Business cycles as nature's seasons

change Sep 25, 2017

We don’t have to squint our eyes too much to see the link between the four business cycles and nature’s seasons. Although we don’t really run our businesses that way, well not deliberately anyway.

Rorty (1922) defined four phases of the economic cycle as revival, prosperity, liquidation and depression. Schumpeter later referred to them as expansion, crisis, recession and recovery.

What if we accepted that businesses are actually organic creations, and so just like any other organic creation, they too will move through seasons.

Along with this acceptance, what if we deliberately ran them that way where we participated in business activities that were congruent with the activities of the season?

When we think of the Earth’s four seasons, and what Mother Nature tends to during these seasons, we see a stark resemblance with the four business cycles.

Winter is a time for healing, rest and preparation, Spring augers new growth, during Summer flowers blossom and bloom, Autumn brings the shedding of leaves and we retreat back into Winter. It seems that Winter is the depression within the business cycle, Spring is the revival, Summer is prosperity and Autumn is liquidation.

Although we don’t actually run our business this way. We tend to focus on being in Summer the whole time, well for as long as possible, focusing on prosperity and growth, always. And we seem to be forced into the actions of liquidation (Autumn) and depression (Winter) because of market forces, or forces external to us and we are forced to respond accordingly.

If we deliberately ran our business where the summer months were about growth and prosperity, the spring was when we brought new products to market and launched new ways of working internally, the autumn we consolidated our businesses, looked for opportunities of optimisation and during winter we concentrated on learning our lessons, implementing them and reflecting internally to fix things we know aren’t that great, we spent time healing our organisation, tending to our culture, fixing broken processes etc.

Of course, the time it takes to do these activities will be longer than the three months it takes nature to perform all her duties, she has been doing this for much longer than us. But we could view our long term business strategies in terms of the seasons, and break them down into four phases of these types of activities.

If we run our businesses this way, would we be less vulnerable to the sometimes painful fluctuations that businesses inevitably go through? We would actually be smoothing out the undulation of business cycles rather than avoiding them as long as possible, stretching out our growth as long as possible, and then having to cut back severely to manage the inevitable downward cycle.

I intend to put this into practice with my firm and see if I can gather some empirical evidence over time that it creates a more resilient business. And with Spring now truly here, we begin.

This was first published on Huffington Post

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