We had published a blog about an upcoming recession super-early into the pandemic in March 2020. No one knew what would transpire next at that time, but now we know how events unfolded.
We had some advice for Industrials in March 2020 and we are happy that most Industrials had stuck to the suggestions we made back then.
Just as we were beginning to think that the pandemic and its long tail effects were behind us, we are facing an economic crisis unlike any other. So it made sense to revisit our guidelines for Industrials looking forward to both surviving & thriving through this recessionary period.
The trends that will impact Industrials the most in 2022
There are several trends that are different this time around compared to 2020 –
1. Talent shortage:
There’s an extreme talent shortage within the Industrial space with senior employees (and their tribal knowledge) retiring at a rapid pace in the last two years and the inability to hire a suitable replacement. The Bureau of Labor puts the percentage change in manufacturing quit rates at 58% which is the highest across industries.
Many Industrials were able to make a decent investment towards providing a digital-first touchpoint to their customers. This includes an entire gamut of technology and tools such as eCommerce portals, IIoT, support & service portals, etc. The IoT technology market value is expected to rise to $1.39 trillion by 2026.
3. Digital Transformation –
At least 1 out of 4 Industrial is currently invested in upgrading/revamping their ERP/CRM with a typical project expected to cost hundreds of thousands of dollars, if not millions, and last for at least 2 years.
So what should Industrials be doing to make your business recession proof?
1.Your team & employee still come first –
Let me get the most fundamental guideline out of the way – Your team still comes first. At the height of the pandemic, it was your team’s health that was of paramount importance. With the recession that we are hurtling towards, you need to quickly act on how to incentivize and motivate your employees to stick around and perform as always in a struggling economy. These are teams that had to dramatically change the way they engaged with your customers in the last 2 years and have been through one of the worst prolonged moments of modern history.
2. Use this time to stress test your risk models –
Risk models can make us risk-prone, often creating an “illusion of control” before things fall apart. This happens because we tend to believe we’ve covered the worst-case scenario. But when the rubber meets the road, the best-laid plans can fall short. Stress testing is both a science and an art that can only be truly tested on the day those models are stretched to the limit. This is one of those scenarios where your risk models are going to be tested every single day. Take this opportunity to evaluate your risk models & guide your team to gather around the common cause – let them know there’s no playbook for this & you all are building one.
3. New customer acquisition will be tough –
Across the board, new customer acquisition will be a challenge as customer Capex is bound to go on hold. It’s time to look at your existing footprint & understand additional revenue opportunities in your installed base where the sales cycles are shorter, given the established relationships. As a first step, take inventory of what is installed where & create target segments so you can deploy your sales force constructively. Your sales team is tough, but everyone needs a win in bad times – your installed base is the most accessible place to start.
4. Think beyond equipment sale –
Aftermarket sales is a trillion-dollar industry that is looked over in good times because everyone is focused on large equipment sales. With a looming possibility of a recession, your customers are going to likely hold onto their equipment longer. It also means that the same equipment will have more wear & require services often. Herein lies the opportunity to sell parts, services, and warranties, amongst other things which can offset your lower equipment sales. However, this also implies that you have reliable installed base data that you can quickly deploy to create sales strategies or to power support & services. As the situation evolves over the next couple of weeks & months, I will make it a point to write to you to share what I learn from the industry. I am in it so we can ride out this wave together. Entytle provides the fastest way to access clean, reliable installed base data from your existing tools & systems.
5. Safeguard your technology investments –
As Industrials rush to invest in ERP/CRM upgrades & invest scarce dollars in digital-first customer experiences such as eCommerce, Service portals, etc, they need to ensure that these investments are justified, start to deliver immediate value, and consume minimal business resources, including people. The average ERP upgrade can run up to 2 years and many other upgrades/tools being rolled out will rely on unreliable Installed base data. This puts the entire tech investment at risk as bad data implies bad insights & consequently bad applications being run on top of them. Learn how an Installed Base Platform can help with this here.
I hope you find this post useful & in case you would like to discuss this further, please feel free to Contact Us here.
It’s time to act, and it’s time to recession-proof your business.