Investing in Growth Through Uncertainty

Start your week on a positive note with this Newsletter ???

Every week, I carefully select inspiring articles and share my thoughts, accompanied by motivational quotes. I hope you enjoy this next edition of my Monday Motivation and I look forward to hearing your feedback and suggestions for future topics.??

Today, I wanted to shift the focus a bit away from opportunities and challenges that GenAI poses for all of us to something a bit more timeless. I hope you get something out of today's perspective. ?

When faced with disruptions and downturns, many leaders and companies instinctively focus on cutting costs to maintain profitability. However, some identify opportunities and then take thoughtful action to emerge from a crisis or disruption even stronger. That means not only planning for worst-case scenarios and pressure-testing operational and financial health but also staying alert for ways to find a winning edge and making needed investments. Those leaders do so by fostering three mindsets: sensemaking in crisis, a bootstrap ethic, and stakeholder balance. Today's article, Investing in Growth Through Uncertainty, provides examples from?Firefly, Panera Bread, and Edward Jones which show how this works in practice. Leaders who embrace these ways of thinking can chart a course for the future even when the outlook is darkest.?

Studying the strategies employed by nearly 5,000 companies before, during, and after recessions in the 1980s, 1990s, and early 2000s, the author and his researchers found that only 9% used those periods to fuel sales and profit growth through improved operating efficiency (rather than simple budget and workforce cuts) and strategic investments in market development and new assets. Psychologists will tell you that most of us have a natural orientation toward either offense or defense—playing to win or playing not to lose. Our personalities are either bold, striving, and “promotion focused” or conservative, cautious, and “prevention focused.” Still, adversity accompanied by uncertainty typically triggers fear and defensiveness in everyone. However, leaders who embrace these ways of thinking manage to chart a course for the future even when the outlook is darkest.

?Sensemaking in a Crisis??

There is a famous story, perhaps apocryphal, of a group of soldiers who get lost in the mountains for several days during a blizzard. Eventually, one of them finds a map, which rallies their spirits and helps them make their way back to their base. Only later do they realize that the map depicts an area that’s entirely different from the one they were in. The moral of the story: “When you’re lost, any old map will do.” The map served the soldiers not because it provided them with a reliable path to safety but because it emboldened them to take action. Difficult circumstances can feel paralyzing, but we don’t need to wait until we’ve figured everything out to move forward. Combining a long-term perspective with an action orientation enables leaders to respond to a crisis by adapting, improving on, and adding to investment plans rather than abandoning them.?

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An Ethic of Bootstrapping??

The most common form of human stupidity, the philosopher Friedrich Nietzsche observed, is forgetting what one is trying to do. Sadly, adversity often leads panicked executives to do just that. In their quest for lower-cost operations, they may destroy their companies’ prospects—falling into what some have called an “efficiency trap”.? A better approach when cost cutting is to consider the effectiveness of operations. This is a subtle but important mindset shift. It’s not enough to squeeze out as much as you can with the least amount of waste. You must still create the products, services, and internal processes that will lead you to your desired goals.?

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Balancing Stakeholders’ Interests ?

We can all relate to the challenges of attending to stakeholders with completely different desires. Achieving such balance is hard in good times, but it can become especially vexing in a crisis. As fears of scarcity intensify, internal and external groups can become tribal, deeply protective of their own interests, and resistant to change, making both cost cutting and investing for growth more difficult. Left unchecked, this phenomenon can lead to timid, unimaginative, and shortsighted decision-making. But leaders at resilient companies lean into tensions among stakeholders, challenging themselves to serve conflicting interests as best they can with creative trade-offs—an approach the author terms as practical idealism. It means working with employees, suppliers, partners, investors, and local communities to devise solutions that might extract short-term concessions from some groups but limit the pain they feel while also addressing broader, long-term needs.

Too many leaders allow deep-seated fear to control their companies’ responses to adversity. They huddle in their corners, afraid to make a move beyond slashing costs and forbidding new investments. They focus on increasing the efficiency of their operations without investigating whether doing so will make their organizations more effective at generating customer value. They prioritize certain stakeholders and fixate on short-term results. Resilient leaders, by contrast, calmly appraise the challenges they face in times of crisis, taking defensive steps while also launching offensive action. They continue toward their goals but pivot quickly as more information becomes available. They operate with a bootstrap ethic—investing where it makes sense but staying ruthlessly frugal everywhere else. And they balance the needs of all their stakeholders, over the short and long terms, for the best results.

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Stay on the beat with me and have an amazing start to your week ???

Yours, Mark?

Sources?

Gulati, R. (2023, 14. June). Investing in growth through uncertainty. Harvard Business Review. https://hbr.org/2023/07/investing-in-growth-through-uncertainty?