How to keep investing in growth and innovation as a recession looms

October 27, 2022, 9:18 AM UTC
Updated October 27, 2022, 9:50 PM UTC
CEO Greg Becker of Silicon Valley Bank
CEO Greg Becker of Silicon Valley Bank in Santa Clara, Calif., Nov. 1, 2017.
MediaNews Group—Bay Area News/Getty Images

Good morning.

With a recession coming, how can companies maintain their investment in innovation and growth? That was the topic of a Fortune dinner conversation last night, held in collaboration with Bain & Company. The short answer to the question: It’s not easy. Here’s how Silicon Valley Bank CEO Greg Becker put it:

“I’ve been at the bank for 30 years. I’ve been through many cycles…And the earnings calls all go the same way when you hit a downturn. ‘Why are you not cutting more aggressively? It makes no sense.’ And my response is, ‘If we didn’t believe in our outlook, if we didn’t believe in the long-term trajectory, you would be making a really good point. But we are not going to cut the muscle in the foundation right now that’s going to impact us in two years, three years, four years, and five years.’”

Leslie Donato, chief strategy officer for AmerisourceBergen, made similar comments, but added that, on the merger and acquisition front:

“It’s actually creating opportunities for us…We are seeing more opportunity for strategics to get into certain areas that have really been dominated by private equity for the last at least few years.“

Earlier in the day, I moderated a virtual CEO roundtable discussion, held in partnership with Deloitte, where participants reported seeing only the faintest signs of the much-predicted recession. Here’s Tony Bates, CEO of Genesys:

“I’ve certainly seen some odd behavior where we’re about to sign, you know, very large deals, and then they just sit on the CFO’s desk, or the CEO just says, ‘No, I’m not signing until I see what’s going on.’”

Yet the CEOs also reported the battle for talent continues unabated. Here’s Brian Niccol, CEO of Chipotle:

“We’ve got more turnover than we like, and the capabilities of those people that are in our organization are lower than they’ve been, because they haven’t been with the company long enough to get a lot of experience.“

Most significantly, a number of the CEOs say they have never been in an environment where the range of possible future scenarios is so broad. Here’s Ron Coughlin, CEO of Petco:

“I’ve never developed plans with such a span of differentiation. The pet category could be up 8% to 10% next year…But at the same time, there is a catastrophic view that there is zero growth. I’ve never had as broad of an array of outcomes.”

More news below.


Alan Murray
@alansmurray

alan.murray@fortune.com

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AROUND THE WATERCOOLER

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This edition of CEO Daily was edited by David Meyer. 

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