How to win in a downturn: prepare your company now.

• Author: Kaufman, Bob
• Position: ECONOMY

Think about this: Alaska's coming recession could be the best thing that ever happened to your company.

Of course, that's only if you play your cards right.

Downturns reshuffle an industry's competitive landscape far more than periods of economic calm or growth. During a recession, studies show that up to 40 percent of industry leaders topple, while 20 percent of laggards vault into a leadership position--a rate of change twice what's seen during other economic periods. What's more, the gains companies make during a recession typically endure long into the future.

So, how do you position your company to win in a downturn? Research into past recessions point to a few winning strategies. And they're not what you might intuitively think.

When storm clouds gather on the horizon, many managers react by denying the early warning signals in order to project confidence and maintain the esprit de corps. Another common reaction is to hedge bets by pursuing a diversification strategy to broaden the company revenue base. Then, once the crisis is undeniable, managers tend to pendulum to the opposite extreme, slashing R&D, sales, and marketing spending across the board and hammering suppliers hard on price.

Research shows each of these moves to be exactly the wrong ones, because they erode long-term competitiveness and financial performance. Instead, it's better to take a more strategic and contrarian approach.

Here are four steps you can take now to prepare your company for what may be a mild recession in Alaska ... or a long-term economic winter.

Run Scenarios Before Trouble Approaches

The time to consider your options is before a downturn hits. Some managers avoid this step, because they either don't want to invest time planning for a situation that may never happen or they fear that discussing worst-case scenarios will demoralize the organization. Yet research into cognitive behavior shows that people are less creative and less able to conceive of new approaches when under stress. Once a company finds itself in distress, it becomes much harder for management to think outside the box.

So contingency planning is a wise investment of time. You want to think through how various scenarios will impact the company. In the case of the Alaska economy, for example, you might consider three scenarios:

* A modest downturn (e.g. oil prices rebound within two years)

* A severe recession (e.g. oil prices stay low for three to five years)

* A long-term decline...