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Exploring Business Responses to Inflation: Lessons from the Past and Insights for Today

Many individuals, employees, executives, CEOs, and business leaders have grown increasingly concerned about the current rate of inflation at 6.8% (USBLS, 2021). As executive coaches, what lessons and insights on managing inflation can we point our clients to? What can we learn from past business owner and CEO responses to inflation and how can we share this knowledge with our clients? This insight article takes a deep dive into what leaders of the past have done, and what leaders of today can do to combat inflation.

Not since 1982 has the US economy experienced inflation at the rates we are experiencing now. Bankers define inflation as a rise in the general price level. Put simply, this means, inflation is when the underlying price of a good or commodity rises faster than buyers’ income, such that inflated prices reduce buyers’ purchasing power. For example, if you make $15 per hour at your job, and the price of your food, rent, and fuel increases faster than your wages, then you have reduced purchasing power, and that’s called inflation. Inflation impacts businesses as well. When a company’s input prices (for costs of goods sold) rise, and the same business cannot raise prices commensurately on their customers, then inflation reduces company profitability and ongoing operations. In such times, companies do what they can to increase prices, and frequently implement cost-cutting measures inside the company to maintain profitability.

When inflation is at 2% YoY or lower, then inflation is almost not noticeable and easier to absorb. However when inflation rises more quickly, then problems, shortages, imbalances, and market volatility can persist. Hyper-inflation exists when the inflation rate is 50% or greater per month, and sadly this has occurred from time to time and wreaks economies. Happily, we are not there yet in the US, and there is still time for the Federal Reserve Bank and others to take action and tamp down on inflation before it gets out of hand.

“Let us learn from the past to profit by the present, and from the present, to live better in the future.” - William Wordsworth

Key insights from the 12/13/21 Arete Coach Podcast on inflation (episode 1052)

  • Inflation is higher than any time since 1982.

  • Inflation of goods and services is outpacing wage growth; meaning buyers (consumers and businesses have less purchasing power).

  • Central bankers typically seek to hold down inflation with five levers, all of which impact business operating conditions. The five levers include:

    • Monetary policy – increasing interest rates to cool off lending and slow the economy down

    • Control of money supply – pulling back cash in the system to reduce cash available to lend and spend

    • Supply side policies – implementing policies to increase competitiveness and efficiency of the economy, or to impact certain markets in a way bankers feel will help the economy

    • Fiscal Policy – recommending tax increases (to slow the economy) or tax reductions (to speed the economy up)

    • Price and Wage Controls – where the bank and governments seek to freeze prices, wages, or some combination of both. This has not been used since the 1970s however we have seen a willingness of the Fed Reserve Bank to do whatever it takes, and they have been quite creative in their application of their mandate. It embraced its role as “lender of last resort,” it provided liquidity to borrowers and investors in key markets, and it expanded its interest rate (market operations)

  • On the podcast, we also review insights from a 9/28/21 article published in the Harvard Business Review (HBR) titled, “6 Strategies to Help Your Company Weather Inflation” which offers key suggestions for business owners. The article authored by Jason Heinrich, Simon Henderson, Tom Holland, and Megan Portanova, examined 5,700 companies globally and what worked and did not work to navigate the waters of business during periods of high inflation. They found that the “businesses that cut costs to improve productivity the most during previous inflationary periods achieved higher total shareholder returns (TSR) than their industry peers that took less action.” Furthermore, “companies will need to make moves that not only cut costs but also build more scalable growth platforms, positioning them to strategically reinvest in programs that deliver greater resilience and stronger purchasing and pricing capabilities. They need cost programs that allow them to grow top-line revenue and reduce their dependence on volatile labor markets while improving employee retention.” The authors suggest six strategies to prepare for inflation now:

    • Get [greater] spending visibility

    • Differentiate between strategic and nonstrategic spending

    • Unpack the drivers of spending; [get inside the numbers; they even suggest strengthening ties with your suppliers to get preferred supplier status for pricing and delivery]

    • Reduce consumption

    • Eliminate work [reduce SKUs, reduce what is sold to increase profitability of most important items, remember the 80:20 rule; fire some customers]

    • Automate

  • Our podcast concluded with 23 potential strategies for business owners to raise prices while seeking to keep their customers.

