Leading With Optimism

Two imperatives we give business leaders, particularly in times of uncertainty, are “lead with optimism” and “model positive leadership.” We are not advising you to put a smile on your face and go about your day despite all warning signals.

Optimism in this case means you can identify a path forward and a way to make it work. It is the only way to effectively lead your company during the inevitable difficult times.

Difficult Times?

Tariffs, which are for the time being still on-again/off-again, have the potential to make the near-term future one of those “difficult times” for some businesses.

“Some” is an important caveat, because we expect overall US Industrial Production to rise this year and beyond despite the ongoing trade turbulence. In addition, numerous domestic markets and businesses stand to benefit from tariffs as the higher duties price out competing imported goods.

If you are one of those that stands to benefit from tariffs, then you have reason to be optimistic, but be careful:

• In the long term, your customer relationships are likely to be more important to the success of your business than whether or not the current government has designated your market a “winner.”
• You will likely have the opportunity to increase your prices in response to demand shifting away from the potentially cost-prohibitive imported alternatives.
• Balance any margin-related decisions with a clear analysis of your market share, current and future. What price increase is an understandable response to market forces? Where is the line, beyond which customers will perceive themselves as being taken advantage of?

For the Non-Winners

If you are not a business that will benefit from tariffs, you will also need to be optimistic.

Tariffs may snarl some supply chains. During the COVID era, we saw the “golden screw” problem arise: Once supply chains were mostly recovered, some companies were still having difficulties obtaining a key component that was necessary for the completion of their product.

• In situations characterized by trade tensions, it is possible that a supplier could stop making the golden screw that your company needs because that supplier is making greater profits from their other offerings and rededicates the manufacturing capacity that had produced your screw.
• Alternatively, overseas suppliers of your golden screw may simply stop exporting because tariffs put them out of business or made the US market unattractive.

Exercise your optimism by doing the following:

• Leverage an alternative supplier that you had identified before your primary supplier stopped producing your part.
• If you did not identify an alternative ahead of time, find one now.
• Or find a way to get your product to market without that golden screw.

Having the flexibility of alternative suppliers would be prudent for all your inputs, not just the golden screw. And if there is a supplier element of your company, you may be able to pick up business from others whose suppliers are no longer reliable resources of needed inputs. You might not have the golden screw they are looking for, but you may have something else that can be used it its place to help get their product to market.

Solutions are available. Identify them, plan for them, and be optimistic.