United States: Why Some Companies Grow Amid Uncertainty — And Others Don't

Strategic planning plays a key role in helping companies anticipate and manage business cycles. But forces like emerging digital technologies, climate change, and deglobalization — not to mention "black swan" events like the Covid-19 pandemic and wars — have turned a rolling sea into a choppy one, where companies are beset by currents, crosscurrents, riptides, and squalls. This multiplicity of related, unrelated, and inter-related difficulties have one thing in common: They are unpredictable.

By their very nature, disruption and uncertainty make a hash of strategic plans. When you cannot base strategy on reasonably certain premises — or when those reasonable premises are undone by unforeseeable events — what is a company to do? You still have to make plans, allocate capital, and invest for the future. Some argue that agility is the key to thriving in disruptive times, but if all you do is pivot, you are just going around in circles. Our annual AlixPartners Disruption Index surveys 3,000 global executives* about what is knocking them sideways. Among other things, our 2024 report shows that three out of five say that it is increasingly challenging to know which disruptive forces to prioritize. But prioritize they must: That is what leaders do.

Amid all this, there is a group of companies doing very well. Almost one in five said their companies lead their industry in revenue growth. About the same ratio said their company's profit grew 10% or more in the last year. And 8% (249 of the 3,000) put themselves in both groups: the top quintile of growth and profitability.

Now, it turns out that these executives are not any more strategic than the other 2,751. We asked about the leadership traits that matter most in dealing with disruption — asking people to pick three traits from a list of a dozen. For the whole group, the two top choices were strategic thinking (39%) and timely decision making (36%). But for the profitability-and-growth leaders, timely decision-making nosed out strategy, 34% to 33%.

If strategic thinking does not set them apart, then what does? For this article, we conducted additional analysis of our survey data to separate this group's attitudes and activities from the others, and found three things.

Growth and profit leaders embrace disruption.

Three out of four say they always or usually drive disruption in their industry. By contrast, executives at the other companies we surveyed said their company is in the middle of the pack or behind 59% of the time, more likely to react to changing circumstances than to be the ones who cause circumstances to change.

The top performers are unafraid of big change. In the next year, 63% will change their business model significantly, and they are nine times more likely to see a total business model change this year. They view business model change much more positively. When they change, they are 30% more likely to be planning to revamp their capital structure along with operations, geographic footprint, talent model, and so on.

Their appetite for big change extends to their portfolios, too. They are 46% more likely to say they will actively pursue mergers in the coming year. This does not mean that they are diversifying to spread their bets, because these companies are also 42% more likely to be planning divestitures and 33% more likely to be planning to reduce the number of products and services they sell. Our experience confirms what the numbers suggest: that they are constantly reshaping their portfolio — planting here, pruning there — to concentrate where they see competitive advantage.

Growth and profit leaders are learning- and data-driven at all levels of the organization.

Because this group is growing fast, it needs to hire; but these companies train, too. Two out of three executives at these high-performing enterprises say that newcomers to the workforce lack the skills needed to succeed in their companies. But seeing a skills gap, they fill it: Compared to others, growth and profit leaders are more likely to provide leadership development programs (by 23%), offer networking and professional development opportunities (by 59%), assign employees to cross-functional teams (by 29%), invest in training for growth (by 33%), and upskill employees in the use of technology (by 57%).

They also focus more on their personal learning and growth. While they are virtually unanimous in believing they have strong personal networks of advisors, nine out of ten say they need more. Their appetite for advice is 20 percentage points higher than that of the leaders of less successful companies.

They put this learning to use: The executives who lead growth and profit s exemplars stand apart for their unblinkered focus on the facts and their relentless determination to act on them. More than half of this group say that they are fully exploiting the advantages that data gives them in sales, customer experience, operations, and supply chain — averaging about 13 percentage points better than other companies.

Growth and profit leaders are action-oriented and prioritize pace over perfection.

Asked which leadership skills are most important to respond to disruption, they are much more likely to say that execution and follow-through are critical. The others, by contrast, emphasize resilience. Resilience — the ability to take a punch — is a good thing; but in uncertain times, you need to throw punches, too. The ability to do it nearly right but do it now is one of the hallmarks of great leaders.

Earlier this year, one of us was speaking to Delta Airlines' CEO Ed Bastian, who said this: "Decision-making is a learned skill...One of the things you learn about making decisions is that you gather the information, you move quickly. You don't sit and belabor a decision." At the same time, he added, a good decision-maker is ready to admit error and correct course — something that is easier if you are making a series of quick, small decisions than if you wait until you think you are certain.

That is why growth and profit leaders are less likely to approach a problem from the standpoint of risk and cost assessment and more likely to look at competitive position and take a crisis-management approach. That is to say, they get out in front of a problem before it mushrooms. Asked about their personal strengths, they do not boast of their communication or coaching or motivational skills; but they are 43% more likely to take pride in how well they execute, and 83% more likely to say that their biggest strength is energy and willpower.

This approach succeeds because of how uncertainty and disruption work. Uncertainty is not the same as risk. Risk is calculable; it can be expressed in terms of odds. Uncertainty is incalculable. A game of roulette is risky but not uncertain. As John Maynard Keynes put it in his General Theory of Employment, Interest, and Money, uncertainty means "there is no scientific basis on which to form any calculable probability whatever. We simply do not know."

Disruption is similar: While it is sometimes foreseeable (we know that climate change will disrupt most industries), it is generally incalculable (we usually cannot see beyond first-order effects). In such cases, a well-researched, well-ordered strategy can lead you down the road of yesterday's reality, unaware of how it has changed and blind to unmapped threats and growth opportunities.

To deal with risk, you need to build things like redundancies and hedges into your strategy (such as lines of credit or back-up suppliers). Disruption and uncertainty call for something different. David Snowden's research about decision-making, including his and Mary Boone's seminal 2007 HBR article, "A Leader's Framework for Decision Making," shows that in complex or chaotic environments, leaders need the capacity to probe, test, and respond, devising strategy on the basis of what they learn as they go. For that, you need a mindset and an organization designed to sense, interpret, and adapt quickly — along with an overall sense of strategic direction, so that you know where you are headed even while never being sure which specific path will take you there.

In an uncertain environment, a false sense of certainty is the last thing a leader should want. Yet, as Keynes noted, "the necessity for action and for decision" drives executives to behave as if they had in hand "a calculation of a series of prospective advantages and disadvantages, each multiplied by its appropriate probability."

The necessity exists, but not the calculation: "We simply do not know." And that is why the most important strategy is to get started. Align on a few key assumptions — as few as possible — about competitive dynamics, the larger business environment, and customer trends. Then act, learn, and act again.

*Note: This year, we also asked a subset of the questions to a group of 100 executives in the Middle East; their responses are not included here because our analysis required answers to all the questions.

Originally published by Harvard Business Review.

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