Additional lessons from the past

Although today’s inflation has relatively unique circumstances due to the COVID-19 pandemic, inflation itself is not a unique concept. According to Chair Cecilia Rouse, Jeffery Zhang, and Ernie Tedeschi of the White House, there have been 6 periods of inflation above 5% since World War II (2021). The most recent period of inflation they assess is the 2008 increase in gas prices (Rouse et al., 2021). Below we examine 4 major business responses to the 2008 financial crisis, as it is the most recent example of how businesses have combated inflation previously. Consider the strategies they used to ensure the wellbeing of their business despite the economic difficulties of 2008.

Adapting to market adjustments

During seasons of inflation, customers have less purchasing power. Meaning they are not able to purchase their usual amount of goods. However, people want to maintain their standard of living and are resistant to change. Because of this, they look to cut costs and save money on entertainment (Riserbato, 2021 & Wolverton, 2009). In response to the market adjustments brought by the 2008 recession, Netflix offered consumers new products at a better price than competitors. Netflix was offering customers a subscription-based service that allowed them to rent as many DVDs via mail one at a time per month or unlimited streaming online starting at $9 per month. Meanwhile, customers during that time expected to “pay $10 to $20 to buy a single DVD, or up to $5 to rent a DVD from Blockbuster” (Wolverton, 2009).

Inflation and recession changes consumer priorities and purchasing power. By adapting to the changing market and providing customers with a more cost-effective way to purchase entertainment, Netflix was able to survive and innovate during the 2008 recession. From this case study, it is apparent that adapting to changing market demands is key to financial success amidst seasons of inflation.

“During inflation, goodwill is the gift that keeps on giving.” - Warren Buffett

Look for addressable opportunities in other geographies

While customers in America sought to cut down on unnecessary spending during the 2008 recession, companies like Lego transitioned to the global market. While American consumers were managing the effects of the 2008 recession, Lego altered its focus to consumers in Europe and Asia (Riserbato, 2021). In doing this, their sales were able to reach “an all-time high” despite the recession (Thompson, 2009). Lego adapted to the financial challenges of America by investing in globalization. They saw an untapped market and innovated towards globalization to reap the necessary profits.

“Innovation is the ability to see change as an opportunity- not a threat.” - Steve Jobs


New products have helped multiple businesses survive recessions and inflations. Apple during the 2008 recession, released their new iPhone 3G. During this time Steve Jobs was reported saying, “We set a new record for Mac sales, we think we have a real winner with our new iPhone, and we're busy finishing several more wonderful new products to launch in the coming months…” (Johnson, 2009). The same is true for Amazon. They are reported as launching new products and services “in the months leading up to the start of the recession” which “contributed to the health of the company in the longer term” (Smous, 2021). Although inflation is on the rise, innovation does not stop. Consumers are still interested in the latest technology and tools that are available. The primary difference is the decrease in consumer purchasing power, which should be accounted for when determining production cost, consumer price, and profit margins.

Improving customer experience

During the 2008 recession, Starbucks changed its marketing strategy. As customers transitioned to cheaper coffee options such as McDonalds, Starbucks created the “My Starbucks Idea” campaign, “an online portal where customers could create a profile and contribute ideas about what they wanted from the Starbucks experience” (Smous, 2021). This campaign along with other customer-centered approaches helped them establish a greater sense of community and brand loyalty amongst customers. Although they struggled like many other companies, closing stores, and laying off employees during the 2008 recession, their customer-centered approach helped them withstand economic turbulence (Smous, 2021).

Similarly, CitiGroup also invested more resources into customer experience. As the only bank that experienced any growth between the 2008 recession and 2014, it is important to note that they invested in their customer experience. CitiGroup increased community services, worked towards providing better experiences for customers, and reevaluated their marketing strategy (Riserbato, 2021). Both CitiGroup and Starbucks overcame the 2008 financial challenges by investing in their customers and developing a customer and community-centered approach to business.

What others say about fighting inflation

Not only are lessons from the past a key source of insight, but also are the knowledge of today’s researchers and leaders. Consider the following resources, insights, and thought pieces when discussing how to best adjust to inflation.

