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You could be forgiven for thinking that the cinematic storms lashing the UK’s shorelines and cities are a macabre foreshadowing of the economic tempest to come over the next 12 months. Although it’s obvious that troubles most certainly do lie ahead, it’s equally true that leaders who continue to hold their nerve and are willing to adapt can and will make their businesses prosper.

As the CEO and one of the founders of Criticaleye, I believe that whatever the wider economic and political environment, over the course of this year those leaders that are able to put ‘context’ first will thrive. The leaders that base their decisions on the context of their own organisation and its eco-system, while carefully monitoring the experiences and views of others rather than just the macro-picture, will take their companies into strong commercial positions.

To my mind, 2012 is going be a great year for leadership, an investment year, a growth year and, above all, a positioning year.

As Ian Bowles, Chief Executive Officer of Allocate Software plc says, the current crisis was not triggered by widespread business failure or lack of opportunity: “Good companies can thrive if they focus on core activities and execute well.”

Besides, plenty of corporates and SMEs have piles of cash on their balance sheets – the question is when and where to invest. For Bala Chakravarthy, a Criticaleye Thought Leader and Shell Professor of Sustainable Business Growth at IMD, “2012 will sort out the true blue-chip companies from the pretenders” and that will require a potent mixture of “innovative strategies and prudent risk taking”.

Troop morale

The immediate priority for executive and non-executive teams is to buoy the spirit of employees and stakeholders so that everyone continues to believe in a business and its future. Siva Shankar, former Corporate Finance Director at commercial property investment and development company  SEGRO plc, warns against the dangers posed by employees falling into the trap of alarmist thinking, largely fuelled by ‘sensationally negative’ stories in the media.

He says: “Unfortunately, this kind of ‘negative sensationalism’ will naturally seep into organisations and leaders will have to be vigilant and take firm steps to contain the impact that a few destructively influential ‘tabloid communicators’ can have across a whole organisation.”

Laura Haynes, Chairman of brand and communications company Appetite, says: “The growing uncertainty often leads to paralysis in change, development, innovation and investment, not only for individual companies, but for the economy as a whole… I [do] think there should be a focus on employee engagement, the values of the brand and how to deliver against the ambitions of an organisation."

The ability to react to change and take an opportunity remains paramount. Mike Hayes, President of gaming company SEGA Europe Ltd, says: “There [is a] need to adapt to the way technology is changing methods of consumption. As broadband improves… consumers will want to experience their entertainment, receive their key information and buy goods in a far more real time and direct manner… Businesses will have to adapt to keep consumers engaged.”

Andy Dunkley, CEO of Lee Cooper Brands, says: “For our business the key opportunity is expanding internationally and giving our customers a full menu of support so they can take as much or as little as they need. That being said, I am anticipating a harder scenario in picking up international business in 2012 than we had in 2009 to 2011, so we are going to be much more cautious in the management of our cost base.”

When assessing the bigger political and financial picture, there’s no point in denying the dangers that exist as growth in Asia slows, the Eurozone teeters on collapse and economists predict a double-dip recession. The threats are out there and, as Marcus Stuttard, Head of AIM, the London Stock Exchange’s international market for growth companies, states, confidence is crucial as “uncertainty in the markets has been the biggest brake on activity in recent months and is likely to continue in the early part of 2012”.

Ian McCaig, Deputy Chairman of smart meter energy company First Utility, says: “I still have deep uncertainties over the consequences of any stimulus actions that seek to bring about short-term improvements. It’s difficult to be positive unless we know what happens next in the Eurozone. If we see an individual market or the currency collapse, trading relationships will continue to worsen.”

Guessing game

Every sensible executive and non-executive team will be measuring the wider risks against the individual strengths and weaknesses of their organisation. Brian Stevenson, former Chairman of Global Transaction Services for the Royal Bank of Scotland Group plc, says: “Most companies are in good shape to weather the challenges of 2012 but, in general, banks and governments are not. This, together with the continuation of macro-economic imbalances in the world’s economy, mean that it is difficult to be optimistic.”

In this sense, over-exuberance and bullishness may appear ridiculous and even offensive, especially as austerity measures start to bite and organisations need to make realistic cuts in tight market conditions. For those in the public sector, for instance, the pressure is on to make savings and reduce expenditure while seeking to improve service. Jane Furniss, CEO of the Independent Police Complaints Commission, admits that this is no easy task as “it’s a combination of adapting and trying different things”.

It’s not a time for any business leader to be operating in a silo. Jane continues, “Certainly, advice from colleagues within other organisations that have been through this, both in the public and private sector, has been useful and that’s where the Criticaleye Community has really helped me. I have conversations that help to give me ideas and also having more formal discussions with people about how they have tackled similar situations.”

And so it comes back to the importance of understanding the context of your business. Only through dialogue, interaction, hard analysis and good old-fashioned gut-feeling will you be able to make the right choices and empower your leadership team so that you’re where you need to be in 2012.

Those who lose sight of their contextual position will be sucked into a very tough vortex!

Please get in touch if you have any comments about the issues raised here.

I hope to see you soon.