Business leaders know though it’s not just economic turbulence here at home they have to face.
There is enduring uncertainty about the global economic outlook buffeted by the trade wars, at the same time there appears to be a material endogenous slowdown and lack of inflation in many nations. We also see uncertainty over oil prices, geo-politics, and market disruption across a whole host of industries, as technology and innovation renders previously fire-walled businesses and industries open for real competition.
This is coupled with changed customer preferences and the breaking down of established barriers between industries, which is leading to cross overs and break outs into new territory and ecosystems by businesses.
For many newer business leaders in Australia, it is easy to be overwhelmed as this might be the first time in their career they’ve face this kind of economic and market turbulence. But Dominic Houlder, adjunct professor of strategy and entrepreneurship at the London Business School, and his colleague Nandu Nandkishore, executive fellow of strategy and entrepreneurship, argue in their article “Five lessons for leaders in turbulent times” that by taking active decisions to build the business and “pursue sustainable value creation” leaders can weather the period ahead.
Houlder and Nandkishore say the application of agile business principals is a critical part of navigating the storm. In the past, companies and leaders have had time to develop a strategy and process, but these days “leaders need a more iterative approach that lets them respond to the sheer pace of change and number of sources of disruption”.
Agile business practices may be familiar to Business Insider Research readers: That’s something we recently covered in “6 ways you can let go to make your team and organisation great”.
The authors argue that as long as leadership in turbulent times doesn’t become “as precarious as a market stall trader, lunging after one opportunity after another” a process of “experimentation and failure that gets successful innovators” through challenging times.
This approach then informs and empowers the other 4 factors Houlder and Nandkishore say are vital to the enduring success of the business.
They say a business needs to build resilience and robustness so that the firm and its leadership can withstand shocks. Companies need to be like “salties” — salt-water crocodiles — which may look like dinosaurs but in reality “once they move, they move. They can go for a year without eating but when the opportunity is there, they’ll snap it up”.
Purpose is also an important touchstone for a firm with Houlder and Nandkishore saying that in staying true to your purpose leadership can — during hard times at a business — reinforce why the company exists and who it serves across the organisation because “in times of turbulence, it is up to leaders to understand, legitimise, spotlight and celebrate the motivations and values that underlie an organisation, and communicate them through storytelling”.
In telling these stories leaders are then able to ensure a commonality of vision across all levels of the organisation to allow it to stay on target.
Closely related to the building of resiliency the authors say that a company needs to build the capability to respond in good — and bad — times. Like the salty ready for opportunity, a company may also suffer bad luck which it needs to ride out. Part of this capability to respond Houlder and Nandkishore say is related to an ability to tap, “into a deeply embedded set of values and purpose”. Further they argue firms need to build “capacity – of the human, factory or technological kind”.
Finally, the other factor the authors say is critical for businesses to focus on is the ability to look to the medium terms and away from the short term. They say an “excessive focus on short-term goals” is a flaw in Western capitalism. They note that cutting out spare capacity and focusing on short term profitability decreases the ability of the company to respond to both good and bad luck events.
Houlder and Nandkishore further argue that leaders should have a private equity or family company focus which allows leaders and managers to look through the vicissitudes of the short term. This then allows managers to focus on the medium term which looks at the health of the firm, “the meaning and purpose of the organisation, and the company’s absorptive capacity”.
That’s all easier said than done of course, especially for listed companies faced with quarterly or half-yearly earnings reports as well as analyst and shareholder questions.
But Houlder and Nandkishore conclude in saying their message is it’s “possible to survive in turbulent times as long as you choose to pursue new opportunities to create value. And hold onto those five pillars of agility combined with resilience, purpose, platforms and a focus on the medium term, to help you navigate the stormy times ahead”.
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