The 5 Big Challenges Every Business Leader Faces
A few weeks ago, I led an intensive two-day workshop for the board of directors of a major organization that had a relevance problem — as in, theirs was weakening relative to that of their competitors. I was 80% sure I knew what the problem was, but I met with the CEO and board chair beforehand to make sure.
My suspicions were correct. But as I sat there listening to these two leaders explain in great detail what they thought I needed to know before the workshop kicked off, a thought struck me: I’ve heard this before — often. This is déjà vu all over again.
There is no magic bullet, or singular panacea, or unique solution, that will guide leaders to the one right answer, because there is no one right answer. Every situation is different, as is the person attempting to resolve it. Yet the reason I was getting a sense of déjà vu was because I had heard what they were saying many, many times before, always beginning with a version of the following phrase: I know you think you understand our situation, but you have to realize, we’re different.
No. You’re not.
Over my 30 years of advising business leaders, I've reached the conclusion that the number of unique challenges that all businesses face on a regular basis can be counted on one hand. The magic number is five. What makes these challenges appear unique to the organizations in question isn't the challenge itself, but rather the extent to which leadership is either equipped to resolve the challenge or empowered to confront it. So, what are the five, and what should leaders think about as they identify and build strategies to overcome them?
1. Reduce Operational Risk
The first is a high level of operational risk. It’s typically caused by a failure on the part of leadership to think and act strategically. And why does this happen? Because acting tactically is more comfortable. Tactical activities have little perceived risk, typically have short-term, known outcomes, and often yield visible returns at the end of the day, which creates a feel-good moment — like mowing the grass.
Strategic actions, on the other hand, feel risky (because they are!), lead to long-term outcomes that are often unpredictable, and offer leadership no direct control over the outcome.
There’s another problem, though: When leaders act tactically, two things happen. First, they abdicate the strategic work. Second, they send a message to the employees who by all rights should be doing the tactical work that they aren’t up to the task, and that leadership will “take it from here.” Great way to create loyalty and trust.
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2. Improved Competitive Position
The second challenge is the desire to improve the firm’s competitive position. Unfortunately, this is often met by a me-too strategy which rarely works, other than for a vanishingly short period of time. As Tom Peters likes to say, “You can’t be remarkable by following somebody else who’s remarkable.” A company cannot stand out by fitting in: It must be the signal that rises above the competitive noise, which takes us back to the first point: Strategic thinking is what leads to competitive advantage.
3. Organizational Differentiation
The third challenge, similar to the previous point, is one of organizational differentiation. The best way to do this is by identifying and resolving blind spots that prevent the firm from being as effective as it can be. By definition, blind spots can’t be seen; whatever lies behind them is invisible to us. Leaders must put into place an internal engagement model that forces a culture of asking uncomfortable but necessary questions: What am I doing well? What am I doing poorly? What am I not doing that needs to be done? What am I doing that someone else should do?
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4. Profitability
The next challenge is assured profitability. Two ways to do that: raise revenues, or reduce expenses. Revenues grow when a company outsells its competitors. Revenue grows exponentially when a company acts in such a way that its competitors are seen by the customer as irrelevant. And expenses? Cost-cutting is important for any organization, but equally important is the ability to anticipate and reduce risks that lead to added operational cost. Again, back to strategic thinking.
5. Leaders Must Lead
Finally, leaders must lead. Sounds silly, I know, but leaders don’t automatically become leaders because it’s engraved on the brass plaque affixed to their office door. Leaders lead by doing: acting strategically while empowering tactically; creating a culture of mandatory knowledge-sharing; and creating a culture that places a very high value on vertical and lateral communication.
Five challenges that, if dealt with, resolve the vast majority of existential threats that companies across every industry, regardless of size, face. And that last one? That leaders must lead? That one falls into the category of table stakes.
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About the Author
Dr. Steven Shepard is the founder of the Shepard Communications Group in Williston, Vt.
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