As a leader, it’s your responsibility to protect the interests of your employees, customers, and shareholders and uncover and helm any opportunities hiding amid the maelstrom. While it may sound impossible, insightful leaders are often able to guide their businesses through a crisis, so they emerge stronger than before. As former CEO of Intel Andy Grove once observed, “Bad companies are destroyed by crisis. Good companies survive them. Great companies are improved by them.”
So, how do you turn a crisis into an opportunity? Below are a few of the elements seasoned leaders wield to help them emerge from challenges more robust and more successful than before.
1. Establish a Baseline
In his 2006 book The Happiness Hypothesis, Professor of Ethical Leadership at New York University’s Stern School of Business, Jonathon Haidt, provides an analogy of an Elephant and its Rider. The Rider (rational) sits atop the Elephant (emotional), holding the reins and appearing in charge. Given the Elephant’s sheer size, however, tension exists whenever the Elephant and Rider disagree on which direction to go.
For leaders facing a crisis, the first monumental step is for the Rational Rider and the Emotional Elephant to agree on a way forward. Should the Elephant be given total reign to lead, he’s apt to charge ahead or else retreat without, first, rationally surveying the terrain. Conversely, leaving the Rider to his own devices results in over-analysis without any resulting action.
When a crisis hits, your first commitment as a leader is to understand the facts and assess the risks they pose to your business. Establishing a baseline shows you what is true in the current moment. This doesn’t mean you won’t take a deep dive into how it happened or take steps to plot the way forward. Instead, it means your starting point is, and must be, gaining the most precise possible insight into the present so you can understand how it is impacting you and your business. Only with this insight can you begin to make decisions about how to adapt and even profit from the new market conditions.
2. Long-Term Gains
Professional play can appear a confusing and, at times, brutal business to the amateur chess player. In competition play, competitors move pawns with the same confidence as when they trade rooks or sacrifice queens. However, as the amateur player develops their skills, they acquire the strategic and tactical knowledge to see professional play for what it is – neither confusing nor brutal, but brilliant and beautiful. The transition from amateur to adept play arrives when a player learns to see the board not for what it is but for how it will be.
As a leader, what your business looks like after the crisis is largely up to you and other senior decision-makers. Your short-term decisions will have long-term effects on your business, which may mean you need to make changes to your long-term business strategy. However, just as moving one chess piece can reveal a discovered attack on two enemy pieces, these short-term strategy changes can reveal hidden opportunities that lead to long-term gains.
An example many experienced throughout 2020 and 2021 during the Covid-19 pandemic was the shift to virtual operations. Many businesses found they could shift in-office roles into work-from-home positions, leading to reduced overhead expenses and opening positions to a larger pool of experienced applicants outside their local area. One short-term change revealed two potential long-term gains: reduced expenses and a wider pool of applicants.
3. Go Over Expenses
No matter how much time you’ve spent perfecting your budget, it’s time to review it when a crisis hits. You may need to consider ways to reduce costs, such as making cuts to discretionary spending, putting off non-urgent expenses, reducing infrastructure spending, and more. At the same time, you may need to increase spending in other areas. Adapting to the conditions brought on by the pandemic, for instance, required many businesses to invest more in the technology that facilitated virtual workspaces or in making improvements to their facilities’ ventilation systems to keep on-site employees safe.
Leaders facing a crisis often believe they need to start cutting costs when a crisis hits, but reviewing your expenses is not solely about finding ways to cut them. You may be faced with a financial crisis that requires you to increase production, for example, which could come with an upfront increase in spending.
4. Long-Term Profit
Just as you may realize long-term gains by successfully navigating a business crisis, it’s also possible to increase long-term profits. Successfully navigating the short-term pain of a crisis and emerging with greater long-term profit potential requires thoughtful and skillful leadership, however.
Consider the example of two (fictional) businesses undergoing identical crises. Hank’s Hats and Helen’s Hats have been hanging on by a thread since the Kennedy administration. Unfortunately, hats aren’t the in-demand accessory they once were, so Hank and Helen have both scaled their businesses back from once-thriving retail millineries to appointment-only custom hat boutiques.
