Lessons from Brazilian champions

How can managers survive and thrive in unpredictable markets? To shed light on this question, I and my co-author Martin Escobari, who is now a managing director of Advent International in Brazil, analyzed ten Brazilian companies that managed to survive and thrive amidst the turmoil of the Brazilian market during the 1990’s. In several cases these companies emerged as world-class competitors in global industries including aerospace, brewing and banking.

We published our findings in the book Success Against the Odds. My posts through the rest of the summer will draw on our research and this book to bring to light some of the impressive success stories and the broader principles they illustrate about thriving in turbulent markets.

These firms’ success is an impressive accomplishment, because Brazil is one of the most unpredictable markets in the world. Brazilian managers during the 1990’s faced volatile exchange rates, sporadic availability of capital, inconsistent industrial policy, unpredictable rates of inflation and interest, and sharply increased levels of foreign competition, in addition to the competitive threats, shifting consumer preferences, and potential technological disruptions common to every country.

An elite group of Brazilian companies not only survived this turmoil, but actually emerged stronger at the end of the last decade. They responded quickly and effectively to shocks that threatened their very survival and undid less successful competitors. They quickly seized golden opportunities that positioned them well for the future. Perhaps more importantly, they capitalized on periods of relative calm to probe the future, identify and manage key risks, build a cash cushion, continuously improve operating efficiency, and build flexibility into their organizations. These actions taken together prepared them well for the risks and opportunities that emerged regularly during a turbulent decade.

These companies beat the odds by surviving a decade that saw the deterioration and in many cases demise of their former rivals. For soccer fans, the success of these firms resembles Brazil’s stunning victory in the 2002 World Cup. Recall that, when the competition began, the Brazilian Congress was investigating charges of widespread corruption in the country’s Soccer League, and the national team suffered its worst performance ever in the qualifying rounds. And yet, against all odds, the Brazilian soccer team emerged as World Champions in 2002, the only team ever to win this honor five times.

Throughout our research, we observed striking similarities among the firms we studied regarding how they prepared for and responded to threats and opportunities. We also found consistent differences between the firms that survived and thrived during the 1990’s compared to similar, but less successful, rivals. After carefully studying successful firms and systematically contrasting them with less effective peers, we codified our findings into a small set of principles for managing in any unpredictable environment.

Some of our findings – such as the importance of active waiting during relative pauses – will surprise readers. Others, like the need to identify and manage key risks, will act as a sober reminder of the danger involved in ignoring business fundamentals in an unforgiving environment. Each one of these principles represents an indispensable part of our comprehensive model of managing amidst uncertainty. These lessons help executives who compete in any unpredictable market. Managers of companies that compete in any emerging market, not only Brazil, but also China, India and Russia, will learn much from the Brazilian companies that we studied.

Our core message is one of hope. Companies can consistently excel in even the most turbulent markets. We offer hope, but not the false promise of easy solutions. The recommendations I will outline in the posts to follow are concrete and actionable, but they are not easy. Sustained success in an uncertain world demands constant vigilance and continuous improvement.

In turbulent markets, “only the paranoid survive” as Andrew Grove, the Chairman of the Board of global semiconductor leader Intel, has observed. Grove’s quote raises an important point about the sustainability of success among the firms we studied. All ten of our elite firms did exceptionally well during the 1990’s. Anyone of them could stumble if they let their guard down in the future.

Leading in turbulent times

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Don Sull is professor of management practice in strategic and international management, and faculty director of executive education at London Business School. This blog is dedicated to helping entrepreneurs, managers, and outside directors to lead more effectively in a turbulent world.

Over the past decade, Prof Sull has studied volatile industries including telecommunications, airlines, fast fashion, and information technology, as well as turbulent countries including Brazil and China, and found specific behaviours that consistently differentiate more, and less, successful firms. His conclusion is that actions, not an individual’s traits, increase the odds of success in turbulent markets, and these actions can be learned.