At some point within the next decade, leaders of both large and small companies will have to make a strategic bet, perhaps even several. That’s why leaders must have the ability to see the need for a game-changing move and seize the moment.
A strategic bet is a life-or-death move made either to transform a company and create a new growth trajectory, or to create a totally new enterprise. It requires commitment fromand will likely be uncomfortable to make.
Do you have the fortitude for it?
CEO Andrew Liveris of Dow Chemical Company made such a strategic move when he bet the company’s future on the acquisition of Rohm & Haas. The acquisition took all of Dow’s financial resources and would shift the company’s business model. Liveris said it would be “transformational.”
From the beginning, the deal nearly fell apart. Financing was hard to come by. Wall Street was skeptical. Two days before the close of the deal, a funder backed out, throwing everything into jeopardy.
With the plans wobbling, most expected Liveris to retreat. But he summoned his mental toughness and perseverance, and continued to project confidence in his vision.
In the end, he succeeded.
He kept the board of directors committed, found new sources of financing from Warren Buffett and two members of the Rohm & Haas family, and convinced the ratings agencies to maintain the company’s rating.
Liveris was right; it was a transformational deal. It tilted the mix of the business and pushed Dow’s stock up.
The example points to the sort of challenge more companies will face in the future, requiring leaders to put their companies on the line. Liveris saw that the global environment affecting the chemicals industry was changing rapidly and that, sooner or later, his company would be forced to change.
He knew what great leaders know: Better to take bold, thoughtful moves to stay ahead of change, even if it means putting everything at risk.
— Adapted from “Strategic Bets,” Ram Charan and Michael Sisk, strategy+business.