Sid is the CEO of Anabasis, Inc. and a serial entrepreneur, author, professor, innovation leader, venture investor, adviser and speaker.
Do situations like the recent trouble caused by the Silicon Valley Bank (SVB) collapse only promise fear and systemic economic trouble, or are miraculous opportunities hidden in the chaos? I believe the answer depends on how all parties choose to respond.
Let’s look further at the SVB situation. On one hand, the resulting fallout depends on how the Federal Reserve Bank (Fed) reacts (e.g., stopping or slowing down the rate hike), how the other banks position themselves (e.g., whether they secure deposits or investments, extend credit lines at reasonable rates or are acquired), and how the market-makers and media moguls exaggerate or downplay the pain. But more importantly, I believe it depends on how each business is positioned—not only to survive but also to thrive.
SVB’s downfall has ricocheted across the globe, from Israel to the ever-trusted Credit Suisse Bank. In the U.S., our big banks were seemingly saved by the Dodd-Frank-imposed regulatory guardrails around bans on trading customer deposits and engaging in speculative trading. The overseas banks, although they enjoy some deposit-centric regulation, do not have similar regulations and are potentially exposed—an exposure that may lead to some investors (e.g., private equity) or countries (e.g., China) to find real, cheap assets in the troubled and cash-hungry (but otherwise healthy) banks. Regardless of who would be the beneficiary of cheaper banking assets on the investment side, the Fed’s and FDIC’s actions will likely lead to a tightening of credit (less and more expensive money to borrow)—an action that will theoretically help ease inflation (less money in the economy) but accelerate a recession-like environment for companies and force them to quickly focus more on generating free cash flow to support growth and survival.
All of this turbulence is happening in an economic environment that Paul Krugman, the Nobel prize-winning economist, calls “murky” and “genuinely confusing.” We have high inflation, high unemployment, high interest rates, and consumers who, despite higher debt and inflationary powers, continue to consume. Furthermore, uncertainty has been amplified due to increased geopolitical risks and polarizing global power plays.
The fact is, there is chaos. But times of chaos are full of potential prosperity. It is not luck but preparedness that gives birth to opportunities. That is why I believe this is the time to overcome our fears, and the first step is understanding what you should focus on to to survive, thrive and evolve as a business.
Traits Of Businesses That Survive And Thrive In Chaotic Times
• Flexibility
Lots of great companies were built during economic downturns. What I see in common among those who have enjoyed this success is their ability to be flexible. This has allowed them to navigate change and uncertainty more quickly, focus on delivering value to customers, and relentlessly practice basic business.
To increase your flexibility, first leave your addiction to past practices behind; what got you here will not necessarily get you to the next step. Next, listen to your customers, employees and partners to discover better ways around both familiar and unexpected obstacles.
• Business Basics
It’s important to understand and prioritize basic business. Business basics are not about cost-cutting, but rather about cost-to-value and results optimization. They focus on efficiency, rationalization and outcome—a need that is being recognized even by some of the iconic new-age companies like Facebook.
Good business practices begin with an immediate evaluation of value exchange between all stakeholders. Give them what they absolutely must have at a price or cost that justifies the value you deliver—whether it is the customers, the employees or your suppliers.
• Resilience
Over the past decade, disruptions have become more frequent and more impactful. Management experts have been calling for strategic resilience as a competitive advantage. According to the British Standards Institution (BSI), organizational resilience is “the ability of an organization to anticipate, prepare for, respond and adapt to incremental change and sudden disruptions in order to survive and prosper.”
Organizational resilience begins with an honest evaluation of achievability: “Who are we, and what are our capabilities?” To be able to face challenges and respond to them in a timely manner, it is paramount to have a constant awareness of risk. Creating systems and processes that lead to efficiency and measurable repeatability is also critical. Resilience is not about stubbornness to hold your ground but rather creativity, mindset and the availability of pre-contemplated options.
• Elasticity
Organizations that survive various cycles of economic ebb and flow typically don’t travel in a straight line. Extraordinary results are achieved in cycles—elastic cycles. An organizational elastic cycle includes a period of intense focus and stretched resources, followed by a rubber band-like leap forward to a competitive advantage and then a reenergizing period before the next leap. Elastic organizations enjoy an inherited quality of trust; leaders and staff must trust themselves and each other, and they also must trust in a common and improved future. Elastic organizations use challenges as steppingstones to spring to new competitive heights.
To behave elastically, start by being transparent about the conditions, challenges and options your company faces. Then reexamine your team, their competency and their commitment to your organizational cause—measure through a lens of bidirectional trust. People typically only change if they believe there is a genuine reason to do so, and they are more likely to endure difficulties and follow your leadership if they trust that leadership.
History clearly shows that booming economic periods are usually followed by a downturn. It is likely that we are rapidly approaching an economic cliff, but no one knows the extent of the fall. What is clear is that a new cycle of growth will follow, and there will be winners and losers. I believe that the next generation of winners will be those who start controlling their fears now, develop resilience and flexibility, embrace an organizational elastic behavior, and focus on basic business practices of defensible data-driven and timely decision-making.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Read the full article here
