The global economy hit probably one of its most turbulent times since the Great Depression when the COVID-19 pandemic spread throughout the world.
Recovery from this turbulence has not been easy, with many countries still trying to stabilise their economies in the wake of massive disruption. During this period, strong leadership is needed. I recently read an article in the June edition of the Journal of Corporate Renewal which 9discusses this in detail.
Quantifying the issue
The article points out that the global economy is showing improvement in 2024, led by particularly robust growth in the United States and more subdued but strengthening activity in China and the European Union. While inflation appears to be moderating in much of the leading economies, the central bank’s determination to stamp out inflationary pressures means that, while rate decreases may be modest at best later in the year, a world of “higher for longer” seems highly likely.
Rosier growth prospects suggest slower activity on the turnaround and restructuring front could be on the horizon. However, certain industries are underperforming to a greater extent this year, including transportation, energy, utilities, commercial real estate, and materials. In addition, countries that are continuing to show weaker economic performance—including the UK, Germany, Italy, and Brazil—present more opportunities. As shown in recent years, though, these conditions can shift overnight, and professional prognostication can seem a fool’s errand.
The article adds that the world is in a state of constant and accelerating change. The unknown and unexpected have become routine. Lightning-fast crises—supply chain disruptions, extreme weather events, or the outbreak of war—meld with longer-term secular changes rapidly reaching tipping points, from technological innovations to a transforming climate, ageing populations, and fracturing world order. It’s no wonder that 63% of CEOs worry their company can’t keep up.
Taking the pulse on these issues, the AlixPartners Disruption Index surveyed 3,100 senior executives worldwide across a range of industries to develop a picture of the challenges and opportunities, as well as the behaviours of companies that are thriving in this disrupted world.
The article points out that this year, a few things are clear. First and foremost, the extreme volatility and uncertainty of the pandemic have passed. Almost two-thirds of executives expect their economic region to grow over the next 12 months—and an even higher number, more than 80%, expect their company’s revenues to grow. Executives report that critical skills shortages have decreased by half from the immediate post-pandemic period. Over the next 12 months, 42% expect supply chain issues to ease further. Compared to last year, only 13% of executives said their company is planning layoffs this year, down five points from 2023.
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Second, after four years of intense disruptions, businesses report getting better at managing their effects. Fewer global business leaders are finding it challenging to prioritise while being buffeted by these various disruptive forces. They are less likely to say that their executive team lacks the necessary agility or are stuck in their ways.
Third, forces outside of executives’ control, however, are increasingly setting the agenda. The highest reported threats in 2024 are from inflation and interest rates. A higher for-longer environment requires companies to strengthen muscles that may have atrophied after more than a decade of low interest rates. In addition, geopolitical tensions and the upcoming U.S. presidential election are high on executives’ worry lists.
The article adds that, interestingly, generative AI—and AI, automation, and robotics generally topped the list of things executives are most optimistic about. Almost three quarters report they expect the impact of these technologies on their business to be positive, and over half (59%) report that they are investing in generative AI. However, as with too many technology investments, most are unsure how best to apply AI. Only 21% believe they are implementing it well.
What are leading companies doing differently?
The article points out that, this year, 547 executives (18.2% of the sample) said that their companies set the pace in their industry regarding growth. Asked about profitability, 557 executives (18.5%) said their company’s profits grew 10% or more last year. Remarkably, 248 (8.3%) are the same people—executives at companies blessed by strong growth on both top and bottom lines.
For many executives, disruption implies a negative impact on their business and shakes their competitive positions. However, the study reveals a group of companies focused on growth that are leaning into disruption by making moves to invest in their top and bottom lines.
The article adds that, compared to others, both growth and profitability leaders are significantly more likely:
- To be investing more in tech than they did last year (89% vs. 48% others);
- To expect their company to actively pursue mergers/ acquisitions in the next 12 months (73% vs. 50%);
- To expect to reduce their product/service portfolios (52% to 39% others) or divest business units (61% to 43%) within the next 12 months;
- To have programs to identify/develop future leaders (96% vs. 88%);
- To have conducted scenario planning/analyses (42% to 31%);
- To have found new suppliers/ partners (38% vs. 29%) or renegotiated supplier pricing (31% vs. 28%); and
- To have built cash reserves (37% to 30%).
Interventions
The article points out a few specific ways in which the behaviour of the growth and profit winners stands apart.
They embrace the challenge and opportunity of new business models. In the next year, 63% expect their business models will change significantly due to disruptive forces; 18% expect a total business model change—over four times more than the bulk of surveyed companies. They see the business model change much more positively. When they change, they look at the balance sheet and the income statement. They are 30% more likely to expect meaningful and positive changes to their capital structure over the next year while also more likely to expect changes to their operations,= geographic footprint, talent model, etc.
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The article adds that they are investing in the future of their workforce. Because this group is growing fast, it needs to hire, but companies in this contingent are also learning machines. Compared to others, they are more likely to provide leadership development programs (23%), offer networking and professional development opportunities (59%), assign employees to cross-functional teams (29%), and invest in training for growth (33%). A lot of that development seems to do with technology. Ninety-five per cent say their workforce fully
understand and support digital investments, and this group is 57% more likely to consider the need to upskill employees—which they do in very practical ways.
They make data-driven decisions. The executives who lead growth-and-profits exemplars stand apart for their unblinkered focus on the facts and relentless determination to act on them. They are data-driven. More than half say they fully exploit the advantages data gives them in sales, customer experience, operations, and supply chain—averaging about 13 percentage points better than other companies.
The article points out that they are acting now. When asked which leadership skills are most important in responding to disruption, they are less likely to cite strategic thinking, resilience, or the ability to prioritise. However, they are 30% more likely to say that execution and follow-through are critical. When asked about personal strengths, they don’t boast of their communication coaching or motivational skills. Still, they are 43% more likely to take pride in their execution and 83% more likely to say that their biggest strengths are energy and willpower.
Disruption is the new economic driver. While the worst post-pandemic volatility and uncertainty are over, longer-term fundamental disruptions to how individuals work and live are accelerating. How and where companies drive value for customers, shareholders, and employees are shifting. Building a sustainable future and making the most of emerging opportunities mean being focused and deliberate today.
It will be interesting to see if these interventions will work in South Africa.
We live in interesting times.
