One of my clients described himself as “pretty risk averse” when we met a few years ago. Fast-forward to today, and this executive and his team have just completed a significant re-invention of their business. Disruptive technology was threatening their existence and they responded with a new platform that has the potential to leapfrog their competitors.
This transformation was not easy. Along the way, the team had to manage the unpleasant task of restructuring – a nice way of saying that they had to fire many people who were committed to the old business, but who did not have the skills to transition into the new business. They also had to shut down sources of revenue that weren’t sustainable and invest heavily in new distribution channels. It is too early to declare victory, but this bold move has elicited a mixture of shock and awe from market pundits. This is a fabulous story, but one that is all too rare in Canada.
As Canadians, we are often criticized for being too risk-averse in our approach to business. This can be a virtue, as was the case in 2008 when our banks were well positioned to ride out the global financial meltdown. However, despite the occasional benefit of being risk averse, there are many, many examples of Canadian businesses crumpling when confronted with changing circumstances.
Deloitte Canada recently published an excellent report: The future belongs to the bold – Canada needs more courage, which I highly recommend. My takeaways from this study are that Canadian businesses are culturally more risk averse than their American peers, that only 1/10 Canadian companies can be categorized as “courageous,” and that these courageous firms grow significantly faster than others.
This is not a pretty picture and, with Trump as President-elect, I fear that the stakes have gone up significantly for Canadian business. I spent much of my career working for GE and I have seen how risk culture plays out in real life on both sides of the US/Canada border. Americans play to win. They can be relentless, take big bets and push boundaries. Size is almost always an advantage, and American companies use their size and the size of their domestic market to their advantage.
In an environment where Wilbur Ross, the new Commerce Secretary, has suggested a 20% tariff on all Canadian goods, where the political climate will support any number of “Buy American” initiatives, and where NAFTA might be ripped up, Canadian businesses and policymakers need to be ready to play offence and not simply react. This is not the time to wait-and-see.
We must face reality and recognize that the environment has changed. Depending on your business, you might start working on diversifying your customer base within Canada and in international markets other than the US. If you have any specific leverage – maybe your talent pool, or a proprietary technology, or access to a distribution channel – get ready to exploit it ruthlessly. And if you have never thought about engaging with your industry association to lobby government about how to counteract unilateral trade moves by the US, do it now.
It is time for all of us to be at the top of our game. I encourage you to channel your inner Churchill and not let a good crisis go to waste. We can use the existential threat of Trump Trade to push changes that make our businesses more resilient and adaptable. Maybe we can even learn to be courageous!