Forbes: Strategic Empathy As A Source Of Competitive Advantage

20 Dec 2022
Empathy for customers, competitors, and employees.

Originally found at Forbes

Do layoffs today hurt profits tomorrow? Recent research suggests that these cost-cutting measures might decrease a firm’s hard-won competence, arguing for a refrain or at least a pause from drastic measures. There is a broader concept that ends at the same conclusion: strategic empathy analyzes, reflects, and internalizes the current and future sentiments and plans of a firm’s customers, competitors, and employees. This empathy requires a pause before a firm takes drastic action to retrench or innovate.

The headlines have been awash with reports of massive layoffs across many sectors of the American economy. Last month it was Facebook. This week it is Goldman Sachs. Even though there is still some debate as to whether the American – and global – economy will have an incremental brief drop in demand (a “soft landing”) or a precipitous prolonged tumble (a “hard landing”), few economists and business leaders doubt that we are heading into a period of economic pain.

Conventional wisdom suggests that, as demand wanes in a recession, firms should lay off employees and shut down currently unprofitable activities. These actions reduce costs as revenue declines to preserve profits or at least avoid heavy losses. This line of thinking implies that companies should postpone new investments into innovation and idle plants in order to preserve cash to protect the core portions of their business.


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