In July of 2021, McKinsey and Company released an article outlining how CEOs and business leaders can respond to the current rates of inflation. They suggest that business leaders invest in a “procurement nerve center” that “brings together specialists across the value chain- from supply chain, planning, finance, operations, and engineering- to triage supply-availability problems for raw materials, components, and related inputs.” They state that doing this can increase a “company’s response to uncertainty” and help them “capture cost savings, find and approve alternative commodities and their sources, and develop deeper partnerships with key supplies to generate additional sources of value” (Basar et al., 2021). In summary, McKinsey and Company encourage business leaders and CEOs to invest in strategic planning and problem solving to overcome current rates of inflation. They also state that cross-functional communication is vital to production and profitability in seasons of inflation. Other inflation tactics include investing in, or creating, “inflation nerve centers” that study “supply-chain risks, control spending, and accelerate collaboration.” When implementing these inflation nerve centers they point out several things to consider such as:

  • Identifying which supplies are strategic partners

  • Reduce waste

  • Create win-win outcomes

  • Revisit “value engineering” and design

  • Plan for the long term (Basar et al., 2021)

“Use it up, wear it out, make it do, or do without.” - New England Proverb

This unique article from The Philadelphia Inquirer includes a discussion between two executives Bob Rosania and Fred Woll who are in government “negotiated, fixed contracts,” making it “almost impossible” to increase their prices amidst inflation. Because of this, Bob and Fred focus on cutting down production costs. In this article, they discuss the importance of reevaluating efficiency, workflow, and processes to look for new ways to improve efficiency, reduce waste, and increase profit margins. For example, Bob Rosania hired an individual as a “continuous improvement team leader” whose “sole function is to look for opportunities to eliminate waste in our process.” They also discuss how business leaders can begin to negotiate long-term contracts with suppliers and employees that protect them from further price increases or labor shortages (Marks, 2021).

In this article by the Harvard Business Review, an analysis of 5,700 companies is discussed. They “found that those that cut costs to improve productivity the most during previous inflationary periods achieved higher total shareholder returns” than those who did not. In this article, they outline 6 strategies that businesses can take to weather inflation based on the findings of their research (Heinrich et al., 2021).

“Your margin is my opportunity.” - Jeff Bezos

Deloitte recommends that businesses take a “portfolio approach” to create strategies that best combat increased rates of inflation. They state that businesses should “quantify, prioritize, and plan to capture potential opportunities” in order to best manage their margins. In their article, they provide an example and infographic of a business that used this strategy within their MarginPLUS analysis (Deloitte, n.d.).

“The single most important decision in evaluating a business is pricing power.” - Warren Buffett

With insight from various companies, Deloitte outlines 4 steps that businesses can take to create effective pricing strategies during seasons of inflation. These steps include finding “easy wins” by correcting “pricing decisions made in the past,” creating a “targeted pricing strategy,” embracing effective communication, and rethinking “commercial positioning” (Deloitte, n.d.).

From the Accenture blog, we find 5 key strategies that businesses can implement in the face of inflation. These strategies are based on embracing reinvention. Accenture’s Managing Director, Praveen Kishorepuria, states that companies can “use price increases strategically,” “aim for cost visibility and transparency,” “reset” their baseline, make cost structures “more variable,” and “build operating resilience” (Kishorepuria, 2021).

Felix Kaiser, Marc Sommerer, Stefan Thimm, and Jan Vandaele of McKinsey and Company discuss the impact that inflation has had on category managers and businesses due to the COVID-19 pandemic. In this article, they outline 5 strategies that category managers can implement to help manage inflation. They state that category managers should gain a “full understanding of supply–market dynamics and outlook,” “ensure suppliers can clearly articulate the impact of price increases in the market on suppliers’ prices,” “view unavoidable price increases as temporary surcharges, not the new future state,” “prioritize cross-functional initiatives,” and “work with sales to pass on price increases” (Kaiser et al., 2021).

“Your ability to communicate with others will account for fully 85% of your success in your business and in your life.” - Brian Tracy

Amidst the current state of inflation, Walmart has been investing in “fulfillment,” “automation,” and “technology.” Brett Biggs, CFO of Walmart has been reported as saying “The investments we are making - and that’s going to be, you know, in fulfillment, it’s going to be in automation, it’s going to be in technology- I feel really good about the returns on those. And we wouldn’t be investing if we didn’t think our returns could go up.” Furthermore, Walmart is also diversifying services and inviting subject matter “experts” (Crawford, 2021).

