How to lead in uncertainty
The unpredictability of U.S. tariffs has thrown a wrench into the plans of Canadian entrepreneurs, especially those in sectors that have long relied on stable cross-border trade. How do you set prices, invest and make plans for the future in the midst of this uncertainty?
A potential economic slowdown only adds to the indecision many entrepreneurs are experiencing. How do you lead when you don’t know what comes next?
When under stress, it’s common for entrepreneurs to fall into bad habits: losing focus, second-guessing themselves and their team, and micromanaging. It’s natural to want to grab the wheel tightly.
But success rarely comes from trying to do it all yourself. In fact, the current environment might be the best time to do the opposite. Step back from firefighting mode and take a hard look at how your business is run. You might find opportunities to grow your company and yourself as a leader.
Market makers proactively shape their own outcomes. They constantly look for new opportunities and search out new perspectives. When the economy goes sideways or uncertainties increase (as they inevitably will) these companies have the greatest chance of not just surviving, but thriving.
Glenn Yonemitsu
Managing Director, High-Impact Firms
Market taker or market maker: Which one will you be?
I’ve worked for many years in turnaround management, helping struggling businesses deal with downturns. I’ve also worked for over 20 years with high-impact firms, identifying what they commonly do to succeed, in good times and bad.
Through these experiences, I’ve found that most businesses fall into two categories: market takers and market makers. Market takers bob along in the economic currents, reacting to changes and taking what the market gives them, for better or worse.
Market makers, on the other hand, proactively shape their own outcomes. They constantly look for new opportunities and search out new perspectives. When the economy goes sideways or uncertainties increase (as they inevitably will) these companies have the greatest chance of not just surviving, but thriving.
How do you go from market taker to market maker? While there are no easy answers, the three steps below can put you on the right path and give you ideas to build a more resilient business.
1. Triage issues and prioritize
The immediate reaction of CEOs in times of uncertainty is often to try to tackle everything themselves. This can lead to a loss of focus and inadequate bandwidth for the complex issues that truly require leadership attention.
Entrepreneurs in this situation can benefit from a concept used in hospitals: triage. Think of your business as an emergency department. Patients show up at all hours, but not all of them need immediate attention. A runny nose isn’t the same priority level as internal bleeding.
In your business, issues are like patients. You can define each one in terms of its complexity and urgency, then “triage” by delegating simple issues to managers while reserving the most complex for yourself or your executive team.
Triage helps ensure the right person deals with the right issue at the right time with the right resources.
2. Adopt a decision-making process
Triage only works if you can delegate tasks with confidence. That requires a team capable of making good decisions. And that, in turn, requires a decision-making process your team can use and trust.
You’d be surprised how few entrepreneurs take the time to establish a decision-making process for their team. Without one, is it any wonder that managers are paralyzed by indecision and queues form while processes break down? Such indecision is only exacerbated in times of great uncertainty.
Market makers impart a decision-making framework to managers and show them on how to use it. When you empower your team, your decision-making skills also expand as you become better able to reserve time for more critical challenges, while you confidently delegate everything else.
One example of a decision-making process is the observe, orient, decide and act (OODA) loop, developed by U.S. Air Force Colonel John Boyd. It’s not necessarily the one you need to implement in your business, but it’s a good example.
The observe, orient, decide and act (OODA) decision-making process
The table below breaks down the four steps of the OODA process.
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1. Observe
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2. Orient
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4. Act
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3. Decide
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Source: A strategy for fighter pilots developed by Col. John Boyd, U.S. Air Force
To make good decisions in the face of uncertainty, it’s important to ensure that you are constantly getting new insights, information, perspectives and opinions. This leads to better understanding, more options and helps you spot errors in your thinking.
If the same people are always helping you make decisions, regardless of the problem, you are not challenging yourself with new information and viewpoints.
Stress can change your approach
Another feature of OODA is that it is a process, a scalable and repeatable cycle of steps. This brings clarity and minimizes chaos and uncertainty.
This helps you make decisions because it allows you to observe, orient, decide and act despite the stress of the situation.
A lot of entrepreneurs are very efficient at running their business in normal times, but completely change their style when they come under stress.
That’s because they don’t have a system in place to organize their thinking and steady their focus. This leads to mistakes, which can endanger the company.
The next time you need to make a decision, ask yourself:
- Did I gather all the necessary information?
- And am I structuring that information and taking in a variety of perspectives and opinions about what it means?
Then take action, and once a plan is implemented, keep track of the results to feed more new data into your process so you can make the next decision.
3. Refresh your strategic plan
The third tip I have for you is to refresh your strategic plan. Pay special attention to any updates needed for your SWOT analysis (strengths, weaknesses, opportunities and threats) due to changes in global trends or industry shifts.
