Growth Opportunities in Uncertainty: The need to Survive, Reset, and Thrive

A once in a generation crisis. The week that will have a dramatic impact on markets for decades to come. A historic drop in consumer confidence. The Great Reset. The Great Recession. The Great Crisis. Everything changes after this.  

Phrases like those above should define one traumatic or historic moment in time; a point over the past 50+ years when we all quickly align on the same reference point.  But they could have referred to many events over the past 25 years: the 2001 dot.com crash and recession, the 2007/2008 global financial crisis (GFC), the 2020 Covid pandemic, the 2022 ugly trinity of high inflation, high interest rates and slowing GDP, and the subsequent slowing of capital flows.   These could also be the events of September 11 or the collapse of the Berlin wall.  We are constantly facing unpredictable disruptive events that overturn ‘the old certainties’, and occasionally, but not always, these events also lead to a period of downturn.

The problem is not that these unpredictable events happen; the problem is that organizational leaders tend to freeze, and then panic when these events occur, and then they often falter through the uncertainty that follows. 

Uncertainty is an issue.  There is something about the word uncertainty that I realized several years ago, long before Covid’s impacts became equated with it.  Whenever we use the word uncertainty, we tend to put a word before it that means it is going to be bad.  We speak of how we need to ‘manage’ uncertainty, to ‘overcome’ uncertainty, to ‘get through uncertainty.’  Think of the last times you heard, or made, a reference to uncertainty.  We almost always precede this word with a verb that signifies this is a nasty thing that we just must get through to get to the other side.

Viewing it in this way does not set you up for growth:  we need to reframe how we view uncertainty.  What is uncertainty? Uncertainty is a series of future events which may or may not occur. Whether or not these events are good or bad depends on what we are trying to achieve and how we are set up. 

Uncertainty is normal.  Certainty is a delusion.  

As organizational leaders, figuring out what you are trying to achieve, and then setting up the organization up for success in an uncertain environment is the core of your job.  How to do so is the focus of the Survive Reset Thrive playbook.  

Senior leaders are rightly concerned about what crises, and the – sometimes - subsequent downturn means for them and their business. While the concern is understood, leaders must remember that periods of uncertainty can be a great time to grow.  Anyone can grow a company when markets are booming, cash is free flowing, and everything is going up.  When the froth clears, only those with true strategic insight prevail.   

So when shocks occur, how can we start thinking about the necessary stabilization, reset, and strategy to accelerate on the other side? 

You need a strategy, and the essence of strategy remains the same.  Strategy was, is, and will always be an articulation of how your organization creates value.  Strategy comes from making tough choices when facing uncertainty.  Sometimes, as now, that uncertainty is more manifest.  

The question is, how do you outlast the immediate crisis, reset, and prepare for high growth.  To assume you need to blow everything up is silly, but likewise going forward like nothing has changed is equally so.  I suggest you stop planning, start preparing and embark on a three-part process I call Survive Reset Thrive. 

SURVIVE – weather the immediate economic storm and preserve business continuity

Buffet’s fundamental rules of business rings true when shocks occur.  To paraphrase: Rule number one: Stay in business, Rule number two: Don’t forget rule number one.

After a shock, we need to react 

We all need to react fast, now.  The current focus is rightly on safety, business continuity, and keeping day-to-day operations going.  In this phase, leaders must ‘get the basics’ right of low fixed costs, strong balance sheets, cash flow forecasts, and collecting receivables.  

Companies that stop there won’t get to the next phases.  We also need to look at repurposing aspects of the business and partnering with other organizations.  Examine each part of your business including your teams, physical assets, digital assets, and capabilities that cannot add the same amount of value right now and ask: what can this do now, and who could this provide value for? Do not limit yourself to your own company walls but look to repurposing with partners (e.g. borrowing retail employees from fast fashion to grocery, borrowing industrial drivers to e-comm platforms).

Employee engagement, while always critical, is now strategic.  Assign one person to own the ‘employee pulse, and have a daily or twice weekly check in with your nominated leadership team member who owns the employee pulse to hear an update, get a sense of how the employees are doing, and address any escalated issues.  Unless you are a very small company (less than 40 people), this should not be the CEO’s role

High growth companies are those with high learning velocity: if you learn faster, you grow faster.  Key to survive is accelerating the learning curve rather than neglecting this.  

We need to take tough decisions now in order to avoid facing even tougher ones later.  With uncertainty so high, we should not try to optimize them for one possible scenario we currently think most likely but make them robust enough that they produce an acceptable outcome under any plausible scenario.  In doing so, avoid the common trap of sunk cost fallacy.  

