CEOs must be comfortable with contradictions and ambiguity. Set and protect the strategy, vision and mission, but also stay attuned to market changes and be ready to adapt to them.

I’ve spent nearly 30 years helping companies grow and scale through both market highs and lows. While these cycles are inevitable and should always be considered in a company’s strategic planning process, they can be unpredictable and volatile. How should you react? Should you stay the course? Should you pivot? These are some of the hardest strategic decisions a CEO must make, and often the most consequential.

I was interviewed on this topic by LLR’s Head of Strategy, Sarah Long, during the firm’s Collaborate forum for portfolio companies along with CEOs Dawn Carter, Rich Harris and Tom Woodruff. In this GrowthBit, I’ll share six practices we agreed were critical in helping us as leaders make better strategic decisions in response to fast-moving and unpredictable markets.

Invest in the future while others hit pause

When the market craters, the tendency is to trim costs, but I have always believed in swimming against the current and pumping up R&D spend. A downturn gives you a credible story to tell about why revenues were lower than expected. So why not use that opportunity to narrow margins a little further by upping the investment in R&D and being better positioned against competitors on the inevitable upswing?

In Q1, my team spends 80% of their time on the current year and 20% of their time on the future. In Q2, the split is 60-40. In Q3, it’s 40-60, and in Q4, it’s 20-80.

Rich used this strategy in his first year heading up TrustEngine, a borrower intelligence platform for mortgage lenders. When interest rates shot up and shook the industry, Rich invested in building innovative solutions that could support customers in the current climate and when the market corrected.

At YCharts, I build future thinking into our processes with a simple planning formula. In Q1 of every fiscal year, I ask my management team to spend 80% of their time on the current year and 20% of their time on the future. In Q2, the split is 60-40. In Q3, it’s 40-60, and in Q4, it’s 20-80. Having a specific amount of time allocated to long-term planning sparks the right conversations at leadership meetings and signals that the organization’s leaders are expected to be thinking ahead at all times.

Gain early insights by talking to customers

We all know it’s valuable, but when the market is in turmoil, talking to customers can take a back seat. But it’s at these times that reconnecting with customers is especially important.

Tom, whose company, Allmark Door, installs and services industrial doors and loading dock solutions, talks to customers toward the end of every Q3 to discover their plans for next year and how it will impact spend. Not only does it reveal the resources he will need to meet their upcoming requirements, but it gives him an opportunity to understand the market more broadly.

“Customers are having the same challenges every year on where they will be allocating their budgets to deliver the most value. To meet their needs, we need to understand what they are thinking about doing over the next 12 months. As we are working with them, just talking through their plans is a big help to both of us, as they usually have that answer a little bit before we need it. The sooner we can tap into that intelligence, the better we can plan to respond to it.” – Tom Woodruff

Dawn heads CareATC, a company delivering on-site healthcare services to include comprehensive primary care services, Occupational Health, wellness programs and population health analytics. Her rule of thumb is to interview new customers and potential clients throughout the sales cycle, a process that, among many benefits, identified a promising new direction for CareATC.

“This year, we’ve made significant investments to help our client success team more effectively partner with customers, not only to look at where they are today, but to develop a multi-year plan together and help them align with their overall healthcare goals. And that’s been really impactful for us.” – Dawn Carter

Continually update your planning model

Our panel of CEOs was also aligned on the importance of continually updating their planning models with fresh data. In his leadership roles, Rich likes to develop a two-year plan that he and his team update weekly with actuals to see whether they align with predictions.

“If we’re behind on any milestones, that’s a signal to modulate expenses to account for slower growth. If the actuals are on target or in excess, it may be time to put the pedal to the metal and aggressively invest in growth.” – Rich Harris

Like Rich, I set and continually check a long-term plan against well-defined upper and lower thresholds. If we hit the high end, it’s time to double down and increase spend. If we hit the low end, it’s time to revise our goals or we run the risk of demotivating our people whose KPIs and bonuses are tied to unrealistic milestones.

Having a competitive intelligence function enables you to evaluate the situation strategically rather than jump to lowering prices as a knee jerk response.

