The only certainty is uncertainty
The coming months and years will reveal how great the upheaval will be and for whom. Some sectors will hardly see a change, whereas others may see failures, relocations, restructuring or reorientations in businesses to fit the new reality.
The prospective business landscape for 2017 looks dramatically more uncertain than last year's and seems to have only downside risks. Commentators from sources as diverse as the media, corporate pundits and governments all clamor to agree that the uncertainty in the US and Europe is as extreme as we have ever experienced. Reactions have been largely emotional to the populist results of the US election and the UK Brexit vote, with fears being voiced about possible similar populist outbursts in pending 2017 elections in Germany, France and the Netherlands. These issues, alongside persistent financial instability in Europe (Italy this time!) and continuing refugee flows, as well as wars in the Middle East, risk creating a stagnating business environment.
War, uncertainty and worrying indicators have always been with us. As an example, 9/11 was a terrorism event that had decades-long global consequences. Yet airlines, perhaps the most severely affected sector in the immediate aftermath, quickly adapted themselves to the new realities. And, indeed, opportunities also presented themselves. Smaller, less-profitable airlines retrenched, allowing more-efficient operators to fill the gaps. The net result was an adapting industry that continued to serve its markets effectively. Many industries would have a similar set of tales of response and adaptation from any one of the disruptive events that affect the world each year.
Remember Y2K? It was one of the biggest-ever corporate overreactions. As a CEO running an airline at the time, we worried about the integrity of aircraft avionics, operational systems and our website and reservations systems. Due to this concern (and fueled by media hype), teams of people months ahead of time worked through the "what ifs" and contingency plans if our world fell apart on the stroke of midnight 2000. The world didn't end: Our systems moved into the new millennium without a hiccup.
So, is all the handwringing and worry an overreaction to the election of Donald Trump and the UK's decision to leave the EU? It isn't immediately clear because the exact shape of the changes to come have not been articulated. The coming months and years will reveal how great the upheaval will be and for whom. Some sectors will hardly see a change, whereas others may see failures, relocations, restructuring or reorientations in businesses to fit the new reality.
One thing is clear: The basic wheels of industry will need to continue to revolve. Consumer demand for goods and services will be delivered with flair and at competitive prices (albeit perhaps at a higher level). Annual budgets will need to be put together, board meetings will be held and the corporate world will persist.
Sensibly, most businesses will create teams to assess the implications of the shocks that are most relevant to themselves. Some industries, like the European low-cost airline sector, only exist because of the deregulation of markets in Europe. Does Brexit imply the end of the industry? No, but airlines with a strong UK presence will need to react quickly to the new world as the details become clearer throughout 2017.
In the absence of clarity, the best a company can do is plan for contingencies. Cross-functional groups of talented and creative people looking at possible changes and challenges to Britain's exit from the EU will help guide risk-mitigating decisions.
In addition, today's CEOs will want to plan for future growth. The effect of current uncertainties won't change the basic underlying attractiveness of growth in the UK or the EU.
In addition, today's CEOs will want to plan for future growth. The effect of current uncertainties won't change the basic underlying attractiveness of growth in the UK or the EU. All that will happen is a possible change in the perceived level of risk in investment and growth opportunities in the UK and Europe. Changing patterns of relative export and import prices may change the relative attractiveness of international markets. Regions of the world or areas of business that require less export/import of production inputs or final products may become more attractive in this new world. So staying home and doing more with less may offer the best chances for growth and profits.
If I were running a business today, I'd look at my list of business development ideas and might assess that the "riskier" opportunities in North and South America and Asia now look more attractive. Or perhaps doubling down on domestic new business ideas could be the winner in this new age of nationalism and populism.
The winners emerging from this newest era of uncertainty will have separate teams— some focusing on the downside risks to the business and others looking for growth opportunities. 2017 will certainly spell peril for some businesses, but others will thrive and grow as they adapt and move quickly to fit the needs of the new world.