Future challenges require firm leadership

Posted by: on Dec 12, 2014 | No Comments

Predicting the future is almost impossible and it takes strong, firm leadership to turn challenges into opportunities.

When I did my MBA at INSEAD many years ago, one of my professors told me that the only way to predict the future is by looking at the past — there is no such thing as a crystal ball which tells the future.

This might sound a little simplistic and maybe even brutal but this is the way things are.

Take trying to predict currency movements, stock market development, economic cycles, for example: all predictions are simply assumptions and these assumptions are typically based on past experience.

The likelihood is that someone will guess correctly but this is down to luck and experience rather than an ability to look into the future.

Who could foresee the economic meltdown in the Eurozone starting in 2008? Who would predict that the euro as a currency would come under threat? Who could predict that oil prices would plunge the way they have done lately? Who could predict that the tension in Russia and Ukraine would bring us back to the ‘Cold War sentiment’ where Russia once more was cast as the enemy?

Since nobody can predict the future it is important to listen to the views of many different people.

When running a global healthcare services company with presence in 18 countries, the only thing  that is (almost) certain is that there will be macroeconomic challenges in one or a few of these countries at any given time. We have seen the Russian rouble, Argentinian peso and Turkish lira plunge during the year; we have seen signs of recovery in Spain and Portugal; and we have seen the impact the falling oil price has had on the economies of Saudi Arabia and Russia.

What will happen in 2015 which we are not able to predict today? Will there be a sustainable economic recovery in Europe in 2015? Probably not. Will oil prices increase again to 100-plus dollars per barrel? Probably not. Will the situation in Syria and Iraq improve or will IS continue to seize more territory? Probably yes.

Will something significant happen in the world in 2015 which we cannot predict today? Definitely yes.

What are the implications for business in all this uncertainty? One thing which I always have believed in and which is going to be important for the foreseeable future is to manage cash flow as well as one possible can. Cash is king (or queen). This is for any company the most important measure of financial success. A company with strong cash flow will always fare better than a company not focusing strongly on cash flow.

I believe that any company today also needs to have mitigation plans ready to be implemented in case country performance is much lower than planned. To sit back and accept that performance goes down without implementing strong measures is nothing that shareholders or private equity owners appreciate. What we know is that shocks to the system do happen much quicker today than before due to increased volatility and shorter cycles. Therefore any successful organisation must always be prepared to mitigate, face the problem and turn it into an opportunity.

Strong leadership from the top is a prerequisite for success. Management by objectives and delegation is something I have practiced in all leading positions I have had, but one must always keep a firm hand on the steering wheel and be prepared to act quickly whenever things do go wrong. And the only thing we can be certain about is that things will go wrong. The only question is where, when and what the magnitude will be. Being prepared will help you turn these challenges into an opportunity and come out as a winner! There will be many losers in tomorrow’s world and a few winners. Which category do you want to belong to?

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Foto på Dag Andersson