Leadership and Strategy in a Changing World
The world is entering the most significant and tumultuous period of political and economic realignment since the end of the Cold War. China has emerged as both the single most powerful manufacturing nation and a revisionist power. Europe is no longer the center of the global marketplace for ideas, commerce, and influence. Peak globalization is over. We have been reminded that countries have armies and use them, and that industrial capacity is the backbone of military, economic, and diplomatic strength.
The trade and industrial policies from 30 years ago are not valid today. The reality of 2025 is that we live in a competitive and dangerous world, and our country requires a proactive industrial policy that advances American interests. The Trump administration clearly understands this, and as we’ve seen with this week’s tariff announcements–they are not messing around. While we can argue about what tools of industrial policy are appropriate and how they should be applied, the bottom line is that we are officially in a new era. As the world gets more competitive we should necessarily expect to see more of these types of mercantilist trade and monetary policies in upcoming decades, regardless of what party controls the White House.
Bias Towards Action
This shift creates risk and opportunities for all companies who operate in or source from international markets. Leaders need to quickly move past “what is happening” and “why is this happening” to “what do I need to do about this to ensure the success of my business for the next 25 years.”
At Sustainment, we build software and AI applications to help companies optimize manufacturing supply chains, so my orientation is to see this through the lens of supply chain strategy. In our industry, if you are not thinking about how to reorient your supply chain to be effective in an environment that incentivizes or requires localization, you are going to fail. Related, if you do not have the ability to be agile and react quickly in the turmoil that characterizes these transition periods, you are going to underperform.
These are some of the best practices that we are working through with our customers:
- Lean into your existing relationships with US suppliers. They are being inundated with new opportunities and you need to be present with them to stay top of mind. Ask them what new capabilities they might have added since the last time you walked the floor.
- Dual sourcing or aligning secondary sources of supply on as many components as possible is essential. Work to line up a domestic and nearshored alternative for every single one of your overseas suppliers. As you work with new potential suppliers, it is necessary to weigh production ramp lead times vs. total cost of ownership with overseas purchases to prioritize the highest-impact work transfers.
- Ensure you have visibility into your 2nd and 3rd tier suppliers and where tariffs will affect their prices in your value chain. Finding out three months from now that your domestic supplier’s input costs increased by 46%, which will be passed on to you, puts you in a reactive position.
- Look at your RFQ processes to ensure you have the team and workflows in place to quickly get quotes from multiple suppliers. The key to an agile and flexible supply chain is your ability to quickly get quotes from multiple suppliers so you can make informed decisions on price and timeline tradeoffs.
Significance of this Moment
This shift will define the next 25+ years and will transcend supply chain operations. It is not too much to say that businesses should re-evaluate every single element of their strategy and operations to determine what changes need to be made in context of the changing global environment.
The cardinal sin of organizational strategy is executing a great strategy that was built for a different environment. When the assumptions that underpin your strategy change, you need to change your strategy. Change happens quickly, and market winners and losers are determined in these rapid transition periods.
Don’t miss the moment.