Given the way we are programmed, human beings unfortunately have the tendency to escalate commitments that have already been paid because ‘we’ve already spent so much time/money/attention on this.’  Unfortunately, the situation has changed, so the question is not ‘how much have we invested in this,’ but ‘given what we know today, would we start this project now.’  If the answer is no, or even maybe, it goes.  

While harder to believe now, crises bring opportunities.  Many businesses will re-shape themselves and that process should begin now.  

RESET – revisit and reset your strategy to take account of the new reality

To stay in business tomorrow as well as today, top leaders need to think forward and prepare for what could come.  If they don’t, nobody will think beyond the immediate crisis and every future development will become another crisis.  This involves a complete review and reset of the existing strategy.

A key distinguisher of high-growth companies is they act on beliefs, not facts.  Waiting for facts is too slow and leads to paralysis but pretending an unstable situation is predictable is delusional. During the reset, leaders must examine the organizational beliefs, assess what has been challenged, and set the new set of emerging beliefs they will constantly be testing as they shape future choices.  These thought experiments (if x, then y) become the basis for the future strategic insights.  

We need to set direction in terms of a compass-heading, not a destination, to give our people a framework for decision-making.  Our decisions should set boundary conditions within which our people can make decisions autonomously whilst being aligned with the direction of the organization as a whole.  Many solutions will be developed by people working in front-line operations, and we must give them space to innovate and encourage initiative.  

A thorough review is needed of the critical ‘where we will play’ choices including the customers of focus, value proposition, and go-to-market.  Growth strategy necessitates revisiting all customers: buyers, users, and influencers.  I have long held that hyper growth comes from controlling your own destiny, which means owning, or at least knowing, not just your buyers, but your end users and the critical influencers.  Times like this prove that we need to have clarity about who they are, build relationships across the circles and get close to those final end-users.

Downturns always eliminate some jobs to be done and provide an opening for tangential and new jobs.  You next must revisit each of the pillars of your existing value proposition and have an honest, tough conversation.  Have you been lazy and only articulated this as ‘customer service’ or ‘quality?’  If it wasn’t not good enough in February 2020, it certainly won’t be now.  The threshold for purchases (if not paused now) will also move going forward, and tenuous notions of value get frayed during a downturn.  On the flip side, if you have a compelling job to be done that customers still want, we need to leverage this into a long-lasting growth alliance.  Draw out the key factors of your value proposition, be critical, and test any major assumptions as quickly and cheaply as possible.

Your go-to-market options have changed as there are few places in the world in-person meetings are allowed now.  Changed does not have to mean limited, though.  Now is not the time to loosen the focus on distribution and go-to-market but more to re-examine what’s working, what’s not working, and where your strategic advantage lies.  Many teams are finding that as customers cannot demand in-person meetings, it is easier than it has ever been to get 30-minute intro or demo meetings via zoom.  If your sales team is not busy now, they do not want to work for an entrepreneurial company

Priorities must be re-examined in light of the current situation with a focus on operational efficiency without prematurely cutting innovation – combining these together leads to the next phase: thrive.

Thrive – set yourself up for growth to take advantage of emerging opportunities.

Thrive comes for the companies that did not just play the first two phases to survive but to win.  The companies that will get through survival into thrive have three characteristics: those with the strongest balance sheet (there is strong empirical evidence that  in a downturn, the last man standing wins), those with a strategic insight, and those with strategic agility (i.e. the companies that spot insights and act quickly on them, pivoting when necessary).  If you have these, you can win this round.

Downturns always produce imbalances that need to be met, allow for new jobs to be addressed, and force the dramatic change that provides an entry for new business models.  Identifying and seizing these strategic insights allows the high-performing growth organizations to thrive through the downturn. 

All of the above involve finding, optimizing and exploiting a strategic insight in a disciplined way with agility. Agility and discipline are not counter-forces. Agility is making good decisions quickly aligned with the strategy.  Discipline is methodically testing assumptions and meeting the rhythm of agreed commitments.  We need to do both in order to ensure that we are constantly learning as we are acting and taking actions on choices based on tested beliefs.  

Ask yourself: what doesn’t exist that should? What do businesses wish they had now that they haven’t? What flaws in existing systems are exposed? What do people and businesses want to over-index on going forward?  What do our beliefs about the world imply about future strategic insights? 

Haven’t found it yet?  A belief many have is that the current business has been optimized for efficiency (JIT supply chains, low inventory, etc.) and the weaknesses in this approach have been exposed. Will more organizations going forward optimize for resilience and robustness? If so, what does that imply for your business model?  Lay out these hypotheses, form assumptions, and start testing. 

