When dealing with turbulence: act carefully, don’t panic
By Ryan Williams | 5 minute read
Key points:
- During turbulence stay calm.
- Be realistic about your situation.
- Make careful, practical decisions.
During turbulence ask what truly matters
Many SME leaders are dealing with challenging times or “externalities” right now. The conflict in the Middle East has seen fuel prices escalate, causing panic over supply and negative impacts on agriculture, travel and logistics. Local consumer confidence is at a half-century low, with Australians fearing recession as inflation rises and GDP growth slows.
For business leaders, the noise is from this turbulence is constant and overwhelming. The instinct is to react quickly, but giving in to knee-jerk instinct can steer your business towards trouble in a time of crisis.
What’s needed is a clear, structured assessment. Not a 60-page strategy document or a reactive cost-cutting exercise, but something far simpler and more disciplined.
Map out the genuine problems
For most business leaders, it should start with a blank sheet of paper. Map out the external world using a simple externalities framework such as PESTLE (Political, Economic, Social, Technology, Legal, Environmental) or TOWS (Threats, Opportunities, Weaknesses, Strengths). This is the reverse order of the usual SWOT analysis because you’re putting the externalities – the threats and opportunities – first.
Consider the key headlines that you’re aware of in each risk domain. That alone is clarifying because the next step is where most SMEs fail: asking what truly matters.
It’s easy to be carried away and worry about issues that ultimately won’t affect your business. Not every global shock is your problem. A dental practice, for example, doesn’t need to react to the overseas conflicts in the way a travel agent does. The discipline is to filter potential problems ruthlessly. Reduce the noise to the handful of forces that genuinely affect your revenue, costs or customers. Then, once the genuine problems for your company are down on paper, it’s possible to start planning for genuine turbulence.
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Sort noise from action
The next layer is practical. For each relevant externality, identify two or three things you need to do. That might mean adjusting pricing, reshaping your logistics approach or preparing for cost increases. Then, it’s time to triage and figure out what’s imminently threatening.
We often rush to solve potential problems in a hurry but treating every issue as urgent leads to rushed decisions and poor execution. The cost of acting too quickly is often higher than the cost of waiting briefly to think.
When leaders panic, they often make ill-considered decisions, for example, slashing expenditure or stopping investment. Many businesses cut too deeply, too early, only to reverse those decisions months later at significant cost.
Model before you move
Another recurring failure point for SMEs is a lack of financial modelling. This process can help determine whether there’s a major threat to your survival or whether a modest price adjustment may solve the problem. Without such modelling, leaders guess, which tends to skew towards pessimism.
If modelling capability doesn’t exist internally – outsource it. An accountant or consultant can quickly build scenarios that anchor decisions in reality rather than headlines.
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Consider the opportunities during turbulence
In any crisis or turbulence, there is usually upside for someone. The current fuel price panic has seen a surge in interest in EVs (electric vehicles). Alternative energy has become much more attractive, with greatly increased interest in solar.
Rising energy costs create pressure for some businesses and opportunity for others. AI disrupts existing models while enabling new ones. Supply shocks drive innovation in logistics and sourcing.
A leader’s role is not only to defend against threats but to identify where advantage can be built on.
Around a decade ago, I worked with a cinema business that faced a serious existential threat: the rise of streaming. The panic response would have been cost-cutting by reducing screens and seats. Instead, we took the time to figure out why people go to the cinema and identified the demographics who attended cinemas. It turned out the real audience for cinema wasn’t the same demographic as the shareholders or board members, who created a skewed perspective on the problem.
Cinemagoers wanted the experience of watching a movie in a theatre, and so we invested in experience differentiation to appeal to the target customer base: IMAX, Gold Class, kids’ cinemas and so on. Recent innovations include escape rooms and other activities at cinema locations. Ultimately, we transformed a business that faced losses numbering in the tens of millions into a highly profitable company within 18 months. After all, cinemas survived the arrival of video stores, so why not streaming too?
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Key principles to follow during turbulence
The steps we took for the cinema business apply to organisations across all industries:
- Filter the noise and determine what actually affects your business
- Triage the threats so you’re only dealing with the urgent ones
- Take time to plan – for example, securing a short-term financial bridge from shareholders to do this
- Look for opportunities – for example, focussing on experience differentiation, not just cost reduction
The role of leadership is not just to defend against threats but to identify where advantage can be built. Take your time and decide what will genuinely affect your company, what’s urgent and what steps you can take.
In an environment where everything feels urgent, the advantage lies with those who can decide what is not.