It’s time to go beyond simply fretting about tariffs or a possible slowdown. Quantify the risks for your business, then develop risk-mitigation strategies. Game them out by creating financial projections.
For example, if you’re wondering whether to reduce prices to offset tariffs, modelling may show that you’re better off absorbing a reduction in sales, as we found in an interesting BDC exercise involving a hypothetical case (see table below).
| Scenario 1 | Scenario 2 | |
| Assumption | -10% reduction in sales volume | -10% reduction is sale price |
|---|---|---|
| Effect on U.S. gross margin | -3.5% | -10% |
| Impact on U.S. sales in US$ | -US$210,000 | -US$600,000 |
| Impact on C$ cash inflows | -$172,500 | -$546,000 |
A 10% reduction in sales volume would result in a 3.5% reduction of your gross margin on your U.S. sales. Because of the exchange rate, this would lead to a $172,500 shortfall in your cash balance in Canada. The table also shows that the 10% reduction in sales would have a much lower impact on your cash inflows than a reduction of your sale price, resulting in a -$546,000 impact on cash flow.
Preserve cash
Risk mitigation doesn’t have to be dramatic. It should focus especially on preserving working capital. Cash not only allows you to meet your obligations, but also to seize opportunities that can appear in tough times.
This can involve simple steps, such as arranging for a credit increase before you absolutely need it. Or you can review your contract terms and conditions. For example, you could increase the deposit and progress payment you require from customers.
Don’t only evaluate risks. Take a look at opportunities. Has the changing environment opened up new potential markets? Our BDC ViewPoints panel survey found that 67% of entrepreneurs surveyed have noticed more customer interest in Canadian products.
Also interesting: The portion of entrepreneurs who say sales demand is increasing is actually on the rise, up from 14% in mid-March to 22% in mid-April. Entrepreneurs who report that demand has decreased have fallen from 43% to 35%. In other words, the economic situation appears to be improving for a lot of businesses, which could open up more opportunities for yours.
Leadership in uncertainty is largely about attitude
Market makers tend to ensure they’re well diversified in terms of customers and suppliers. If you’re finding yourself overly exposed to the U.S. market, it might be time to address this in your strategic planning by finding new growth opportunities.
This is where perspective becomes a powerful tool. Market takers see what everyone else sees. Market makers train themselves—and their teams—to look differently.
A big part of this is about your attitude as a leader. If you have a positive attitude in uncertain times, it will rub off on the rest of your team. If all you do is focus on the obstacles, restrictions and the odds stacked against you, you won’t be able to see opportunity.
With the right attitude, one can see through these challenges and see the cracks in them. To quote Leonard Cohen, “There is a crack in everything. That’s how the light gets in.”
The right attitude helps you and your team get to the “seeking opportunity” stage. This can sometimes be hard to achieve. Here are eight techniques to help develop a positive attitude that always keeps the door open to opportunities.
8 techniques to build a positive attitude in uncertain times
- Believe there is always a way out
If you don't believe there is an opportunity, no one else will. If you think you are doomed, you will be. - Keep an open mind
This is about being willing to adapt to new demands and needs and being willing to consider all options, even if you have tried something before. Stay open to brainstorming and building upon ideas, as opposed to shooting ideas down. - Take control of your future
Rather than accepting your situation, take control and own your situation. If you ingrain it in your head that you are in control, then you will be able to take responsibility for your future and be the master of your own destiny. - Know your core competencies
Know what you are truly good at. Think of these capabilities as transferrable skills. This will help you envision how you can leverage these skills in a different situation. - Consider what big levers have changed in the world
Think about the impacts of the changes on the supply chain, what your customers need and want, how your customers’ work and living habits have changed, and ultimately, how these big levers have affected your range of opportunity. - Look at the situation from various perspectives
If you look at the situation from the same perspective as everyone else, chances are you will see only what they see. If you look at the situation from your customers' or suppliers' perspective, you might spot something different, and maybe an opportunity. - Don’t be afraid to be a contrarian
If everyone else zigs, you can zag. If everyone is abandoning a product or service, maybe opportunity comes to those who stay. If you want different results from others, don’t do the same thing. - Be courageous
Reward comes to those who are willing to take on risk. The easy route rarely provides big returns, because that is what the majority of people will follow.
By having the right attitude, you’ll be better able to project the confidence your team looks to you for. This will help them excel and make good decisions.
Investing in your team, your processes and your own leadership will help you build a company that can think under pressure. The businesses doing this are more likely to not only survive this moment but to come out ahead.
BDC is here to help
Our experts can help you build a more resilient, data-driven company. Don’t hesitate to contact us to get personalized advice for your business.