In the recession, clever business leaders discover new products or methods, and sometimes market fundamentals shift to give the advantage to an existing business model. However, these tend to be exceptions to recessionary economics. If you are just waiting for the fog to lift, you may emerge to find that your business is weakened. What is more, there is a great chance that your best remaining people will leave and take better positions at other firms once the firing freeze thaws.

In past downturns, some companies, including Toyota, Nokia, Cisco, Samsung and Emirates, emerged from an economic crisis stronger than before, deriving strength from economic hard times. Many of their competitors, in contrast, languished or failed. Part of the difference is down to having managers who understand how to create value during a downturn, as well as their effectiveness in acting on these insights. Managers who see economic strife only as a threat are missing out an ideal opportunity to implement change and instill better practice.

Managers can harness a downturn to make any number of possible changes, but the following three actions in particular are likely to create long-term value.

Encourage ongoing cost discipline. Golden opportunities to increase sales often emerge in downturns. The best opportunities to cut costs often arise in good times. During a boom, managers tend to overlook the inefficiencies that sprout like weeds throughout the organization, draining resources which could be applied more productively. During a downturn, good managers weed their overgrown gardens, but great ones also build process to nip these costs in the bud as they crop up in the future.

Force hard choices. Good times produce ample resources that blunt the need to make hard trade-offs. During a boom, managers tend to spread resources evenly to preserve a sense of fairness and minimize conflict. Even in the best of times, this means that promising opportunities receive fewer resources than they require while others get more than they deserve. In the worst of times, it is even more harmful, dissipating scarce cash. Many managers, for example, try to spread the pain of downsizing evenly, demanding an identical percentage reduction in headcount or expenditure across all units regardless of their merits.

In a downturn, senior executives should consolidate their major initiatives into a single list and select a handful of truly critical ones. To ensure everyone gets the message, they should communicate the key priorities throughout the organization, including a list of initiatives that are no longer objectives.

Seize golden opportunities. Golden opportunities refer to occasions when a company can create value significantly in excess of the cost of resources required to seize the opportunity. Examples include acquisitions at bargain prices, innovative products that dominate a new sector; expanding in emerging markets; or acquiring valuable resources cheaply.
Most managers look for golden opportunities when the good times are rolling. This is a mistake. The best opportunities often arise during downturns when distressed sellers are forced to offload valuable assets at bargain prices. To conserve cash, companies may be forced to retreat from attractive propositions, thereby creating an opportunity for rivals.

In a downturn, it is easy for managers to focus exclusively on managing threats, and thereby lose sight of golden opportunities. To counterbalance this, they should ask themselves the following questions. Are competitors retreating from opportunities that we can seize? Should we double down in growth markets, such as China, rather than retrenching to our core? Does our customers’ or competitors’ pain create an opportunity for us? Can we snap up key resources at bargain prices?