Among many companies, the knee-jerk reaction to a downturn is to pull back. Capital spending is cut, acquisitions are scaled down and marketing expenditure is slashed in a desperate effort to survive the bad times. But smart companies apply a more controlled response to difficult conditions. Instead of simply cutting back wherever possible, they take precisely targeted steps to ensure that they come out of the bad times a step ahead. This article shows how any company can go beyond the reflex reaction and take advantage of the downturn to emerge stronger than the competition.