The key to exploiting this is disciplined flexibility.   Throwing stuff at the market and seeing what sticks is usually a bad idea, but in a downturn it can be disastrous.  Cheap, efficient information discovery and disciplined execution are the key. 

Above all, Survive Reset Thrive is a phased approach.  Avoid jumping into thrive without doing the work on stabilize and a needed reset, but likewise if you are spending the majority of time on Survive, you are already behind.  

Finally, do not be silly.  Uncertainty can lead to paralysis (doing nothing and waiting) or panic (doing everything in a chaotic and disorganized way).  Do not let either of these happen to you.   Even well set-up companies fail to Thrive because the leadership lets uncertainty get the better of them.

Some of the most valued companies today grew out of previous downturns (Apple Google, Uber, etc.).  Yes, this crisis is different: the initial drop is steeper, and the recovery cycle is scary and unknown.  Most are predicting this will be the worst downturn we have seen, but that cannot be our current concern as we cannot control this uncertainty.  

Uncertainty is and will always be a series of future events which may or may not occur. Whether or not they are good or bad depends to no small extent on how we are set-up (prepared), what we are trying to achieve, and how we react.  So that’s our focus: prepare, set direction, test and learn, and react quickly.

In closing, I refer to the opening: Uncertainty can be a great time to grow, BUT it is usually not an easy time to grow.  

Uncertainty can be hard and demand you make some tough choices.  Most of these will be uncomfortable.  Strategy, however, is and has always been about making tough choices when facing uncertainty.  Growth is fundamentally about being comfortable with being uncomfortable.  The principles of growth strategy are the same, but in uncertainty the discipline of leading one has adjusted, and it is now a harder game to play.  But, for those of you who pride yourselves on being an entrepreneur, it’s your time.

Note the above is a summary of an extended piece on the subject and a forthcoming book published by Kogan Page in 2024.

Downturns are a Great Time to Grow

When a system shock occurs, our natural instinct is to view this - and the uncertainty it creates - as negative.  And as organizational leaders, negative is often equated to a possible downturn.  The Survive Reset Thrive approach asks you to reframe how you view shocks and uncertainty: rather than inherently bad, instead see this environment as one with possible upsides.  Opportunities are always available to those who are prepared, stabilized, and willing to undergo resets.

But what happens when a shock does produce a market downturn, or recession?   They are often accompanied by a self-reinforcing cycle of fear, which leads to panic and premature freezing of spending and investing, which translates into the slowing of capital flows and the beginning of lay-offs, which leads to more panic.  These effects can ripple through public and private markets into consumer sentiment, and the doom spiral begins.  But macro downturns are not necessarily micro downturns.  If you prepared - embrace these times, as downturns can be a great time to grow!

This is not a catchy slogan - there is empirical evidence that supports this.  While technological and societal advances (such as the iPhone launch in 2007) helped, some of the highest performing companies of the 2010’s (Uber, Airbnb) rose from the ashes of the 2009 Great Financial Crisis.  And great companies emerged before them from other previous downturns: Microsoft (founded 1975) from the economic turmoil of the 1970’s, Netflix or Google (founded 1997 and 1998) from the 2001 recession, and many more.  And despite technology stocks falling more than 30% in the USA in 2022, by late 2023 several high-performing companies, such as Nvidia, were emerging with sustainable growth paths.

Many reasons make downturns a great time for growth; below are six of my favorites.

1. They are a great time to hire – and keep - talent

Financial capital becomes scarce in downturns, but human capital becomes more available.  When there is a market shock, big public companies stop hiring and then start cutting management; technology companies freeze hiring and consider layoffs, growth companies get scared, and private entrepreneurial companies feel left behind if they are not in a cost cutting posture.  While in the quarters before, attractive job seekers would have five or six offers, now they may have only one or two.  If you keep your mettle and have a clear growth story, this is a great time to hire talent.  More so, it’s also easier to keep great talent as most of the siren songs of obscene wage offers have fallen silent.  To take advantage of this opportunity you must have a clear and meaningful purpose, strong and compelling employee value proposition, and the credibility that you are or will soon be a Thrive company.

2. Focus matters; Scrappy forces innovative approaches

Focus provides clarity and enables you to channel your critical resources into the areas that matter the most.  We often describe successful early-stage growth companies as ‘scrappy:’

devoid of the resources and brand recognition of larger companies, they are forced to be creative, resourceful, and agile.  Scrappy is using limited resources to your advantage to force new, innovative approaches: it is not synonymous with severe cost cutting, which often leads to malaise and lack of motivation from talent.  Companies that channel scrappiness over slowness focus on what matters the most for value creation and therefore enjoy more successful growth journeys.  Airbnb CEO Brian Chesky consistently extols the powers of limited resources, focused work, and a ‘scrappy culture’ in building novel solutions, and he credits this with the company’s success – most recently in recovering from the 2020 pandemic.  Over-funded and over-resourced companies often struggle, as excess resources can lead to over-hiring, failing to kill lagging projects, and sinking time and money into distractions.  Execution requires focus.  Strategy is not about doing things right but doing the right things.  A downturn can bring scarcity, and scarcity when channeled as scrappiness forces you to focus on what matters most.

3. Customers make better decisions

While downturns feel scary as you fear losing customers and share of wallet, they can be the best time to retain and keep customers – if you have a differentiated offering.  In downturns, customers make smarter decisions, and in upturns customers often make silly decisions.  When inflation is low and cash seems limitless, both professional customers and consumers will try new things out of curiosity and overextend on options or subscriptions.  When things get tight, solid value propositions matter, as customers will cull the excess and keep only the products and services that continue to solve critical problems or meet serious needs.  For companies that deliver real value, downturns become a great time to solidify their customer base and accelerate growth.

4. Fundamentals matter

Fundamentals matter – unit economics, customer retention, cash flows, and the tradeoff between customer acquisition costs and lifetime value.  Investors and leaders sometimes forget this – because overexuberant markets let them.  When downturns hit, the sting of lacking fundamentals can be too much to overcome.  For companies that have them in place, the base is built before the market tells you it needs to be.  Fundamentals provide a solid foundation for growth, enable confidence, and foster continued execution while acting as a launchpad while others are floundering.  

5. The Tourists have left town

In downturns the froth is blown off the ecosystem.  Good companies often get punished in frothy markets because so-called ‘zombie companies’ get over-funded, an obsession with growth at all costs takes over, and land grabs become the default business model rather than a conscious choice.  More and more companies pursue dis-economic initiatives and get rewarded, and companies practicing prudent management of their balance sheet may feel outsized pressure to be more cavalier than what would otherwise be pragmatic.   This leads to unrealistic expectations from investors and lenders, overwhelming consumer choice (usually exacerbated by companies pursuing customer acquisition with free or unsustainably low offers) and valuations (public and private) with unsustainable growth baked into them.  True entrepreneurs love when froth leaves the system!  It’s better to grow when competition is less intense, there are more acquisition candidates, and market opportunities are clearer for those that have prepared.

6. Learning velocity increases

Longtime Berkshire Hathaway leader and Warren Buffet’s partner Charlie Munger once remarked ‘You have to keep learning….. When the world changes, you must change.’  Downturns provide the most fruitful environment for learning, and as in chapter 10, those that learn faster grow faster.  Limited resources focus lean test and learns and constant experimentation, sharpening the learning capability of the wider team.  Customer feedback becomes more forthright: in macro slumps both businesses and consumers are increasingly candid about what they are really willing to pay more for, and what they are not.  Learning loops become shortened as the pressure to move heightens, and these learnings – when captured and shared quickly - increase the velocity that they are embedded and used.   

Downturns can be growth vehicles if you are willing to change.  There are growth opportunities available, and preparing your company to seize them can be a compelling call to action.  But these opportunities come only to those willing to adapt and change.  Part of why downturns are great is most companies are not willing or able to change: use your willingness to reset as fuel for your competitive advantage!  Insanity is often defined as doing the same thing over and over again and expecting different results, and executing the same strategy as the situation shifts around you and your beliefs have been challenged will not set you up to grab growth possibilities.

Great does not mean easy.  Being a great time to grow does not mean it’s an easy time to grow. In a downturn, some things are much harder, notably raising capital.  You can address this by employing steady-state Survive (chapter three), having solid fundamentals, and maintaining a strong strategic story.  Having a strong cash runway allows you to weather the brief storm of capital flight while still executing towards Thrive.  While valuations may take a temporary hit, leave your ego aside, and do not equate it with your company’s performance potential. Try to avoid being in a position of a forced raise, sale, or other shareholder events.  You may need to pause or slow a strategic priority that requires capital investment, which is ok. Keep testing your beliefs and assumptions and increasing learning to invest incrementally as the situation progresses.

As entrepreneurial leaders, we do not need it to be easy to be great.   Uncertainty is inevitable, and it always contains growth opportunities, even in the event of a downturn.  What separates high growth companies from others is learning velocity. If you foster a culture of empowered and agile learning while moving across the three modes of the SRT loop, you can grow faster, regardless of the market situation.

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*This blog posts appears as an Appendix in the upcoming Survive Reset Thrive book published by Kogan Page February 2024.

1. As captured in Berkshire Hathaway’s 2022 Annual Letter, available at: https://www.berkshirehathaway.com/letters/2022ltr.pdf