Coping with the stagflation blues

The outlook in 2023 for the British economy and hence many British companies is grim. Stagflation, the combination of high inflation and persistent low growth, has returned to the UK. As Tony Danker, director-general of the CBI. puts it – “Britain is in stagflation—with rocketing inflation, negative growth, falling productivity and business investment.” Ian Stewart, Chief Economist at Deloitte, identifies why CFOs are taking a cautious attitude to borrowing for investment – “The most aggressive tightening of monetary policy in more than 30 years is reshaping corporate attitudes to debt. Not since the credit crunch have CFOs rated debt as being less attractive as a source of finance for their businesses than they do today.”

Read the full article on Investopedia here.

Many reasons are given for the return of stagflation and resulting recession including the pandemic, supply chain problems, obstacles to export, high interest rates, and extortionate energy costs. It is clear then that UK companies face many challenges, some never encountered before by younger leaders, to sustaining output and growing their business.

While the invasion of Ukraine is linked to some of those challenges, it is heartening to see an amazing story coming from Ukraine, where conducting a successful business is many times more challenging. Andrew Pavliv, the Founder and CEO of Ukrainian software outsourcing company N-iX, believes his leadership style suits unpredictable situations.

“You get to the reality of your business on a very deep level, he says. You need to be able to mobilise everybody in the company quickly. Even when Covid started, I considered myself a wartime CEO.”

The results of N-iX are impressive with revenues growing by 56% in 2021 during the post-Covid economic recovery and by 35% in the last 12 months. This was in spite of the shelling, power supply cuts and internet interruptions. Pavliv and his team came up with ingenious solutions to these problems including setting up an office in the underground car park and renting an office in Kviv with connections to three different power stations.

The results from N-iX show that Pavliv was able to make sense of the extraordinary difficulties of running a business in a wartime situation. While dealing with stagflation does not carry the same risks to life as leading a company during a war, business leaders need to make sense of challenges not experienced in decades and to come up with innovative solutions. In doing this they can call on the expertise of their people who undoubtedly will have opinions about the situation in their organisation. This is what we in Tensense call organisational experience (OX) data, which helps businesses make sense of novel challenges. You can watch a short video here.

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