The perennial cliché “never waste a good crisis” has been used for years but perhaps never more so than in the 2020s. OK, perhaps for good reason. It’s been one thing after another. Every business team I have seen in the last few years has been resetting twice as much, twice as often. I remember, for example, meeting a private equity firm that had stepped into a new industry and a challenged set of brands. In the first few months they learned they needed to take price rises equivalent to the entire base EBITDA of their business. That is not a good day for your financial models. I launched a startup in 2019 and made personal commitments to individuals I have known for many years, so I have lived some of this personally. It weighs heavily.
Across consumer goods there have been bankruptcies, failed recapitalizations, and transfers to lenders. Constant restructurings. A rare confluence of volatility on toplines (COVID, channel rotation/eCommerce, major retail failures), cost base (inflation, dramatic supply chain shortages, shipping disruption) and cash flow (rapid retailer destocking, rapid ascent in the cost of capital and risk with liquidity falling because of the volatility). Drama and intense pressure across and throughout your financial metrics.
So where do we go from here?
We’re more nimble, agile, and open to fresh perspective. Chaos is the new normal but, so what? What do we do with the freedoms the volatility has created? Sacred cows are on the table for the first time. Stakeholders want you to have the right portfolio because they have seen what it’s like when you don’t and bad weather hits. You’ve cut the fat and proven you can muscle through, but so what? You didn’t build anything, you just mitigated risk and navigated market weakness. Essential at the time but what’s the plan now?
Picabo Street said, “to uncover your true potential you must first find your own limits and then have the courage to bust past them”.
The value of what we have learned in the last few years is we have truly tested the risks and potential of our businesses and teams. We have seen each extreme and so have true insights to our limits. We now need to embrace the next phase. Building to blow past those limits. There are tailwinds to work with and the enduring challenges of the volatility create real necessity for innovation. Great rewards will flow to those who step up to the plate. There’s a tremendous canvas of opportunity but it will take an entirely different set of skills, ideas, and initiatives to the last 5 years. It is not an evolution. It is a new phase awaiting our collective imagination and execution.
What will make firms and individuals successful in the next few years is a return of animal spirits. We must leave the safetyism of recent years behind. Stabilizing a business and keeping everything running to the best outcome in difficult circumstances isn’t today’s opportunity. The brief will leap to ideas that build new markets, change behavior, and unlock potential from the new realities our consumers and customers face.
It will mean investment. It will mean intelligent risk taking. It will require vision backed by real belief. It will require ambition beyond the curse of incrementalism. It will require execution in a world of permanently higher interest rates, elevated geopolitical risk, and smaller P&L capacity after all the restructuring. Every help from technology to improve productivity and performance will be needed. Teams with purpose and passion will also need to be ruthlessly focused. We need great editors of activity so that the very few ideas with the potential to really matter get all that they need.
That’s why CEOs must sign up to drive shifts in focus, culture, and business plans quickly. Inspire bigger expectations. Evolve and invest in the team. Bring in outside support to catalyze fresh thinking and new activities quickly.
Reset for growth. Unleash the animal spirits in your team.
What we have been through is a microcosm of what every founder goes through over a much longer period. No more rationalizing stability strategies. Create a compelling and ambitious point of view on your future and invest all your energy in positioning your team and business to take advantage of that future.