Jan-Feb 2020 - ChannelVision Magazine

CORE COMMUNICATIONS McKinsey provided three steps to help companies get through the next downturn, if it should happen. 1. Before the recession: Reinforce your “core” As McKinsey explained, resilient operators invested in core revenue en- gines long before the last recession. “They started by optimizing the bal- ance sheet and deleveraging, freeing up the cash they needed to continue invest- ing in critical infrastructure during the re- cession, and ramping up investment and acquisitions into the recovery,” the report stated. “Today, with leverage high, this will be more important than ever.” During the next downturn, McKinsey said, telecom companies will be chal- lenged to strike a balance between invest- ing in capital assets and deleveraging. 2. During the recession: Protect your investments During the last downturn, McKinsey continued, resilient operators focused on remaining efficient and nimble. It’s important to be able to react quickly and with agility. “Assuming the balance sheet is pre- pared in advance, this is the time to layer in short-term moves,” the report stated. Once again, hard times call for strik- ing a balance. According to Mckinsey analysts, “while rightsizing operating expenditures is important, reducing key network and IT investments during a downturn does not correlate with resil- ience, and safeguarding such expendi- tures should be a priority.” 3. After the recession: Double down on investing Companies that played their cards right during the last downturn expe- rienced much higher gains once the market corrected. “Many of the benefits of resilience are harvested after the downturn,” ex- plained McKinsey. “From 2007 to 2009, resilients grew revenue 9 percent more than nonresilients; by 2011, resilients had grown revenue 27 percent more than nonresilients compared with 2007.” While the actions in the six to 12 months after a downturn are partly dependent on the choices made before and during, “resilient operators across the board focused on this growth and quick recov- ery,” said McKinsey. After emerging from a downturn, that’s the time to focus on long-term investments and invest in next-genera- tion technologies. “Resilients extended their lead be- yond the end of the recession with large investments in technology, including artificial intelligence, advanced analyt- ics capabilities, and automation across sales, customer service, and operations,” concluded the report. “Leading operators also pursued growth opportunities out- side their core revenue engines; today, some are realizing a significant percent- age of revenues from adjacencies such as digital and OTT services for consum- ers and cloud and cybersecurity services for businesses.” o 53 January - February, 2020 | CHANNEL VISION

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