We are five years into the post-COVID economy, and the world's still wobbling in my opinion. I mean, we've seen some ups and downs and maybe some brief stability here and there, but things to me are just changing faster than change itself. Inflation is sticky, tariffs are back on the rise and in the headlines, and I feel like executives everywhere are really whispering the same question: Where can we cut costs before this gets worse?
And the thing is, I own a business myself, and it's a reflex. I get it. But I actually think it's the wrong approach, especially for those of us in product development.
The Historical Pattern: Contraction Doesn't Equal Recovery
If history's a clear indicator, every time the economy has tightened, the first response is contraction—freeze hiring, cancel projects, pause innovation. And yet when you study the data, which is what my aim was today, the companies that recover the fastest are the ones that kept learning while everyone else was cutting.
Hi, I'm Lance Dacy, also known as Big Agile. And I am knee-deep in organizations almost every day. And I have been for the last 15 years and I understand how they think. And I've seen the movie over and over again.
My Own COVID Pivot: Drinking My Own Champagne
I actually recall back in February, I believe it was February of 2020, I kind of took my last trip for a long time. I was experimenting with doing public classes and I decided to teach a class in Honolulu. Why not? I returned home—this was at the end of February. I returned home in March. And I think most of you're aware of what happened next.
So as a business owner that I tend to try to help other businesses as well, it was time for me to drink my own champagne of agility. I help organizations pivot and we call it turning on a dime for a dime. And here I was in my own business having to do the same thing.
And so I noticed from March to April of 2020, I actually probably worked harder than I really ever had in my life. I was trying to figure out how the 70% of my business that was focused on in-person learning, coaching and consulting organizations—that's really the only way that I conducted my business—how was I going to adapt to this world where everybody is now at home? We had some remote working back then, but not like, "Hey, I'm going to teach a class remote." So we really didn't know how to solve that problem.
And I tell you what, I went all in. And guess what? I didn't cut costs. I started investing in innovative ideas. I bought a lot of new technology. I set up a recording studio and I didn't know whether they were going to succeed or not. But the different question was: How can I prove that it was going to work and how can I prove I was doing the right thing?
The Data Behind Learning Over Cutting
So my business isn't as well known as a lot of others in the industry. So I thought, let me go find some data that resonates with this as well.
McKinsey's 2008 Financial Crisis Study
During the 2008 financial crisis, McKinsey studied more than a thousand companies. The top 10% that emerged stronger didn't slash R&D. They didn't lay off in a panic and they just simply resequenced their work. They shortened decision cycles and preserved flow, which is a lot of what I talk about.
In the last economic cycle, companies that managed to do this drove value creation in the form of about 5.3% excess total returns to shareholders—and that's five times higher than the average company. Rebecca Dory actually has a good quote, and she says, "You should start placing some of your strategic bets while you're still on the downturn because that will help both broaden and deepen those investments when things start to improve." But the natural ability obviously is to cut costs.
The companies that did this, they had a term for them and they called them the Resilients. The resilient companies did better at the outset of the downturn and then way better afterwards as well. To give you the data point, they grew earnings by 10% above the industry average by 2010. Meanwhile, those that kind of leaned on the traditional cost cutting alone were still down 6% three years later.
So while cutting feels safe, I really think it kills flow, morale, and the other word I'd like to use is optionality. What are our options here? I spend a lot of time trying to help teams practice flow in the organization. And can you imagine if we just cut 20 teams out of the herd—your flow would nearly go to zero. Now you can learn how to build that back up with the current skills, but I don't think we're thinking about that when we do the cost cutting measures.
Toyota's Kaizen Approach During the 2008 Collapse
Now I found another interesting one: Toyota. Most of us are familiar with Toyota. And when auto demand collapsed in 2008, Toyota actually resisted mass layoffs and instead they retained—or retrained, I should say—idle workers to identify the waste in the production system. And within six months they had removed thousands of micro-bottlenecks. So they just repurposed these people in more of a kaizen approach.
