What We Can Learn From Three Companies That Turned Uncertainty Into Opportunity
It's 2024, and the effects of the pandemic on supply chains, interest rates and how we work continue to reverberate. Tension surrounding the presidential election cycle has markets increasingly on edge. Geopolitical conflicts across the globe are prompting national economies to turn inward.
The current level of volatility has been called unprecedented.
It may be. Either way, it presents boards and executives with a stark choice: play offense or defense?
Risk mitigation is a smart move in any environment, but too much can lead companies to miss pivotal opportunities not only for survival, but breakthrough growth.
Fortunately, we have examples of companies and the strategies they used to turn uncertainty into historic milestones of growth.
Stability Through Revenue Growth
It seems counterintuitive for organizations to achieve revenue growth during times of uncertainty. However, careful planning for diversification, market expansion and innovation are all effective strategies for growth. In practice, this might mean doubling down on a core product, growing into strategic adjacencies or pursuing inorganic growth. Firms can be strategic buyers and take advantage of undervalued opportunities.
Nvidia continued to produce chips at a global scale during the COVID-19 pandemic; it recognized the opportunity in the cloud gaming market at a time when consumers were staying home and had access to virtual entertainment.1 Nvidia's founder, Jensen Huang, stated that AI would "open up a whole new world of applications not possible today."2 With AI companies recently exploding in growth, Nvidia, which owns 80 percent of the high-end chip market,3 followed suit in terms of its own growth. Nvidia's total revenue grew from $27 billion in 2023 to $61 billion in 2024, and its basic EPS increased by more than sixfold.4
Liquidity Leads to Opportunity
Once a firm has defined its growth strategy, it is important to prioritize building a strong liquidity position. Ample liquidity allows firms to pivot and be opportunistic in the market. For example, active acquirers with strong liquidity positions during the Great Recession of the late 2000s saw total shareholder return (TSR) increase by an average of 5 percent compared to others experiencing a TSR of 1.7 percent.5
To achieve good liquidity, CFOs and other leaders should incorporate comprehensive liquidity and cash management practices, such as improved receivables, effective inventory management and prudent cash reserves. Data-driven insights and analytics can aid in quick adjustments to preserve liquidity and boost revenue.
Warby Parker, the popular direct-to-consumer eyewear brand, took note of this by making strategic investments to build liquidity since its founding during the 2008 financial crisis. It invested heavily in e-commerce and innovative features, like virtual try-ons, to establish cash flow generating assets.6 This liquidity position enabled Warby Parker to quickly expand to 200 global retail locations and to continue the growth trajectory of its core e-commerce business.7
Steering Through Uncertainty
Navigating uncertainty demands strategic and agile leadership. Strategic leadership plays a pivotal role in fostering transparency and maintaining communication within an organization, nurturing internal trust and stability amidst ambiguity. Meanwhile, agile leadership, which facilitates rapid decision-making and strategic pivots, is essential for safeguarding revenue streams and effectively managing cash flow in turbulent times.
Leaders play a critical role in cultivating an environment that values proactive problem-solving and flexibility, guiding teams to perceive uncertainty as an opportunity rather than a challenge. Moreover, leaders are urged to actively engage in scenario planning and stress testing to refine their approaches to financial challenges through ongoing evaluation and adjustment.
Jamie Dimon, the CEO and Chairman of JPMorgan Chase, is the only CEO remaining after leading a major bank through the 2008 financial crisis. His ability to adapt to changing market conditions and respond to uncertainty has led JPMorgan Chase to be one of the largest and most profitable of the big banks. Some key characteristics of Dimon that have contributed to JP Morgan's resiliency are having a good decision-making process, acting at the speed of relevance, and constantly looking at market possibilities and their probabilities. To stay ahead of the ever-changing market environment, Dimon says that the firm conducts 100 stress tests every week.8 The resiliency that Dimon has built at JP Morgan is evidenced by the increase in diluted earnings per share from $1.35 in 2008 to $16.23 in 2023.9
Uncertainty presents unique opportunities for companies to take advantage of growth. Today's corporate leaders must master the balance of being opportunistic in the face of uncertainty and making measured decisions to ensure that the company and its shareholders feel safe and supported. Resilient companies will be marked by leaders who are unafraid to explore adjacencies in the marketplace, are calculated with investment decisions, and practice transparency within the company. Approaching uncertainty with a bold, opportunistic mindset will enable companies to thrive amidst volatility.
Footnotes
1. Christian Stadler, "Pandemic Winners: The 10 Best Performing U.S. Companies," Forbes, January 18, 2022, https://www.forbes.com/sites/christianstadler/2022/01/18/pandemic-winners-the-10-best-performing-us-companies/?sh=3b2992217220.
2. Rob Lenihan, "Nvidia CEO Jensen Huang weighs in on huge AI opportunity," The Street, accessed May 24, 2024, https://www.thestreet.com/technology/nvidias-jensen-huang-delivers-cant-miss-quotes-after-earnings.
3. "With These 2 Big Moves Nvidia May Signal Massive
Growth Ahead," Yahoo! Finance, accessed May 24, 2024,
https://finance.yahoo.com/news/2-big-moves-nvidia-may-094000488.html.
4. Noel Randewich and Medha Singh, "Nvidia adds record $277 billion in stock market value," Reuters, February 23, 2024, https://www.reuters.com/technology/ai-leader-nvidia-rises-forecast-tops-wall-streets-lofty-goals-2024-02-22/.
5. Anne Gherini, "6 Iconic Companies That Succeeded During a Recession," Inc.com, April 2, 2020, https://www.inc.com/anne-gherini/6-iconic-companies-that-succeeded-during-a-recession.html.
6. Steve Denning, "What's Behind Warby Parker's Success?", Forbes, March 23, 2016, https://www.forbes.com/sites/stevedenning/2016/03/23/whats-behind-warby-parkers-success/?sh=219312c411ac.
7. "Warby Parker Inc. (WRBY) Valuation Measures & Financial Statistics," Yahoo! Finance, accessed May 24, 2024, https://finance.yahoo.com/quote/WRBY/key-statistics/.
8. "JPMorgan Chase CEO's Lessons From Leadership," The CEO Magazine, April 2023.
9. Jamie Dimon, "Letter to Shareholders, Annual Report 2023," JPMorgan Chase & Co., April 2023.
Originally published 10 June 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.