Saturday, 7 March 2015

How to Lead in Ambiguous Times

A glance at today’s headlines leaves little doubt that we have entered a new era of geopolitical turbulence. Acts of terror and violence, humanitarian crises, and public health emergencies are rarely localized events. Instead, these shocks transcend borders, presenting global challenges. Just as one crisis fades, another rises to take its place. Adding further complexity, today’s enemy (unlike in that previous period of great geopolitical uncertainty, the Cold War) is often unseen or unknown.
Of course, it’s not just our problems that have become global. Most mainstream businesses have operations and business units spread far and wide, and an eye perpetually turned toward expansion. For company leaders, then, geopolitical uncertainty raises critical questions: How can you make decisions, particularly long-range investment decisions in far-flung parts of the world, when so much is in flux? How do you lead your organization through ambiguity to success?
Economists tend to focus on growth in determining the attractiveness of an investment. That makes sense when the international backdrop is reasonably stable. For instance, in the pre–financial crisis environment, you could successfully choose an emerging market to invest in by throwing a dart at a map. But in a more turbulent world, these countries are becoming increasingly differentiated—in their economic health and potential, as well as in their particular rules of the road and political threats to investments and foreign business activity. On top of this, many emerging market growth rates are only on par with those of developed states, and many developed states face political uncertainty more characteristic of emerging markets. The categorization is breaking down, making it much more difficult to engage in universal strategies.
Moreover, the very definition of success changes amid uncertainty. The more volatile and hostile the environment becomes, the more we see success and survival begin to converge: In a cataclysmic environment, the two would be one and the same. We aren’t facing threats of that extremity, and corporate leaders cannot give up the need to grow. But they have to take ambiguity into account. In essence, the right approach is focused on sustainability. When we hear talk of sustainability, it is typically of the need for corporations to reassess a go-go growth model—one aimed at maximizing profitability—that is viewed as insufficiently inclusive. Company leaders are asked, by their employees, customers, or society at large, to “give back” by supporting charitable causes and the environment. But the same companies do not pay enough attention to becoming more sustainable themselves.
The more volatile and hostile the environment, the more success and survival begin to converge.
The kind of decision making that works when you know what’s likely to happen won’t suffice. Sustaining a business in uncertain times requires executives to prioritize stability, resilience, and relationship management. Underpinning all three is a shift in strategic direction—from a focus on growth above all else to a focus on having enough. You make your company prosper enough by maintaining and improving the quality and caliber of what you do. You decentralize your business enough so that the parts can be strong if the whole faces risk. And you maintain and improve the relationships that your business depends on enough by integrating them with your whole company. Developing these executive practices won’t shield you from crisis, but it will help ensure that when the dust settles, your company is not just standing, but moving forward.

The Power Vacuum

To understand the shift in focus that companies need to make today, executives need to first understand how we all got here. The old geopolitical model is breaking down, but the only thing emerging in its place is sustained crisis. U.S. president Barack Obama said as much in a speech in Seattle in July 2014 that addressed the crises in Ukraine, Gaza, Syria, and Iraq: “Part of people’s concern is just the sense that around the world the old order isn’t holding and we’re not quite yet to where we need to be in terms of a new order.” The most alarming long-term global challenges, such as climate change, cyber-conflict, and the threat of terrorism, will loom much larger before they elicit a coordinated government response—and by then they will be that much more difficult to address.

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