And by 2010, while GM and Chrysler were still restructuring and dealing with their org chart, productivity at Toyota was up 12% or so and their time to launch for new models actually dropped from, I think it was 24 months down to 18 months. And so they didn't save their way out of this problem. They learned their way out, which is a big theme for the topics that I'm covering here in Q4: How do we build a learning organization, or can we prioritize that learning? And that's really what lean really means—preserving capability while improving throughput, not cutting it out.
SaaS Companies During COVID: Three Success Stories
Now, I usually work with product development teams that are in the technology business. And so I thought, well, let me try to find some data on that as well. So SaaS firms during COVID—I'd say in 2020—most of the SaaS companies faced a 20 to 40% revenue hit. That was overnight, right? That's what the data is showing us. Now, some went straight to hiring freezes, budget lockdowns, but Atlassian, Zoom, and Shopify basically doubled down on flow and transparency instead of cost cutting measures.
Atlassian: Small Teams, Limited WIP
Atlassian kept product teams small and autonomous, capping their work in progress at three major initiatives per team. They were intentional and deliberate about doing that.
Zoom: Daily Operations Reviews
Now Zoom is really an interesting one. I feel like Zoom went on the journey with me because as I was trying to transition my business, I was looking at all these online remote hosting tools. We would normally talk with a client that was remote and just get on a call and do something. But how was I going to conduct a class and do breakout rooms and share content? It was very concerning to me. So I was really out there trying to find what are the right products to do that. And obviously Zoom was probably one of the first ones that I stumbled upon.
And so when I look at Zoom here and how they kind of navigated it along with me, they spun up a daily operations review cadence—I guess is what you could call it. And it was really just a 10-minute standup for executives to manage load balancing and scaling capacity of their teams.
Their daily meeting participants jumped from 10 million in December 2019 to over 300 million in April of 2020. I was one of those. And you can see here their annual revenue skyrocketed from $622 million in fiscal year 2020 to $2.65 billion in 2021. That's a 326% increase during the downturn. And so their market capitalization and all those things that we look at with business peaked at $159 billion in October of 2020.
And obviously that came with some challenges. They scrambled to address security concerns, scaling infrastructure. I think I read an article one time—they had to scale their infrastructure performance like 900% literally overnight. And so I thought that was a good indicator in the tech sector, which I work in, of a good example of not cost cutting, but going all in.
Shopify: Flow Metrics to Guide Decisions
Shopify used flow metrics to identify which experiments actually moved retention. They were cutting pet projects, not people. And so the result: all three ended 2020 with record annual rate of return growth while their peers stagnated.
I was also looking at a tool called BlueJeans, and they had some really nice innovative ideas, but I don't even think they're around anymore.
The Science of Flow: Why Throughput Beats Cost Cutting
Now I'd really like to focus on the science of flow as it's related to these. Probably most of you're familiar with the economist Donald Reinertsen and physicist Eliyahu Goldratt. Both proved the same laws kind of in different ways, but the faster value flows through a system—or the faster the value flows through a system—you can basically see the higher the effect it is on the margin that we're going to see. And that's regardless of the cost base.
So throughput isn't really about the volume, it's about the speed of validated learning. And I think we lose sight of that sometimes.
The Power of Limiting Work in Progress
Limiting work in progress is one of the best things we can do. Chopping our work into small pieces, which most of us believe in an agile process when we do that. So limiting work in progress and keeping the work small—that can expose delay costs, and that shortens our cycle and turns inventory into cash faster, which a lot of us know in technology that that inventory is invisible and hard to track.
So keep that in mind that flow and learning and keeping work small is still how a lot of these companies successfully navigated the uncertain times.