This article from Mckinsey and Company offers specific insights for business leaders of industrial companies. In this article, an example of the required price increases based on prior profit margins and rates of inflation are discussed. This article also discusses how inflation can exacerbate “margin leakage” that results from poor interdepartmental communication. Three key steps are recommended for businesses looking to make “consistent price improvements.” These steps include setting the right price, optimizing “discounts and rebates,” and “managing leakage.” Each of these steps have detailed subcategories to further help business leaders apply these strategies to their workplaces. Their suggestions are summarized into two central claims “pricing is still the most powerful profitability lever, and companies that continue to rely on outdated pricing approaches- disconnected from input costs or customers’ willingness to pay- will fall further behind as their margins shrink” (Krishnamurthy et al, 2021).

“Difficulties strengthen the mind, as labor does the body.” - Seneca

The main takeaway

Inflation is a part of the current economic climate and leaders that adapt run businesses that thrive. While the threat of reduced profit margins, sales, or production supplies can be intimidating, it is vital for executives to remember that they have the ability to adapt their production lines, management strategies, marketing strategies, and investment in innovation. Executive coaches can use the examples from the past discussed in this article as inspiration and insight for their clients. These articles and research studies can also be useful information for executives and business leaders to consider when managing their businesses as well.

Remember, from the HBR article, “businesses that cut costs to improve productivity the most during previous inflationary periods achieved higher total shareholder returns (TSR) than their industry peers that took less action.” Be proactive and see what you can do to navigate inflation.

The current state of inflation should signal business leaders to innovate new ways to reduce waste, increase efficiency, attract customers, and better communication between marketing, procurement, management, sales, and other departments. Executive coaches can use this information as a springboard, inspiring questions and insights as necessary. Consider the following questions that executive coaches can ask their clients when discussing the challenges associated with inflation:

  • Does your business have effective communication between branches? If procurement can’t obtain a resource, would marketing know?

  • What areas of your production have the most waste? Have these areas been examined recently?

  • What talent and resources have not been put to full use in your organization?

  • Where could you innovate?

  • What message are you sending to customers through your price and marketing? Do these messages align?

  • Does your business plan ahead or react?

  • What about the marketplace has changed? Has your business changed in response?

“To improve is to change; to be perfect is to change often.” - Winston Churchill


Basar, J., Belotserkovskiy, R., Burns, T., Mussacaleca, M., Thoma, A., & Vandaele, J. (2021, July 21). Responding to inflation and volatility: Time for procurement to lead. McKinsey & Company.

Crawford, E. (2021, December 2). Walmart leverages operations to offset margin pressure from keeping prices low as inflation rises. Foodnavigator-Usa.

Deloitte. (n.d.-a). Effective pricing strategies during inflation for consumer companies.

Deloitte. (n.d.-b). Margin management can offset sustained inflationary pressures. Deloitte United States.

Heinrich, J., Henderson, S., Holland, T., & Portanova, M. (2021, September 28). 6 Strategies to Help Your Company Weather Inflation. Harvard Business Review.

Johnson, B. (2009, July 21). Apple bucks recession with some of best financial results in its history, thanks to new iPhone 3GS. The Guardian.

Kaiser, F., Sommerer, M., Thimm, S., & Vandaele, J. (2021, July 14). Getting real about mitigating price inflation. McKinsey & Company.

Kishorepuria, P. (2021, September 8). Inflation and economic uncertainty: What CEOs need to do now. Accenture.

Krishnamurthy, H., Queirolo, A., Redaelli, S., & White, B. (2021, October 22). Winning the race with inflation: The pricing opportunity for industrial companies. McKinsey & Company.

Marks, G. (2021, July 19). Two experienced business owners discuss strategies for fighting rising prices. Https://Www.Inquirer.Com.

Riserbato, R. (2021, May 28). How These 7 Companies Thrived During the Recession. Hubspot.

Rouse, C., Zhang, J., & Tedeschi, E. (2021, July 6). Historical Parallels to Today’s Inflationary Episode. The White House.

Smous, L. (2021, December 1). How Winning Brands Keep Winning in a Recession. AdRoll.

Thompson, J. (2009, August 18). Lego sales buck recession to hit all-time high. The Independent.

USBLS. (2021, December 15). Consumer prices up 6.8 percent for year ended November 2021 : The Economics Daily: U.S. Bureau of Labor Statistics. United States Bureau of Labor Statistics.

Wolverton, T. (2009, July 16). 2009: Netflix defies recession. The Mercury News.

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