It pays to have the right insights, especially during periods of sustained volatility. Here’s how the best leaders are dealing with global volatility.
In a world laden with innumerable exogenous shocks ranging from a war in Ukraine, and impending cost-of-living crisis through rising costs and inflation; a period of the most widespread global pandemic in a century to a period of historic supply chain disruptions, one thing is for certain – volatility is set to be rather high. But, as consulting giant McKinsey & Co. writes:
“The late Brazilian car-racing champion Ayrton Senna once said, “You cannot overtake 15 cars in sunny weather, but you can when it’s raining.”
This age of volatility has now given rise to two kinds of business leaders: one cautious and defensive, and one forward-looking.
The first leader deals with uncertainty with much greater caution than the latter, hunkering down on dealing with the threats of the here and now. This is the majority and includes aspects like resilience preparation, scenario planning, near-term efficiency drives, careful inflation monitoring and balance sheet management. McKinsey opines, “these leaders are in a strategic “wait and watch” mode as conditions unfold. In our experience, the majority of senior executives fall into this category.”
The second leader is proactive. Whilst they take on due defensive diligence, they also lean into the volatility, “using it as a catalyst to galvanise action around new opportunities.” These are leaders who choose to move forward boldly. And, this can honestly prove to be mighty useful. McKinsey research on corporate resilience has found that while defensive-only actions led to median company performance, whilst those with offence-only stances delivered a mix of ‘occasional wins plus some catastrophic failures.’
The best strategy is adopted by the ambidextrous leader: employing prudence about managing the downside whilst aggressively pursuing the upside. Most such leaders are spurring organisations to think about the next decade oliver the next month, making drastic resource reallocations, reevaluating M&A strategies amidst a period of lower valuations, taking a long-term view on growth and innovation and reimagining workforce and talent proposition in a hybrid post-pandemic world. McKinsey writes:
“As one CEO we recently spoke with said, ‘I don’t want to benchmark our performance to the industry—I want to reinvent the industry.’”
The distinguishing factor in such a situation is the kind of approach taken by the organisation, both in terms of risk appetite and the degree of communication and trust involved to ensure their stakeholders are kept satisfied and believe in the long-term success of the project or organisation as well.
An important factor to this, is of course, data-driven insights. It is key, McKinsey writes, “as financial traders know well, when volatility is high, an insights edge generates great value. It may not be possible to be right every time, but seeing accurately through the fog 10 percent more often than your rivals is a substantial competitive advantage. That requires investing the resources, time, and effort to go beyond conventional analysis of conventional data that generate conventional wisdom.”
In order to build said insights edge, one global bank, for example, recently assembled its more than 70 chief country officers and used that collective wisdom to analyse trends on the market- and industry- levels to then disseminate to sales teams in order to drive sharper client opportunity identification. It sounds rather simple, but appropriately harnessing skills of geographically dispersed leaders gives companies a competitive advantage with clients.
Many firms, for example, have been setting up inflation task forces to form a ‘house view’ on potential scenarios. Then, by drawing out the implications of the upside and downside of these scenarios, they are setting up a strategy that has proven to be especially more successful compared to most of its peers.
It clearly pays to invest in data-driven insights.
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