Robert Carr: The only way is up during recession

History shows recession is a cyclical inevitability in our economy. Go back decade by decade and you see the repetitions, some more severe than others. The challenge in business is for the managers at the helm to steer the best path possible.

Do they see recession as an ungovernable monster or as a time of opportunity? By definition economic decline is bad for most companies. Sure, there might be some partially useful outcomes - trimming surplus fat, reconsidering what is your core market. For the majority it is a question of riding out the pain, trying to hold on to your people, and rebuilding, come the recovery. But for a small proportion of businesses it's take-off time.

Larry Keeley, US innovation guru, points out that six of the world's top ten companies by market capitalisation started in recessions, Exxon Mobil and Microsoft for example. They haven't done badly, have they? Look at how Apple has shot ahead in this recession. In 2000 its new Apple Store project was derided. In 2010 they had queues down the street.

What's the difference about what these companies do and what lessons can we all learn? I stress that for many companies which go under or shrink in a recession no blame attaches to their staff. They are victims of strategic blows the business cannot survive. That some businesses (maybe ten per cent of the total) meanwhile go from strength to strength is partly a matter of good fortune. But there is also the challenge of good management.

The ability of businesses to prosper in these times requires sound strategic thinking. Key cost control is important (and that may include people), but successful companies also invest in the future. There has to be innovation - which may be new products or services. Often it is about doing things differently. We are now in what the Harvard Business Review (HBR) has described as "new normal". Failure to adapt is a terminal strategy.

The starting point is to stay close to your existing customer base, understanding their needs, walking hand in hand into a changed relationship, for surely after the recession will be different from before it.

There is a danger that when generals go into battle they become blinded by the fog of war, making snap decisions, responding to crises of the moment. Survivors and ultimately winners remain focused on the medium and long-term goals. Last week Edinburgh Chamber of Commerce held its annual general meeting and reported on a 23 per cent growth in turnover to 4.9 million and a doubling of surplus to 225,000.

It's a classic example of how careful cost control balanced by prudent investment delivers growth in times of hardship. The Chamber isn't just a service to businesses; it's also a business in its own right. Its surpluses are reinvested to grow new services, not distributed.

HBR studied 4700 companies' performance three years before past recessions and three years after. The prevention-focused cut costs. The promotion-focused spent money. The pragmatists made shrewder choices and did better. The progressives made an optimal balance between these options and thrived at the time or took off when recovery came. Getting it right is an elusive balance. The progressives focused on making operational efficiencies and maximising the potential of their people rather than dispensing with highly trained staff.

Edinburgh companies are doing it. Scotmid, in its 150th anniversary year, posted record profits of 10.2m in January. Starting in 2007 with a "Back to Basics" campaign, staff then set about "Raising the Bar", underlined by a policy of continuous improvement in every aspect of the business.

A key question for any company is: are we ready to rebound? The small investment in being a member of the Chamber of Commerce increases their ability to spot new opportunities. It helps managers work out what their company needs. By reflecting on a company's core values, and learning from the contacts we make it is much easier to see strategic opportunities. From that, individual actions can be refined. It is up to the senior leaders to set clear targets, based on customer focus.

How we compensate our staff needs to be geared to those targets, rewarding our people for delivering our strategy. We need Vikings, not just farmers - staff who are willing to enter new territory which may be high-risk, rather than just tending well-domesticated accounts. This calls for ambitious, flexible managers.

Again, the Chamber of Commerce provides plentiful opportunities to develop these attributes. It has also helped many through the recession whose career path hit the wall.

This is not firefighting. It is continuous sustained effort. Edinburgh has a magnificent broad base of business and economic life which is accessible to those who make the effort. The Chamber sits at the heart of that, saving businesses money, helping people win the business they need, and offering a powerful advocacy unrivalled in Scotland at the highest levels of politics, the economy, banking and other business sectors.

• Robert Carr is chairman of Anderson Strathern and president of the Edinburgh Chamber of Commerce.