How to Rescue a Failing Strategy

Your 2025 plans are shot to pieces. Thanks to the trade war, weakening consumer confidence, rising inflation expectations, downward pressure on the U.S. dollar—not to mention the usual uncertainty around customers, technology, and competition—your guidance to Wall Street is about as useful as last year’s Kentucky Derby predictions. Your capital spending plans…can we pause for a bit? Your hiring plans, marketing budget, pricing strategy…can we set up time next week? And it’s not just this year’s budget or this year’s plan. For most companies, the whole foundation of strategy suddenly seems soft: which markets to go after, who the competition is, how to line up suppliers and sales and distribution channels, how to create and defend entry barriers, what AI will do to all the above. You mustn’t let strategic uncertainly lead to operational and tactical paralysis. Yes, you need to revisit, review, and revalidate or revise your strategy, but the world won’t wait for you to finish thinking. Given the pace and unpredictability of disruption, there’s a lot to say for progress over perfection: getting things 80% right fast, then working out the rest. We’ve seen in our work that there are four no-regrets moves you can make as you revise your strategy. These actions will create the flexibility you need to weather major shocks or grab unexpected opportunities, improve operations, and protect or increase revenues now. All of them can be done quickly, and they’re strategy-agnostic: They’ll help you identify, protect, strengthen, and expand your sources of value creation, whether your strategy is built on being a low-cost provider, a leader in technology and innovation, obsessively customer-centric, or something else. 1. Protect liquidity and increase financial flexibility. In times of disruption or distress, cash is king. It’s a shield against a cash crunch and a sword that can be used to seize opportunities. The risk of a liquidity crisis is real. Interruptions in global trade can dry up cash, currency fluctuations can increase payables or weaken receivables, demand can fall, and distressed customers might pay late or not at all. Looking back to the disruptions Covid caused, a study by OECD analysts showed that 38% of European companies would have faced liquidity shortfalls if governments hadn’t helped. The risk is particularly acute for companies that have high debt-service obligations (such as many private equity–owned businesses). Despite the importance of cash, fewer than one in four companies (24%) say cash management is one of their top three priorities in times of disruption, according to data we collected for the AlixPartners Disruption Index. Many companies have only approximate data about their cash needs and position, because the numbers are siloed and aggregation takes time. Two quick actions can make a big difference in a company’s cash position: better forecasting and aggressive improvements in working capital management. Imprecise or inaccurate forecasts cause companies to produce more than they can sell or hide cash under the corporate mattress. Many companies’ forecasts aren’t granular enough to track the impact of tariffs on all their products, components, and materials. It’s possible to improve forecasting significantly in a matter of weeks. Case in point: We helped one healthcare company improve accuracy from 80% to nearly 90% within 30 days by integrating basic AI-enabled supply chain and inventory management tools, and in the process discovered large amounts of idle cash. Better working capital management is the second step toward financial flexibility. Every company pays attention to the money tied up in receivables, payables, and inventory, but these times call for the aggressive approach we’ve seen companies take when in turnaround situations. Payables are quickest: CFOs and treasurers are often surprised to find how frequently their companies pay bills before they’re due, often because the process for making payments was established years ago when people still cut checks, payment processes vary by business unit, or some managers simply don’t know better. Receivables, too, are often managed in a slapdash way, with invoices sent out days or weeks late and poor processes for flagging chronically late payers or pursuing unpaid bills. Permanently reducing inventory takes longer, but most companies can make quick gains by going back to basics with a 13-week cash flow analysis and a sustained cadence of proactive working capital reviews. In each of these cases, AI can accelerate change. For example, it’s relatively easy to ask AI to compare contractual payment terms with actual payment times. With a bit more sophistication, AI can create watchlists of suppliers or customers who are in distress or appear to be headed there. 