The one defensive strategy that will best complement the two above is:
- Increase operational efficiency (cut costs, i.e. facilities, consumables, frills)
Interestingly, the results of our poll had most respondents (72%) choosing the two offensive strategies, but less than 10% choosing the optimal combination of offence and defence suggested by the HBR study.