The surprising strategy to surviving economic recession

Victoria University PhD graduate Simon Collins. Photo / Victoria University of Wellington

Manufacturing firms which survived the 2007 global economic recession have an unusual secret to their success: they stopped manufacturing.

PhD graduate Simon Collins, who wrote his thesis at Victoria University, has identified what factors increased resilience for New Zealand businesses during that time.

Collins found four main resilience-building strategies which separated businesses performing well from those that weren't. These included - stop manufacturing, focusing on development, taking ownership of distribution and retailing products on their own.

"One of the biggest surprises was that some of the resilient firms stopped being manufacturers," Collins said.

"They outsourced manufacturing and instead focussed on developing and designing great products, and then taking ownership of distributing and retailing those products themselves. By delivering their products straight to their customers they captured some of the margin that would usually go to a third party."

Collins said this tactic was part of wider business strategies used to maximise efficiencies and improve margins.

He also found three other resilience-building strategies that well performing businesses were using - including developing the next generation of products to stimulate new sales, actively collaborating with other firms and cataloguing specialist knowledge and skills.

Collins' university supervisor professor Sally Davenport said his research captured the response of firms from "some stellar performers to a couple that subsequently went under".

During the same time Collins started his PhD, he also started the consultancy company Visory which helps businesses use information design to facilitate communication strategies.

He said his study is fundamental to the work Visory does and that the "two cross-fertilise each other in a sense".

"I started Visory with two friends around the time I began my PhD. My research has been really valuable in our work because the findings are widely applicable to the type of strategy work we do for our clients," Collins said.

Collins said he found the companies that performed well during the recession were the ones applying all resilience-building strategies.