2. Improve the fitness of your commercial organization. Facing a downturn, companies often retrench rather than attack. In fact, they should do both, with high-impact, high-speed programs to improve customer acquisition and retention. As we’ve written previously, tactical, quick action can push revenue higher even in a down market. Within the sales force, there are almost always overlaps and gaps in customer coverage, unexploited means of upselling and cross-selling, and opportunities to improve sales-rep productivity. Though consumers are stretched, there are still opportunities to raise prices to cover increased costs, especially for high-end products. And companies should resist the temptation to cut marketing across the board and instead undertake a rapid, detailed analysis of marketing effectiveness so that they can put marketing dollars where they work best. Reducing customer churn and focusing on net retention revenue (NRR) should also be a priority, especially when new customers are hard to find. For example, a $2 billion Silicon Valley-based technology service provider we worked with experienced a 10% improvement in renewal rates ($100 million NRR improvement) in one year by analyzing the lifetime value of customer segments, developing product bundles specifically designed to appeal to each segment, and reconfiguring incentives in its sales and service organizations. Using AI, companies can create models that identify customers that are at risk and create a “save desk” to intervene. Retention gains can be big, and they compound. If you pursue this course of action, you will likely be ahead of your competition: Our research shows that only 15% of companies deliver white-glove customer success support at a low cost. 3. Embrace your most profitable customers. Identify those customers and market segments that are the most profitable—and don’t take your eye off them. Profits and profitable growth potential are always concentrated by market, company, business, and business segment (i.e., at the intersection of products, customers, channels, etc.). Financial reporting and analysis are rarely detailed enough to identify those profitable pockets—but these are the customers you must ardently work to win, keep, and expand, especially in tough times. Smart long-term strategy is best built knowing which channels, customers, and segments are most profitable for you. A detailed analysis of profitability (including accounting for the cost of the capital consumed by each product or segment) can take months, but back-of-the-envelope calculations can be done quickly can give you much-needed momentum, even if you need to refine your approach a few times down the road. 4. Strengthen risk management and cybersecurity. The last thing you need now is a serious risk that materializes out of nowhere; yet changes in both trade and technology have ratcheted up threats of all kinds, including cybersecurity breaches or financial risks caused by distress in a key supplier or distributor. Bad actors exploit times like these. Forty-six percent of executives worldwide cite cybersecurity as a major threat, a 20-point increase from a year ago. They’re right: Any significant changes to financial systems, technology platforms, or those of partners or suppliers can open new vulnerabilities. New suppliers need vetting. The risk profiles of even reliable partners can turn from green to red as they cope with their own disruptions. In trade wars, state actors might attack even purely domestic players like hospitals and power companies. AI has accelerated the cybersecurity arms race, with both attackers and defenders using it. It’s urgent to audit your cyber defenses, which, in our experience, needs to be done from inside-out (testing and upgrading current plans) and outside-in (auditing or stress-testing by an objective expert). That should include an initiative to begin, dust off, or level-up third-party risk management (TPRM). Data from Verizon shows that the percentage of cyber breaches coming via third parties has doubled in the last year. Companies therefore need better supplier monitoring and diversification and stronger capabilities in scenario planning, wargaming, contract analysis, and so on so that they can rank suppliers on a full spectrum of risk. Many outside advisors (disclosure: including our company, AlixPartners) can do this quickly, using AI to speed up risk scoring for Tier One, Tier Two, and even Tier Three suppliers; advanced programs are even able to predict problems. • • • These initiatives cannot substitute for strategy. If your strategy has been sideswiped or totaled, you still need to repair or replace it. But these four moves will buy you time, create options, and protect you against the worst. Many companies aspire to coordinate a sustained, cross-functional response to rapidly evolving market conditions, and many fail. Winning companies in their environment share two traits. First is their willingness and ability to embrace the change and move forward, even with imperfect information and even if they have to change course midstream. Second is their determination that, even while improvising, they’re guided by four points of a compass: cash, commercial effectiveness, customers, and risk. Companies that keep this compass in front of them set themselves apart by translating acute challenges into the very means of achieving competitive advantage and learning as they go. After all, in this environment, no deliberate strategy—memorialized in binders full of carefully crafted PowerPoint slides—is likely to last. This is all about emergent strategy, which is driven by on-the-ground realities and responding to unforeseen changes ahead.

How to Rescue a Failing Strategy

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