Dr. Michael Boehlje, Professor Emeritus

The Upside of Turbulence: Seizing Opportunity in an Uncertain World written by Donald Sull

Food and agribusiness firms are facing turbulent times – geopolitical uncertainty in terms of the Russia-Ukraine war and increased tension between China and the U.S.; climate change and increased intensity of weather events; new technologies such as AI and automation that provide productivity improvements but require new workforce skills and capabilities; new competition in the market and significant changes in competitor behavior, etc. These disruptions are testing the industry’s resilience and its ability to adapt and thrive in these turbulent times.

Risk is perceived by most as “bad” – something to be avoided. But entrepreneurs and businesses know there is no reward without risk. A reasonable return requires taking some calculated risks. But in fact, uncertainty has both an upside and a downside. Management must ensure appropriate compensation for the risks assumed; while also minimizing the downsides of the uncertainties faced in turbulent times.

Many of the operational and financial risks and uncertainties agribusiness firms face can be managed or transferred through insurance and futures markets, but that is generally not the case with strategic uncertainties. Strategic uncertainties often provide significant opportunities for profits, so transferring them to others results in lost opportunity. Managing strategic risk typically requires a different approach – recognizing and retaining the risk and positioning for the uncertainty.

Successful positioning requires two key attributes within a firm: firstly, the resiliency and absorptive capacity to handle the potential downside or negative consequences arising from uncertainty; and secondly, the agility to recognize and capitalize on the potential benefits or positive outcomes associated with these uncertainties. Donald Sull in his book The Upside of Turbulence: Seizing Opportunity in an Uncertain World provides practical suggestions for navigating these current disruptive and chaotic times.

Sull argues that various features can significantly influence a business’ resiliency or its ability to handle downside uncertainty.

  • Low fixed costs – Can help a firm weather a wide range of changes, such as price wars, higher raw material costs, and declining demand.
  • War chest of cash – Cash can be used to offset potential losses from unforeseen contingencies or changes.
  • Diversified cash flow – Spreading investments across different business units can serve as a store of potential wealth that can be sold or developed later.
  • Too big to fail – Large firms can survive by off-loading operations and reducing head count in crises. Size also increases the likelihood of stakeholder support for a struggling firm.
  • Tangible resources – Valuable assets such as raw material deposits and real estate can serve as potential value.
  • Intangible resources – Brand expertise and technology can insulate the firm against market changes in the short and medium term.
  • Customer lock-in – Preventing customers from switching to a competitor buys a firm time when downturn occurs.
  • Protected core market – Entry barriers in a core market provide a secure cash flow during challenging times.
  • Powerful patron – A powerful government, regulator, customer, or investor vested in the firm’s success can buffer it from changes.
  • Excess staff – The corporate equivalent of body fat, these employees serve as a store of value that can be shed in hard times.

Note that most of these sources of resiliency result from deliberate decisions to position the business to withstand and absorb unforeseen events.

Sull identifies agility sources that enable a business to capture the upside of uncertainty as follows:

  1. Strategic
    • A strong balance sheet and a large war chest to finance big bets
    • A governance structure that permits executives to seize opportunities more quickly than rivals
    • Owners and executives with a long-term perspective
    • Early recognition of market changes
    • Willingness to exit
    • Start-up and new venture mentality
  2. Portfolio
    • Central corporate control over important resources, such as talent and cash, so they can be reallocated
    • Regular, unbiased evaluation processes
    • Structured processes for decreasing commitments or selling units
  3. Operational
    • Shared real-time market data that are granular and credible
    • A small number of corporate priorities to focus effort
    • Clear performance goals for teams and individuals
    • Mechanisms to hold people accountable and to reward them

It is critical for agribusiness managers to assess and develop the resiliency of their firm to absorb the potential downside as well as the agility to capture the potential upside of the uncertainty in these turbulent times. Sull offers a valuable framework and specific steps to do so.

Sull, D. N. (2009). The upside of turbulence: Seizing opportunity in an uncertain world. Collins Business.: