As someone who started his career in the immediate aftermath of the 2001 recession and was a private-equity investor working in portfolio companies during the 2008 crash, Daniel Jang has faced his fair share of economic downturns.
The biggest lesson learned from those periods was the need for “decisiveness and a bias for action”, he tells Business Chief on a call from his office in Washington DC.
And it’s a lesson he now uses in his role as Chief Financial and Strategy Officer at CommentSold, the North American leader in live selling technology for thousands of SME retailers generating US$3.5 billion in lifetime GMV – where he leads the finance function specifically and more generally helps to steer the business towards achieving its broader financial and strategic objectives.
“While I’m not involved in every aspect of day-to-day operations, I’m constantly ensuring that my team’s goals are in line with the broader company’s strategic goals and that I’m enabling the day-to-day operations to be as successful as possible,” says Daniel, who has more than 20 years of experience as a strategic business leader, investor, and Board advisor.
“I believe this service mentality should be the playbook for all CFOs”, he tells Business Chief. “Finance should be an enabler, not a blocker, and great CFOs are defined by their ability to enhance the business’s ability to establish and achieve the best strategic outcomes by working more closely with their executive teams and fostering cross-function, productive partnerships across the organisation.”
Daniel points to the current economic environment as unsettling for all business leaders, but that it can be especially tricky to navigate for young companies.
“Having only experienced what it’s like to run a business during a growing economy, and a historically long one at that, many businesses have yet to experience the kind of recessionary environment we are in now.”
So, how should leaders, and businesses, react? And what steps should they take?
What they absolutely must not do, argues Daniel, is bury their head in the sand and hope for the storm to pass quickly.
"I saw many businesses not survive the 2008 recession because they were too slow to reduce cash burn, for example, and they ran out of liquidity. Facing the current environment head-on and taking decisive courses of action are critical. As my former mentor was fond of saying, ‘hope is not a strategy’.”
Daniel points to focusing on cash preservation as a good objective for any business during a downturn – and that taking stock, making bold decisions, and having a bias for action is crucial, if businesses want to not just survive but thrive, and emerge stronger and more innovative.
Be decisive, bold, and have a bias for action
The most important advice in weathering a downturn, says Daniel, is to not be afraid to make bold, even difficult decisions.
“Being in an uncertain and recessionary environment can have a paralysing effect, especially for operators experiencing it for the first time,” he says.
‘Should we wait out the storm?’ ‘Will it really be that bad?’ ‘Let’s see how it looks after one more quarter and then make a decision.’
These are the types of thought processes that can lead to inaction, according to Daniel, who recommends the 80/20 rule in such situations.
“It’s more important to take action based on 80% data, maybe even a little less, versus waiting too long for more precise data,” he says. “The reality is no-one knows exactly how a recession will unfold, and so waiting for the perfect information is not a winning strategy – so have a bias for action.”
Being conservative, but innovative, as a strategy for success
Daniel believes that leaders should never waste good adversity and that economic downturns are the perfect opportunity for companies to find ways to innovate within their core environment, so they emerge stronger.
“In times of economic uncertainty, conserving cash has to be the top priority for all companies, and doing so requires business leaders to be bold with their decision making,” he says, adding that these aren’t always easy decisions, but often necessary to maintain a cushion that allows for execution on a long-term growth plan, not to mention the flexibility for when pivots are needed.
“In this way, businesses need to be conservative,” he says. “To execute this well, business leaders need to be extremely clear on the core competencies of their business, understanding the must-haves versus the nice-to-haves, and shifting priorities as necessary.”
Once they establish this, they will emerge with a clearer set of priorities and vision in many new ways, he argues. And with this refined clarity, businesses that can execute well will have an advantage over competitors that are maybe slower to react.
“They can be innovative in ways they can outperform the competition or take advantage of a rebounding economy through organic growth opportunities and maybe through acquisitions or new strategic partnerships.”
What that innovation looks like might be different to different companies, Daniel argues. Instead of innovating new product or service offerings, business leaders may want to channel the team’s creative energy towards innovating or re-engineering the business fundamentals, the company’s core service offerings or basic processes, for example.
“This is also a good opportunity to double down and realign the teams with the company’s mission and vision,” he says.
“So, while not working on new product lines may look like the company is not innovating, there is a difference between innovating on the core competencies of the business and just taking a ‘hunker down and let the storm pass’ mentality. Companies that take advantage of the opportunities that come from a recessionary environment will be better positioned for growth going forward.”
Taking stock during a time of weakness is an opportunity for change
An important step in facing an economic downturn is to "take stock", Daniel tells Business Chief.
He explains that in high-growth environments, business leaders are empowered to try new things at a rapid pace. A high-growth environment allows businesses to invest budget resources to new initiatives that may or may not yet be generating a positive return, something he says that can certainly drive true innovation, as operators are encouraged to ‘fail fast’.
But the abundance of cheap financing and a growing economy where a rising tide lifts all boats can also cover up many weaknesses a business may have, especially in crowded industries with many players providing similar products and services.
And once the tide falls, those weaknesses are revealed, and only businesses with stronger fundamentals will endure.
So, companies should take advantage of what weaknesses are revealed in their businesses during this time, advises Daniel and use the time to take stock of what areas need to be improved.
Daniel says this can take the form of core strategic decisions, such as ‘should we be in this product or service line?’, or more everyday functions, like ‘is my billing process efficient and scalable?’. But only by getting back to these basics can businesses prepare for a healthy return to growth.
“By taking stock of how current processes are running, then isolating and remedying any gaps, companies can ensure the fundamental business processes are in place to not only weather the storm but be poised for future growth again,” he says. “This backend grunt work won’t grab headlines in the short term, but it will keep the wheels moving and add value in the long term.”
In other words, emphasises Daniel, these economic times present an opportunity for companies to emerge stronger on the other side, positioning themselves to develop and optimise their products and services in ways that ultimately do make those headlines.