When The Going Gets Tough The Best CEOs Invest

Perhaps the tide is turning. Many executives are finally able to shift from their back feet onto the front and begin looking forward. Certainly, while the outlook remains tenuous, CEO confidence is rising—as Chief Executive’s June CEO Confidence Index reports.

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

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 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 in a related article 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. Just as the C-Suite team above is doing. Addressing those vulnerabilities is a proactive practice that better positions your business to survive today and live to fight another day.

Transformational results

Still, while survival is good, stakeholders demand more. Many leaders respond by identifying and capitalizing on the immediate opportunities—offensive actions. Too often, however, 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.

That doesn’t mean offering carte blanche or free rein. In fact, I often recommend imposing some constraints (usually to time and dollars.) Then adopt an iterative test-evaluate-refine approach. These promote a shared sense of urgency and make it easier to shift resources as needed to enhance outcomes.

It’s about agility

Of course, I am not suggesting executives waffle on their investment decisions. It’s about agility: incorporating what’s been learned and taking new actions to achieve objectives.

The executives I advise are investing strategically to position the company for a promising future even as they adjust to survive the current situation. For example:

• Standing up an innovation team. Equipped with a clear mandate and resources to get it done, the team also has a specific, near-term deadline to deliver results. The team is tasked with expanding the range of ideas, implementing prototypes quickly, and testing the validity or impact of the solutions. The senior executive is enhancing the outcome by investing in both internal and external experts to contribute.
• Hiring a Chief Growth Officer. This addition to the C-Suite is experienced, external and focused explicitly on creating new opportunities for the future and rapid revenue for today. Their bonus depends on results, even as the organization takes specific action to integrate the “newbie” and set them up for success.
• Purchasing critical assets. To shore up a known vulnerability and unlock the potential to pursue something entirely different, this CEO is actively “finding the money” to make targeted investments. They’ve got their eye on the opportunities emerging from today’s situation, even as they cut back dramatically in response to sudden loss of contracts.
• Elevating strategic capability and capacity. In tough times, it’s easy to get mired in the day-to-day. These mid-sized CEOs repeatedly ask key strategic questions like: What’s the real issue here? What if we don’t take that path? What else? Exploring strategic questions with their teams ensures sufficient attention is paid to the future, even as their team executes at the operational level.
• Locking in different types of collaborative relationships. Uncertain times can breed strange bedfellows. Perhaps your business model is threatened. Pursue relationships that accelerate trust. Savvy executives look for those who share a core purpose or face a common and critical foe. They reframe the question: Why not partner or collaborate? One CEO deliberately revealed a specific vulnerability and its broader implications for their sometimes competitor. Now, they’re collaborating to unlock new options for mutual gain.

In good times and bad, the most effective CEOs also rely on strategic advisors. A skilled strategic advisor places the situation into the appropriate context and quickly surfaces the broader implications of decisions. Investing in an advisor, the CEO gains a strategic confidante that guides them to accelerate performance, no matter the circumstance. And they know that such investment benefits the entire team.

Skilled CEOs routinely inspire their teams to face forward, even as they address immediate challenges. Importantly, they express confidence and commitment to both people and the business. When the going gets tough, forward-thinking CEOs invest.