When Leaders Have More Questions Than Answers

What does it take to come out ahead in the face of uncertainty??

If ever there were a time to find out, it’s now. Companies around the globe are facing conditions that make it difficult to know whether, when, and how to pursue goals such as reaching ESG commitments, entering new markets, achieving growth targets, going public, or tackling M&A.?

The uncertainty is born from a brew of global disruptions: geopolitical tensions, supply chain bottlenecks, talent challenges, climate change, and more. Soaring inflation, rising interest rates, and the potential for recession are only making matters worse. ?

Sometimes it feels as if there are many more questions than answers:?

• What course will inflation take, and how can business leaders blunt its impact??
• Will rising interest rates create massive global shifts in competitiveness??
• How does today’s economic outlook differ from previous downturns, and how does it vary across sectors??

One of the few business certainties right now is that we can’t wait for clarity. The time to act is now.

Navigating today’s complexity requires developing a dynamic perspective not only on how operating end economic environments will play out but also on the distinct risks—and significant opportunities—these scenarios will offer.??

Taking action does, however, require understanding the nature of the headwinds. Yes, inflation levels are way up worldwide, but they’re expected to come down over the next two years. The drivers behind inflation vary by region, though energy costs are emerging as one of the most powerful. Meanwhile, central bank policy shifts continue to curb consumer and company spending power and limit access to “cheap” capital, a scenario many analysts expect to persist. And while recession remains a risk, today’s forecasts suggest that a period of relatively flat growth is more likely.

There is no one-size-fits-all solution to meeting these challenges head on, but BCG research suggests that there are two things that leaders of resilient companies do to achieve success in uncertain times.??

First, they have a clear understanding of the organization’s strategic starting point, whether that’s occupying a strong position with minimal risk ahead or, at the other end of the spectrum, operating from a place of vulnerability with a weak financial safety net.?

Second, depending on the starting point and specific business context, they take three steps to build their organization's resilience muscle and thrive through downturns:

Sense. Use data-driven detection, scenario planning, and risk assessment tools to feel out macroeconomic and disruptive trends in order to shape—and reshape—strategic business decisions.??

Adapt. Build business and functional strategies along the value chain and across functions in response to new insights and market-based, economic, and competitive developments.?

Thrive. Increase competitive advantage and turn adversity into meaningful mid- to long-term opportunity through portfolio reshaping, M&A, and tech and business model innovation.?

We’ve seen how top performers behave in volatile climates, taking action despite risk and uncertainty. For example, innovation leaders (companies that invest 1.4 times more in innovation than laggards), are rewarded with 4 times the return. And companies that take advantage of lower valuations and double down on M&A experience a 4.6% increase in one-year relative total shareholder returns on core industry acquisitions and 8.5% on noncore acquisitions.?

It’s a balancing act. Leaders have to weigh contrasting priorities against strong macroeconomic headwinds and their organization’s resilience against an uncertain future. But the future can indeed be bright.???

For Further Reading:?

• ?The CEO’s Dilemma: Building Resilience in a Time of Uncertainty ?
• Five Actions to Recession-Proof Your Marketing Strategy ?
• How Resilient Businesses Created Advantage in Adversity During COVID-19 ??

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