Davos in the springtime

I’ll take sunshine over the snow and cold every time. And what a pleasure to connect in person at the WEF meetings last week with so many friends and clients after so long.

Concerns about the macro environment were on everyone’s minds – starting with, but by no means limited to, the war in Ukraine. We are witnessing one of the most disruptive periods in recent history, certainly in my lifetime – one that is shaking the liberal world order as we knew it.

How we deal with today’s multiple crises will impact how we live and do business in the years and decades to come.

According to an old adage, trouble comes in threes. And we are indeed experiencing (for now) three crises: economic, geopolitical, and health.

Economic.

Markets are experiencing extreme volatility. Inflation has hit record highs, and the pandemic has severely affected economic growth. The severe market downturn is being seen in stocks, crypto, and the IPO market. Spreads in the credit markets are widening.

Whether this is long-lasting or cyclical remains to be seen, but either way, it will be a difficult time for businesses and everyone else.

Geopolitical.

The war in Ukraine is the most violent conflict we’ve had in Europe since the Second World War, with no obvious end in sight. In fact, some aspects are getting worse – a related food crisis, oil price shocks, and worsening relations between Russia and the West.

Health.

We are only slowly emerging from the pandemic crisis, which has fundamentally changed the way we work and live. Only time will tell all of the long-term consequences from this crisis.

And if I might extend the health metaphor a bit, the health of our planet is also at a critical juncture. Following COP26, there seems to be critical momentum at both political and corporate level to advance toward net zero goals (with over half of global assets under management now pledged to investments supporting these goals), even if practical plans to make necessary transitions lag.

Each of these crises creates huge levels of disruption, a phenomenon we have been studying via the AlixPartners Disruption Index since 2019. In our view, disruption is now the number one driver of the global economy and business performance.

In this year’s survey, 94% of executives said that their business models must change in the next three years. And perhaps unsurprisingly as a result, 72% of CEOs were worried about losing their jobs due to disruption. The challenge is profound.

Looking at the three crises currently facing us, business leaders should be taking steps to address these challenges now. Essentially, companies need to be shoring up and reinforcing resilience across their business, including a focus on cash flow and profitability. Given how difficult disruptions like the war in Ukraine are to predict, single points of failure in your supply chain and further inflation risks need to be identified and mitigated.

And importantly, crises can be essential catalysts for change. Don’t forget to think about the opportunities in disruption. How do you maintain and grow your customer relationships? Strategically, what are your vectors of growth into the future? Are there businesses that you should be considering acquiring? Are there those that you currently have that are non-core? Now is the time to position your business for the future.

Wide-reaching disruptive events present a way for all of us to rethink how we do business and why we do the business we do. They also allow us to engage with our customers, our employees, and other stakeholders in new ways—to perhaps confront the disruptions together.

But the reality is we are going to have to spend much more energy and time on doing than we are on thinking. Disruption isn’t something we can wait out, something we can hunker down against until it passes. Instead, it’s something we need to devote time to understanding, to anticipating, and to confronting through action.

I value conversations like we had recently in Davos, as long as they lead to action. As leaders, we will be judged on the actions we take and the results we achieve. Many challenges presented by disruption cannot be solved unilaterally – either by one business or even one country. The WEF’s mission is to engage political, business, cultural, and other leaders to improve the state of the world. It’s a worthy goal, but one that requires consensus to move forward meaningfully. And that consensus can be very slow and very difficult to achieve – as was plain to see in Davos this year.

But individually, we can – and should – each focus on what we can actions we can take today that can make a difference. Start with your organization’s purpose and its values. What can you influence with your behaviors that are in line with these values? Are there choices that can make your organization more sustainable? What are the right choices for your global footprint and supply network? Are there steps that can make you more attractive as an employer of choice?

It is possible to be both purpose-led and pragmatic. And it has perhaps never been more essential.