In 2020, Hank saw the pandemic as the final blow to his hat business and, after one last attempt at an online-only operation, closed his doors for good. Helen saw the writing on the wall, as well, but before following in Hank’s footsteps and shutting her (virtual) doors for the last time, she asked a question Hank hadn’t: what’s working right now? While Hank saw only defeat as hat sales bottomed out, Helen noticed scarf and glove orders were not only steady but increasing and she’d begun to receive requests to buy fabric, elastic, and other sewing notions. Unlike Hank, Helen saw an opportunity at the end of her long-brewing crisis and recognized she needed to make only a few minor adjustments to seize it.
Helen’s Hats became Helen’s Haberdashery, an online store selling one-of-a-kind scarves, gloves, and face masks as well as fabric and sewing supplies. In addition, she supplemented her sales with online sewing courses. Though these courses required a significant up-front investment to produce and market, she will recoup them in under one year and enjoy their profit for as long as she continues selling them. She has received a copy of Hank’s resume and is pleased to consider him when she takes on an assistant.
5. Uncover New Demand
Helen’s choice to ask “what’s working” gave her the insight she needed to uncover new demand. This one simple question, “what’s working,” is a critical one to ask when you’re experiencing a business crisis. But, unfortunately, it can be all-too-easy to focus only on what’s NOT working and, like Hank, overlook the business opportunities unearthed by the crisis.
Not every new idea is an opportunity. For example, Helen could have noticed her business picked up in the weeks preceding Halloween each year and chose to re-brand herself as a costume shop. Still, her odds of succeeding at selling costumes amid a global pandemic were far slimmer. So, what is a business opportunity? At its most basic level, it’s a want or need that can be met by a business venture. However, when hats (and costumes) proved not to have sufficient desire, Helen’s insight allowed her to turn her idea into an opportunity.
When you experience a business crisis, asking yourself “what’s working” and “what opportunities does this crisis create” can provide the formula that allows you not only to survive the crisis but thrive after you’ve overcome it.
6. Use Benchmarking to Pull Ahead
Consider another fictional scenario. A seasoned long-distance runner experiences a crisis when an unexpected rain shower begins mid-race. As an experienced and confident runner, he’s prepared for adverse weather and knows how to make the most of running in the rain–he throws over a poncho, adjusts his hat, and keeps moving. However, a mile later, he notices the telltale sting of a developing blister and stops briefly to tend to it. He knows some of his competitors have a slight lead over him now–if he ignores their progress, he can finish the marathon with little lost time. However, using benchmarking to assess his position relative to the competition, he can identify adjustments that may still enable him to win.
Whether you’re facing a financial or organizational crisis that is unique to your business or are one of many businesses undergoing a collective crisis, benchmarking can help you pull ahead during the crisis and after it recedes. Benchmarking enables you to understand where your business stands relative to its competitors. While some aspects of your business crisis management response will deal solely with internal factors, other elements will necessarily include factors that position your business relative to its competitors.
Benchmarking looks at your business in relative rather than absolute terms. In the example above, the runner’s success hinges on his ability to perform better than others. After a business crisis, you may not be able to measure your success against prior quarters or years, but your relative position in the marketplace can serve as both a goal and measurement. Benchmarking can also show you what your competitors have tried or what they are planning, so you can better position yourself for the future while avoiding pitfalls or avenues headed toward saturation.
Challenges and crises are unavoidable. The good news for many leaders is that each new challenge also presents learning and, often, new opportunities. Whether you’re a leader, entrepreneur, or small business owner, learning how to respond to a crisis in business can be intimidating. At Leader’s Cut, I provide business coaching to leaders at all levels and career stages to help build their skills, resiliency, and team effectiveness, so they feel better prepared to weather any literal or figurative storms on the horizon.
If you’re eager to learn more about leadership coaching or want to know what it’s like to work with me, let’s have a conversation. You can schedule a free, fifteen-minute meet-and-greet conversation with me to discuss your goals and see how working with Leader’s Cut can help you achieve them.
Ken Kilday is an Entrepreneur, Executive Business Coach, Business Strategist, and LinkedIn Expert.