When the Going Gets Tough the Best CEOs Invest

I’m hearing and reading a lot about “belt-tightening” activities these days.

Economic, geopolitical, and social forces impact every business. No matter what they do, who they serve, how they’re organized, or where they’re situated, the external context matters. And always – in good times and bad – the situation creates advantage for some and trouble for others.

Important strategy question

Strategy is a journey that never goes as planned. The ups and downs require constant adaptation. At each shift, executives face an important strategy question: offense or defense?

Take these examples:

• Revising near-term profitability expectations downward, the CEO’s board directs them to “cut deeper”.

• A skilled senior executive accepts an exciting inaugural role with a mandate to dramatically expand the business’ global impact and revenue. Upon arrival, they learn that they have no budget.

• Facing rising import prices and tenuous supply chains in a low-margin business, an executive team considers the merits – and demerits – of raising their own prices.

• Reviewing the immediate impacts of the current outlook, the C-Suite also identifies critical longer-term vulnerabilities.

These leaders are certainly not alone. Perhaps you face similar challenges.

Realigning strategy and operations

As skilled leaders know, achieving objectives – your vision – requires actively aligning and realigning strategy and operations. (Discover important tips in my book, Charting the Course.) It’s a constant balance that can be particularly difficult amid external pressures from boards, Wall Street, and customers. Of course, the human impact on staff should never be ignored either.

Facing a worsening outlook and broad negative consequences, it is tempting to focus on defensive measures to mitigate risk and preserve capital, revenue, and cash. Yet strategy always needs both defense and offense, often simultaneously.

A mix of current- and forward-facing actions

Importantly, both defense and offense should encompass a mix of current and forward-facing actions, as I noted here.

By all means: do what’s needed to survive a significant downturn and keep the competition at bay. Then pause to take stock of other vulnerabilities that the current situation reveals. Addressing those vulnerabilities is a proactive practice that better positions your business to survive today and live to fight another day.

Transformational results

Too often, leaders are asked to play offense with one hand tied behind their backs – not unlike the senior executive with no budget in the example above. In my experience, that kind of decision prompts incremental gains (if any) rather than meaningful longer-term outcomes or transformational results.

Instead, when the going gets tough, the best CEOs invest. Strategically.

Adopt an iterative test-evaluate-refine approach

Smart CEOs allocate real resources explicitly to the activities and opportunities that have the greatest potential for positive impact. Typically, it’s a combination of talent, time, and dollars that makes the difference and produces needed results.

It’s about agility. It takes creating space to allow an iterative test-evaluate-refine approach, (as I wrote for Chief Executive.) This promotes a shared sense of urgency and makes it easier to shift resources as needed to enhance outcomes.

The executives I advise – including those in this article – are investing strategically to position the company for a promising future even as they adjust to survive the current situation. They’re hiring external experts in critical areas and acquiring new assets to create opportunities. Internally, they’ve deployed innovation teams and routinely ask key strategic questions like:

• What’s the real issue here?

• What if we don’t take that path?

• What one or two actions will we take right now to address today’s reality and position us for tomorrow?

• What else?

Importantly, skilled CEOs routinely elevate strategic capability and capacity to instill confidence and enhance performance. They guide their teams to consider the broader implications of decisions and actions – and avoid “cutting off the nose to spite the face.”

Indeed: when the going gets tough, the best CEOs invest.