When the economic environment becomes more difficult, the tone of budget discussions is often the first thing to change in many companies. Investments are reviewed once more, new hires are postponed, external spending is questioned, and projects that seemed self-evident yesterday suddenly have to be justified. That is understandable: when margins come under pressure and uncertainty rises, liquidity becomes more important and room for manoeuvre shrinks.
The strategically more interesting question, however, lies elsewhere: Which initiatives will now be pursued with full commitment—and which fundamentally good initiatives will a company deliberately choose not to pursue?
This question is currently arising with particular urgency in Germany's Mittelstand. The latest financial-statement analysis by the German Savings Banks Association is based on corporate-client accounts that, according to the association, represent around 40 percent of all corporate revenues in Germany.
It shows that revenues across the board rose only roughly in line with inflation, while average operating profit fell by five percent and return on sales declined from four to around three percent. At the same time, the equity ratio remains at approximately 40 percent. Loan commitments by the savings banks to companies and self-employed people rose by 5.8 percent year on year in the first half of the year to €46.6 billion, which the association interprets as an indication that investment is picking up.
This is not a situation in which companies are simply shifting into reverse. It is a situation in which investments have to be selected more carefully. That is precisely where strategy becomes practical.
The problem is rarely the bad ideas
A company's list of major initiatives does not normally contain obviously nonsensical projects. Sales may need to be professionalised while a new CRM is being introduced in parallel. A digital product may finally need to be moved to a modern platform. There may be efficiency potential in the existing business while a new business field also appears attractive. Add AI, a major customer request, perhaps a new market, and two projects that have already been running for a year and are supposed to be finished at last.
There are good arguments for almost every individual initiative. That is exactly why prioritisation is so difficult. Cancelling a bad project is not a major strategic achievement. It becomes interesting when a company has to choose between several reasonable options, even though there is not enough money, time or management capacity to pursue all of them with the same level of commitment.
In economically strong periods, this conflict can remain hidden for a surprisingly long time. Five initiatives are launched, budgets and responsibilities are distributed, and bottlenecks are addressed with additional resources. When the economic environment tightens, this model works less well. It then becomes clear that money is only one of a company's scarce resources. Another does not appear on any balance sheet and is often even scarcer: the attention of the people who can actually move an important initiative forward.
Management attention cannot be increased at will
A new business field does not only cost the budget shown in the business case. It requires decisions from the executive team, capacity from sales, product or IT, possibly new partnerships, and eventually an answer to the uncomfortable question of what has to take a back seat in the existing business if the new business is genuinely to become a priority.
The same applies to major transformation initiatives. On paper, the project has a project manager, a timeline and a budget. In practice, questions emerge after a few weeks that cannot be resolved within the project team. Two departments compete for the same resources, an important customer suddenly needs something else, technical dependencies become visible, or an assumption in the original business case proves to be wrong. The project then needs exactly those people who are simultaneously required for four other important topics.
A company may therefore be financially capable of launching five strategic projects and still be operationally able to advance only two of them seriously. Especially for business-critical initiatives that have to be advanced alongside day-to-day operations and must be driven forward, the available budget alone does not determine whether a strategic intention actually becomes a result.
The other projects quickly enter a peculiar intermediate state: they are important enough to be discussed regularly, but not important enough for conflicts to be resolved in their favour. There are status reports, steering committees and project plans, but as soon as day-to-day operations need resources, the project loses.
A year later, the diagnosis is often that execution was not consistent enough. That may be true. But the problem may have started much earlier: perhaps the company should never have launched those five initiatives at the same time.
Strategy is also reflected in what is not on the roadmap
Strategy is often associated with decisions about what a company intends to do in the future: enter new markets, develop new products, digitalise, use AI or reach additional customer groups. Yet the other side of those decisions is at least as strategic—and usually more uncomfortable.
At some point, a company has to answer which customer group it will not pursue further, which product idea will remain untouched, which digital project can wait another year, and which individual customer requirement will be declined even though revenue is attached to it. It becomes particularly difficult when a project has already consumed substantial money and time and still needs to be reassessed.
Economically, money already spent should not play a decisive role in the next decision. What matters is the value the project can still create from today onwards, which additional resources it will require, and which other opportunity cannot be pursued as a result. In practice, sustaining this logic is much harder because major projects are always tied to personal convictions, internal reputation and expectations.
