Lead Courageously in a Challenging New World

There are some positive indicators that we are currently rebounding from the worst economic crisis since the Great Depression. The stock market is thriving. Manufacturing activity is increasing. Retail sales are up. With that said, unemployment now exceeds ten percent. Many experts predict the recovery will be slow and arduous at best. We all hope for a better future. But I think we also know- regardless of how the future takes shape- things will never be the same again. To quote the great philosopher Dorothy Gale from The Wizard of Oz, "We are not in Kansas anymore." For business leaders, the critical new skill set will be the ability to lead courageously in a challenging new world.

Survival in a deeply recessionary economy and building for a healthy future requires leaders to take on two important tasks. The first involves stabilizing the current situation. The second involves adapting to a new and uncertain future and seizing opportunity wherever it presents itself.

The old adage "when you are up to your [posterior] in alligators, it's difficult to remember the original objective was to drain the pond," has come to my mind often during these trying times. The down economy has very understandably caused businesses to focus attention on the immediate task of survival. Research shows that both people and organizations are far more highly motivated to take action by the possibility of loss than by the prospect of gain.

Indeed, it makes sense during tough times to take every reasonable step to protect the existing business. Is your financial house in order? Are there opportunities to trim costs or otherwise gain efficiencies? Are you staffed and organized correctly? Does your product mix make sense? Is your product or service priced right? Are there opportunities to divest? These are all important questions that should already have been part of a rigorous review of your current business model.

The risk in undergoing this kind of crisis-mode analysis involves the inclination to hunker down and wait out the storm once near-term steps are in place. All of us as leaders have a tendency to rely on skills and abilities that have worked for us in the past. We look for recognizable patterns so we can respond to them just as we have successfully done before. We want to be able to reassure our teams that things will return to normal soon. But there is great danger in this mindset because the future that we face will be unlike anything any of us have ever previously experienced.

The businesses that will go beyond mere survival and thrive into the future are those that aggressively seize opportunity. They see lean times not as a disaster to endure, but as a challenge to overcome. During the last recession, approximately one in three industry leaders lost their perch at the top of their fields as savvy competitors maneuvered skillfully during the downturn. Those who follow bicycle racing know that in an event such as the Tour de France, the ultimate winner frequently overtakes the leaders during the mountain phase- the toughest part of the contest.

Do you have an opportunity to rethink your business model? In the recession of the early 1990's, IBM experienced its first revenue decline in over fifty years. Losses mounted year over year. CEO Louis Gerstner took time during the downturn to seriously reconsider a business model based on sales of mainframe computers. IBM shifted its focus from hardware into computer services and solutions, and it flourished.

Are you continuing to think about the future by investing in research and development? In 2001, the beginning of a two-year recessionary period, Apple Computer experienced a revenue decline of 33 percent. Yet Apple bravely chose to increase R&D expenditures by 13 percent, and continued to maintain that level of investment throughout the downward cycle. Such innovative technologies as the iTunes music store and software, the iPod Mini, and the iPod Photo were developed during this period. Rapid and healthy growth resulted for Apple.

Are you continuing to invest in your people? Remember, even during bad times, your top performers have other options. Do you have the right players in place? Are you encouraging them in their development? Do they see a future with your organization? I believe that one of the most short-sighted moves that many companies make when the going gets tough is to immediately cut training and development dollars.

Finally, these pragmatic steps of rethinking your business model, investing in R&D, and taking care of your people should not just be one-time responses to a crisis, but rather an ongoing part of how you do business. In a Harvard Business Review article from 2003, business authors Gary Hamel and Liisa Valikangas state that the strongest businesses are those that continuously "reinvent business models and strategies as circumstances change," rather than just making singular adjustments in reaction to an emergency. The authors argue that those companies that work incrementally to try numerous different ideas on a micro scale- while involving many people in the discovery process- succeed over time. Businesses "should steer clear of grand, imperial strategies and devote themselves instead to launching a swarm of low-risk experiments."

No matter how we cut it, the future is daunting and unknowable. But it is also richly abundant with opportunity. Those leaders who work hard to strengthen their organizations in the short run and then courageously look to the future will end up on top of the mountain when the economy improves. A continuous cycle of scrutinizing the business model, investing in lots of new ideas, and developing people will bring success in a challenging new world.