Find the signal, ignore the noise

Everyone on the panel agreed that isolating meaningful, actionable information in a noisy world is critical. Competitive intelligence can deluge your organization if you don’t have a system for collecting the data and a framework for deciding whether it’s actionable.

At YCharts, we established a formal competitive intelligence function within our product management team. They are the central repository for competitor data and deliver a detailed, comprehensive report that filters out the chatter and highlights potential threats—including the small, hungry companies who could easily be eating our lunch next month.

Both Tom and Dawn had been through situations where competitors created downward pressure on pricing and sparked a lot of anxiety, especially for their sales teams. In both cases, having a formal competitive intelligence function enabled them to evaluate the situation strategically rather than jump to lowering prices as a knee jerk response.

“We obviously want to keep an eye on what’s happening in the market, but my message to the team is to really just play our game. We can’t get distracted from our short-term and long-term strategic plan by every competitive move. We have the potential to win by staying focused on how we service our clients and making sure that we’re providing the highest level of service.” – Dawn Carter

‌Not every growth lever will be available to the company at every step, and a good CEO knows which ones are feasible and how to use them.

Focus on what you can control

One of the most underrated skills for CEOs is the ability to recognize what is and isn’t within their control. Not every growth lever will be available to the company at every step, and a good CEO knows which ones are feasible and how to use them.

For example, the challenging talent market has prompted our CEO group to refocus on systems and processes as more realistic growth levers for the time being. Dawn talked about solving operational bottlenecks and high rates of attrition among clinicians by rethinking the delivery model rather than ramping up hiring.

“We looked closely at how to maximize efficiency and take down the barriers for our providers to see more patients. We invested in the infrastructure to create an ecosystem around our provider to make it easier for them to see more patients and make the touchpoints stickier. It’s been a significant improvement to the way that we support our business, and we think this will grow utilization and our top line.” – Dawn Carter

Rich has a different approach to finding a workaround when the labor market is tight or the budget won’t stretch to the level of talent that’s needed. He believes strongly in investing in existing talent to level them up.

“I try to find that bright, hardworking gem. I’m crystal clear with them that I’m giving them a responsibility they may not be ready for, that I’ll support them in any way I can, and that there are no consequences if they can’t get the job done.” – Rich Harris

It’s like Major League Baseball: If you fail 70% of the time, you’re still a Hall of Famer. Stay flexible and be ready to rethink the strategy.

Don’t be afraid to pivot your M&A plan

Every CEO on the panel had a story about reversing one of the most fundamental decisions in their growth strategy: whether to build or buy.

Despite the availability of good acquisition targets and a high level of consolidation in healthcare, Dawn prioritized improving system and technology integration, a strategic decision that ultimately led the company to launch de novo clinics in target markets.

Tom pivoted from buy to build after a number of opportunities fizzled. Seeing greenfield expansion as a viable alternative, he took advantage of a slight softening in the talent market to snag tech workers and has started opening new operations in target regions instead.

As for me, I’ve been on point for seven M&A deals throughout my career. I know what a bad deal looks like, and I’ll never let myself feel pressured to make one. I recently took the time to reconsider a buy strategy after three years of disappointing searches for the right target. Great deals are incredibly hard to do. It’s like Major League Baseball: if you fail 70% of the time, you’re still a Hall of Famer. Stay flexible and be ready to rethink the M&A strategy if the conditions and opportunities don’t line up perfectly.

Here’s the bottom line.

CEOs must be comfortable with contradictions and ambiguity. Set and protect the strategy, vision and mission, but also stay attuned to market changes and be ready to adapt to them—sometimes at a fundamental level. Recognize that flexibility is not a deviation but instead a core component of strategic planning, so talk to customers, monitor competitors, and take advantage of opportunities to do what others are not doing. Have an established means of collecting and filtering that data and a bold approach to acting on it, even if it takes you in a direction you didn’t expect at the outset.

This GrowthBit is featured in LLR’s 2024 Growth Guide, along with other exclusive insights from our portfolio company leaders and Value Creation Team. Download the eBook here.