In the early 1980s, IBM was a dominant force in the computer industry. However, the emergence of personal computers threatened its mainframe computer business. Instead of just cutting costs and protecting their existing market, IBM’s leaders adopted a SENSEMAKING mindset.
They invested in developing the IBM PC, embracing the new trend. By doing so, they not only survived but also thrived in the evolving technology landscape, ultimately benefiting from the personal computer revolution.
In the mid-2000s, Netflix was primarily a DVD rental company facing increasing competition and declining DVD rental revenues.
Instead of solely cutting costs, the company’s leadership embraced the BOOTSTRAP ETHIC mindset. They recognized the potential of streaming technology and decided to invest heavily in building a streaming platform. This move not only saved Netflix from potential obsolescence but also positioned it as a global streaming giant, revolutionizing the way we consume content.
Patagonia, an outdoor clothing and gear company, exemplifies a commitment to stakeholder balance. In the face of economic pressures and environmental concerns, the company’s leadership decided to invest in sustainable practices and communicate their COMMITMENT TO ENVIRONMENTAL RESPONSIBILITY. They reduced waste, promoted fair labour practices, and encouraged customers to buy less and buy better. While this approach required financial investments and sacrifices, it resonated with consumers and created a loyal customer base, ultimately contributing to the company’s long-term success.
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When faced with industry disruptions and downturns, many leaders and companies instinctively focus on cutting costs to maintain profitability.
But that is shortsighted.
A better approach is to use the period of uncertainty to make smart reductions in certain areas while also investing in new capabilities that will allow you to emerge stronger.
Research shows that the organizations that pursue this strategy gain
a long-term advantage.
To play both defence and offence simultaneously, leaders need to adopt 3 mindsets:
1. Sensemaking (taking small steps to understand the environment and adjusting as you go);
2. Bootstrap ethic (spending money where it counts while scrimping where it doesn’t); and
3. Commitment to stakeholder balance (working with employees, suppliers, investors, and communities to spread out the pain and ensure a collective upside).
Full article: https://lnkd.in/eBwC5ra6
Investing in Growth Through Uncertainty
https://hbr.org/2023/07/investing-in-growth-through-uncertainty