Over the past 25 years, we have faced multiple economic and geopolitical challenges, including 9/11, the wars in Iraq and Afghanistan, the coronavirus pandemic, and an environment in which tariffs are used to influence global trade.
When it comes to tariffs, the Trump administration has three main objectives:
- Require the countries we buy from to offer reciprocal tariffs on what we sell to them, creating a favorable environment in which U.S. products can have stronger export opportunities.
- Incentivize foreign countries and companies to increase their investments in the United States by building factories, providing more direct investment, and increasing their business development operations here.
- Bring manufacturing back to the United States, especially for critical product lines.
These goals certainly have merit, but they have also created chaos, disruption and uncertainty in global markets. While there are some success stories in this mix, U.S. and foreign businesses are not happy with the chaos. Business leaders always yearn for stability and conditions that open the door to opportunity, growth and higher margins – but in the chaos of the past eight months, these goals are under serious threat.
Signs of whether or not the administration’s strategies are working should begin to emerge soon.
The November midterm elections will (1) determine whether Republicans hold both the House and Senate and (2) potentially open the door to a Democratic mandate in the 2028 presidential election. These factors will determine the direction of the U.S. economy and whether or not the world will follow it.
Regardless of the political outcome, senior management must provide guidance and leadership to enable their businesses to manage disruption and not only survive, but also create growth opportunities and higher margins.
The Eight-Step Playbook
Eight steps can help senior executives at organizations with a footprint in global commerce navigate disruption and keep their businesses stable and thriving:
1) Recognize that disruptions will occur over time as the world order realigns. Consider this analogy: Hurricanes, wildfires, and tornadoes create havoc, change geography, and harm populations, but scientists know that this process is a “clean-up solution,” destroying old-growth forests and paving the way for the renewal of shorelines, forests, and land mass, leading to new growth and a healthier natural environment.
2) Rise up to fulfill the obligations of true leadership. Become a beacon of hope and determination. While taking control of the situation, “rally the troops” to do their part and, as a team, create a collaborative atmosphere that heralds positive attitudes and mindset that “we can overcome whatever is thrown at us.”
3) Lead the management team in planning for disruptions. The analogy here is that of the military, whose structured war games create scenarios that mimic potential situations in real time, helping to proactively prepare for disruptive events.
4) Recognize that while each silo of a business prepares differently, all functions within a business structure must collectively row in the same direction, at the same pace and in harmony.
For example, the finance function can create a contingency fund while demand planning can create additional safety stock levels that can be accessed if necessary. Operations can create simulations of disruptive events and define how the team will respond. These are all distinctly important steps, but each is aligned with the unique goal of preparation, which is essential in disruptive management.
5) Bring in external expertise to help you design proactive strategies, benchmarked against similar companies and global supply chains. There are many consulting companies that offer disruptive solutions in advance.
As an example, in hurricane-prone areas, many companies, as part of their emergency plans, purchase access to secure offices for which they pay in advance. The space has all operational needs, requirements and technology connections ready to go and is immediately accessible in the event of an emergency.
6) Create a culture of risk management within your organization. This creates a pathway for the leadership team and managers to stop “chasing costs” and work toward achieving the best value out of spending.
A risk management culture will tolerate a certain level of risk but work more aggressively toward decisions that mitigate risk, such as seeking resilience and sustainability in the overall business model as well as the footprint in global supply chain management. This approach creates the best opportunity to achieve both resilience and sustainability, two admirable goals typically driven by senior leaders.
7) Perform “fire drills” to make sure you are ready. Having worked in the US Navy, I have strong memories of proactive risk management. Almost every day on board a ship, continuous exercises simulate a fire, explosion, hull breach and other serious threats. Teams are formed to handle certain situations, and daily simulations and “fire drills” facilitate preliminary preparation.
Preparation is an important part of managing disruption. We may not be able to anticipate every threat, but we can cover those that are most likely to occur, based on historical experiences and proactive thinking.
8) Implement standard operating procedures (SOPs). Most successful businesses have SOPs – written protocols and guidelines that outline the operational framework of their structure and operations. Include, in writing, SOPs regarding emergency preparedness, with an updating process based on history, experience, and well-thought-out anticipatory events.
Make preparation the choice
We know from a historical perspective that some businesses and organizations fail when disrupted. How much of this is due to bad luck or lack of preparation we can only guess.
In working with hundreds of companies large and small during disruptive events, we’ve found that companies with good leadership and preparation in their culture fare much better than those that don’t.
Preparedness – in almost every aspect of life and business – will determine a company’s ability to survive and thrive in the face of disruptive events.
The result: senior executives have a choice in how to direct their management teams and employees. By leading with a culture of risk management and preparation, we create the best opportunity to keep the boat sailing in turbulent seas.