When a managing director personally initiated an initiative, a team has worked on it for a year and customers have already heard about it, stopping it is no longer a mathematical decision.
That is precisely why the ability to end a fundamentally sensible project nonetheless is part of serious corporate leadership.
A business case begins not with the project, but with the business
This is especially visible at present in digitalisation and AI. There are good reasons to engage intensively with both. But that does not mean every digital or AI project automatically has strategic relevance.
Before discussing technology, a company should therefore clarify which economic variable an initiative is intended to change. Depending on the project, these may be very different things:
- more revenue or a higher conversion rate
- a better margin or lower process costs
- shorter throughput and delivery times
- higher customer retention or lower churn
- additional capacity with the same workforce
- lower working capital or fewer failure costs
- a shorter time to market
- or a new offering customers are actually willing to pay for
Not every initiative has to deliver a positive return on investment after six months. Some investments take years; others initially create capabilities, infrastructure or strategic options whose value does not appear immediately in the profit and loss statement. Even so, a company should be able to explain which assumption it is making with an investment and how it intends to recognise later whether that assumption holds. Otherwise, strategy becomes a collection of plausible future topics.
The right decision is not always the project with the highest standalone ROI
Consider a company with three major investment opportunities. The first project automates an existing process; the savings can be calculated relatively well and the risk is manageable. The second is intended to open up a new business field; the potential return is significantly greater, but nobody knows exactly how quickly a robust market will emerge. The third modernises a technical platform that customers barely notice, but without which further product development could become difficult in two years.
Which of these projects should be funded first? A spreadsheet alone will not answer that question. The executive team has to assess which risk the company can currently carry, how stable the existing business is, which capabilities already exist, how reversible a decision is, and which option may be lost if a project is postponed by two years.
It can even make sense not to prioritise the initiative with the most attractive standalone business case. Companies do not invest in a vacuum. Every project competes with other opportunities for capital, people and attention. The question “Does this project make sense?” is therefore not enough. The more difficult question is: Does it make more sense than what cannot be done because of it?
Transformation rarely works through addition alone
During transformation phases, a pattern repeatedly appears that initially seems harmless. New requirements are added to the existing business while almost nothing disappears from the existing business. An additional sales channel is introduced, along with a new product, another system, new reports, new projects and additional strategic initiatives. The company is supposed to change, but preferably without giving up anything it has done so far.
This makes transformation additive. For a while, the strain can be absorbed. People work more, priorities are shifted and some projects move more slowly than planned. At some point, however, this model reaches a limit because a company cannot simultaneously run the existing business at full intensity and build an unlimited number of new capabilities. Anyone who seriously prioritises something new therefore eventually has to discuss what will become less important. That may be a product, a market, a process or a project.
Especially during growth and transformation phases, the challenge is not to formulate ever more initiatives, but to turn important decisions into tangible results. In some cases, it may even make sense to forgo revenue when that revenue ties up disproportionate capacity and blocks resources that could create more value elsewhere.
Such decisions rarely feel like growth. They can nevertheless be the prerequisite for it.
Difficult times do not automatically require less ambition
Weaker economic conditions do not mean companies should stop every investment in the future. The current findings of the German Savings Banks Association are particularly interesting because they show both sides at once: earnings are coming under pressure while the first investment impulses are becoming visible.
A company that freezes all future investment during a difficult phase may protect its liquidity in the short term while simultaneously weakening its position for the next upswing. The opposite stance can be just as risky: allowing every future-oriented topic to continue because nobody wants to give up a strategic opportunity.
The real entrepreneurial work lies between these two extremes. It consists of selecting a few bets that truly matter to the business, giving them sufficient capital and attention, and accepting in return that other reasonable things will not happen for the time being.
In a strained phase, it is therefore not enough to ask where further savings can be made or which additional initiative might also be worthwhile. A harder question is more useful: If this company could make real progress on only two things over the next twelve months, which two would they have to be? The answer is usually more uncomfortable than a blanket budget cut. But it says much more about the future the company actually wants to build.
Original source and inspiration:
German Savings Banks Association: “Mittelstand ist im Umbruch – Aus Investitionsimpulsen kann Aufschwung werden”, 15 September 2026.
https://www.dsgv.de/newsroom/presse/260915-pm-zukunft-mittelstand-2026-40.html