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Running a software business in uncertain times is like driving a car in a thunderstorm. The first drops of rain might cause you to slow down, turn on your windshield wipers and look around for a safe place to pull over. But once you’ve assessed the situation, you may realize your car has new tires, your wipers are operating fine and you can continue toward your destination. Alternatively, if the storm gets too bad or you’re not properly prepared, you might need to pull over.
As software leaders manage for market uncertainty, they’re tasked with navigating similar challenges on a larger scale — and understanding whether their business is in a position to push forward or if they must press the brakes. In an environment like this, determining the correct strategy is critical. Here are five factors every software executive should consider when evaluating their business strategy in the current macro environment.
Understanding your software business
While leaders can get away with a hands-off approach during periods of growth, they must be unwaveringly diligent during market volatility. Executives who are deeply familiar with every aspect of their business are able to take swift and decisive action when time is of the essence.
Achieving a granular knowledge of your people, your products and your market means putting systems in place to feed critical data and information forward. Dashboards displaying real-time updates on key performance indicators are a good starting point, but the best business leaders go even further. Knowing the top performers on each team, recognizing the customer relationships most at risk and understanding the financial position of your competitors are all examples of the granularity that executives should strive to attain.
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Prioritizing what matters
A deepened understanding of a business paves the way for informed prioritization. Tough times require agility, and the leaders who successfully adapt to changing conditions do so by understanding what to prioritize and what to put on the back burner. There’s a tendency to set cost reductions or increases at a certain percentage across all functions of an organization, but that’s not always the right approach. A priorities-first approach yields better results and is often an opportunity to make strategic long-term pivots.
When businesses face challenging circumstances, executives must be willing to roll up their sleeves and put in the effort. Making difficult decisions and steering an organization around obstacles requires an innate toughness and an unrelenting spirit — grit. As we exit a cycle characterized by abundant capital and record growth, there’s an entire generation of leaders who have yet to face true difficulties. Those with inner grit will not only rise to meet the challenges ahead of them, they’ll also equip and empower their team to do the same.
Leaning on your network
Even the most seasoned software company CEOs rely on their networks for ideas, advice and outside perspectives. Having a trusted circle of advisors who understand the business of enterprise software is critical for successful leaders in the field — especially amid dynamic market conditions. Building a network of peers and mentors takes work, but cultivating relationships opens the door for invaluable knowledge-sharing to occur.
Identifying M&A opportunities and taking action
While the reflexive response when conditions change is to go on the defensive, the best leaders are proactively identifying opportunities for growth. For example, the tightening of available capital and financing typically limits options for subscale businesses, presenting merger and acquisition (M&A) opportunities for stronger players. But leaders can’t sit around and wait for prospects to cross their desks. They must be ready, willing and able to go out and find them.
Some of the greatest software companies in the world have emerged from crises bigger, stronger and more dominant than before. Leaders who know their organizations and have the grit to make difficult decisions can take action, pursue opportunities and ultimately build stronger and more resilient businesses.
Robert F. Smith is the founder, chairman and CEO of Vista Equity Partners. Visit his personal website to learn more about his philanthropic work.
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