MIT's 2022 Research on Cycle Time
And so I want to point some data to that as well with MIT. They're a well-known research institution. In 2022, the MIT studies show companies that improved their average cycle time, which is often considered one of those good lean, agile metrics. They were able to improve cycle time over 20%, and they saw a gross margin improvement of 13%. This is like real data, and they had flat revenue. So they even had the issue of not gaining as much revenue, but they were improving their margins.
So I find if you're an executive or manager and you're hunting for margin, these studies are just screaming to stop cutting spend. I mean, I know that's the easy thing where you just look around, "Hey, we got a lot of fat, let's cut it." But if you're building products and you're using people to deploy things, that's the last thing you want to cut in my opinion. Start cutting the queues, start cutting the projects. Don't cut the people.
The House of Quality: Connecting Customer Value to Flow
And so what I want to show here, as I was going through all of this data, I found this thing called the House of Quality Metrics. And I know you probably can't see it there, but you can certainly do a Google search on it.
But the House of Quality is basically a core framework developed within Quality Function Deployment, often abbreviated QFD, and it translates customer needs into these measurable design, process, and testing requirements—very familiar to us in technology. And basically each room of this house is visualizing how strongly a customer demand (the "what") aligns to a product process capability (the "how").
So when applied in Agile or lean systems, we can see that this becomes more of a living flow map of value. And teams can trace each requirement through specification and test cases, ensuring that every effort that we do in engineering can tie directly to some kind of customer outcome, which I find a lot of teams struggle with—being able to tie the measurable effort that we're doing. Does it even drive an outcome?
And so what we find is in times of inflation or tariff pressure, the House of Quality can provide a way to prioritize high-impact features and eliminate weak correlations that kind of drain our throughput. And that's like prioritizing good projects or limiting how many of them we work on in progress. So instead of cutting costs blindly, leaders can actually see where the investment that they're going to take can amplify value and where it's just friction. So in essence, it connects the voice of the customer to flow efficiency, which could enable us to have smarter economic agility.
A Real-World 2025 Case: Tariffs Don't Have to Mean Layoffs
Now, another case that I want to talk about is a local manufacturer that suffered problems with tariffs just recently here in 2025. So earlier this year, you're probably aware, a mid-size US industrial supplier was facing a 15% increase in component tariffs. And that was very common and the instinct was layoffs.
But instead what they did is they mapped their full value system and they discovered that 18 days of finished goods inventory were sitting idle in a staging location. And that was a pure cash drag. So what they did is they ended up reducing batch sizes and synchronizing their suppliers. I think they were using a Kanban loop, if I remember right. And they freed up $3.2 million in working capital to offset that tariff impact completely.
So their throughput per labor hour actually rose 11% and no one lost their job. Now that is flow-based decision-making in action.
So basically what we want to look at here is when you're going through these uncertain times, which most of us are—but I just feel like it's really uncertain right now—that it's really more about how we organize and optimize the work.
Agile Cadence as a Financial Sensing Instrument
And so my lasting message here is agile cadence as a financial sensor that we can use. And I find that in turbulent economies, if you're facing that, your sprint reviews, your operations syncs are not necessarily meetings. They're financial sensing instruments, they're working sessions.
So every two weeks, they're telling you whether the assumptions you have about your product or demand or cost or throughput—do those still hold true? And so agile cadence is not about faster software or faster production, it's about faster signal detection using metrics, empirical metrics. Small continuous adjustments can beat those massive reaction cuts every time, I feel like. And that's what the data has been showing me.
Final Thoughts: Flow Over Fear, Throughput Over Cuts
So in closing, resilient organizations don't just survive volatility. They learn through it. Flow is much better than fear. Throughput is much better than cost cutting.
And so this week what I hope to do is kind of unpack that in a little bit better sequence with tangible things that you can look at and how to apply these flow-based economics to every part of your business—from finance operations to governance, compliance, to all these things. And that's just what we finished up with last week, is trying to figure out how to practice agile.
So my point here is always to help you find a way to stay lean without cutting muscle. Cut the fat, not the muscle.
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