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Disruption may be the new economic driver: Here's how leaders can meet the challenge

Age of disruption: Business leaders must manage through short-term crises, while monitoring long-term trends.

Age of disruption: Business leaders must manage through short-term crises, while monitoring long-term trends. Image: REUTERS/Borja Suarez

Simon Freakley
Chief Executive Officer, AlixPartners
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Davos Agenda

This article is part of: World Economic Forum Annual Meeting

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  • Business leaders must manage through a proliferation of shorter-term crises while keeping an eye on the longer-term forces shaping the future.
  • How should we focus our all-too-finite resources of capital and time? In the 4th annual AlixPartners Disruption Index, 85% of CEOs say it has become increasingly difficult to know where to start.
  • But a sector of companies is outpacing their competitors through bold action, increasing their recession readiness while positioning for near-term opportunities.

The world keeps getting more complex. We all feel it every day, as longer-term structural changes remake our economies, societies and day-to-day lives. A lingering pandemic, the war in Ukraine, inflation, abruptly lower demand, energy shortages, extreme weather events, refugee crises and other catastrophes demand our immediate and close attention. At the same time, new technologies are reshaping how we work and live, populations are ageing, the post-Cold War order is fracturing, and the earth is warming.

None of these challenges exists in isolation. They form a complex and interrelated network of feedback loops and amplification. To look at just one example, climate change has led to deteriorating environmental conditions, which, in turn, has led to increased migration to better, more stable climes. The mass entry of refugees increases support for nativist or more isolationist policies. Decreased global coordination limits our ability to take collective action on issues like climate change. And on it goes.

The leadership challenge is unprecedented. We must manage through a proliferation of shorter-term crises while keeping our eyes on the longer-term forces shaping the future. How should we focus our all-too-finite resources of capital and time?

In our 4th annual AlixPartners Disruption Index, business leaders cite this as the central dilemma, with 85% of CEOs saying it has become increasingly difficult to know where to start.

4th annual AlixPartners Disruption Index: Almost every CEO in the survey said they would need to change their business model in the next three years. Davos 2023
Almost every CEO in the survey said they would need to change their business model in the next three years Image: 4th annual AlixPartners Disruption Index

Almost every CEO in our latest survey said they would need to change their business model in the next three years; nearly half said they are changing their business models today. That level of transformation puts tremendous strains on CEOs. They tell us that they cannot find employees with critical skills (41%), that their executive teams lack necessary agility (72%) and that their boards impede digital transformation (83%). As a result, most CEOs (70%) worry about their jobs.

CEOs thought they were getting a throne; what they got was a hot seat. Their concern is it may become an ejector seat.

For more than 40 years, AlixPartners has been helping our clients navigate disruption. One of our most critical lessons is that you cannot combat disruption if you are overwhelmed with distractions. You must focus on what really matters. You must be willing to take bold actions to move your company where it needs to go and do so at speed.

4th annual AlixPartners Disruption Index: What impact will a potential recession have on business? Davos 2023
What impact will a potential recession have on business? Image: 4th annual AlixPartners Disruption Index

Our survey identified a segment of companies we call growth leaders – enterprises outpacing their competitors. If one thing sets them apart, it is bold action. Across the board, we see them performing better yet still trying to do more, whether that’s fixing their supply chain, attracting the best talent, or transforming their business with technology.

The growth leaders are more likely to be preparing for slowing economic growth. They are more likely to be building cash reserves (38%), lining up new suppliers (33%), and, though they plan for greater growth, planning layoffs and/or furloughs (26%). These growth leaders are also more likely to look at M&A opportunities (40%) in the current environment.

This is precisely what we would advise companies to do in response to this disrupted environment. Adopt a bifocal vision. Manage through short-term issues by increasing your company’s recession readiness and positioning for near-term opportunities.

However, it’s critical not to lose your long-term focus. Invest in smart growth initiatives that are likely close to your core business where you can take advantage of existing economies of skill and scale. Prioritize operational superiority. There is never a downside to efficiency, but the upside is even greater when growth is hard to come by.

These challenges faced by businesses are shared equally by leaders in government, NGOs and across society. Climate change, geopolitical conflict, aging populations, developing technologies and the like are not issues that can be addressed in isolation by any one constituency and must be undertaken through collaboration, which is, of course, the mission of the World Economic Forum. As a result, the lessons from the business challenge – to move and act boldly while maintaining this bifocal vision – apply just as much to the global challenge.

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We must remember, as well, that despite all the challenges, including any potential unknowns, we can and should be optimistic about the future. New technologies promise to solve some of our most existential threats, including those arising from climate change and ageing populations. Growing geopolitical competition and conflict could actually demonstrate the need for greater international cooperation. Disruption may be the new economic driver, but it creates opportunities, not merely threats.

Leaders must be prepared to meet the challenge and capture the opportunities of this disruptive age.

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