CEOs are expected to set strategy, allocate resources, build the leadership team, shape culture, and communicate with the board. All of these responsibilities depend on the CEO having a coherent view of why the enterprise should continue to exist as this enterprise. Purpose, strategy, the business model, competitive advantage, and enterprise value each describe parts of that view. I use enterprise viability to describe the whole. This is the first of four essays that define the idea, examine what happens when a company loses its grasp of it, describe how the CEO maintains and projects it, and explain why the responsibility cannot be delegated.

What is enterprise viability

At its most basic level, an enterprise’s viability is understood by answering the following three key questions:

• What does it do, and does that need to be done?

• Why is this enterprise the one to do it?

• Why does it get to keep doing this in the future, and for how long?

A company is an abstract, social organization that essentially exists because a large enough group of people agree that it does something useful effectively enough and so it has a right to exist now and in the future. A “right to exist” here is not meant to be any kind of moral entitlement; it is meant to represent a practical reality: a company cannot practically exist without people engaging in it. For it to consume resources and produce an output that the external world finds valuable, people need to work for it, buy from it, invest in it, and otherwise participate in the system around it. People would only do so because they believe that what the enterprise does needs to be done and that there is a reason for this particular enterprise to be the one doing it, and the company actually backs up this belief by delivering said value.

This push-pull of belief and value delivery is not something that is static either because whatever makes a company viable now may not remain true indefinitely. The need for its output may change, the ecosystem around it may change and another organization may become better positioned, or the company’s own capabilities may weaken. Thinking about enterprise viability means continuously testing this relationship between the enterprise and the world. And since belief is a big part of the equation, thinking alone is not enough; there should be projection too. And projecting enterprise viability means creating and maintaining that belief within and outside the company.

Why is it important to think about and project

Given a particular set of resources, a company could move in many different directions. Several of those directions may look reasonable when considered individually. But the history of the company or the founders and investors, when considered properly, will make one or some of these directions more appropriate for pursuit than others. A clear understanding of the relevant history helps the CEO understand which directions are viable. And a clear understanding of and belief in that viability, therefore, focus the company’s efforts. It provides a basis for deciding which opportunities the enterprise is well positioned to pursue, which priorities deserve resources, and which activities should not be performed. The belief in enterprise viability is, therefore, an organizing force.

Depending on the scale of the company, people throughout it will make decisions that the CEO will never see. When doing that, they need a coherent understanding of what the company does, why it should be doing it, and why there is reason to believe it can continue. That understanding allows decisions made in different parts of the organization to reinforce one another. It also contributes to cultural coherence. When people can see the governing logic of the enterprise, there is a better starting point for collaboration and conflict resolution, and the organization feels like a system rather than a collection of activities. They may disagree about particular decisions while still understanding what those decisions are in service of, because the overall system is coherent to them. This relationship between belief and viability is circular. People believe the enterprise has a future, so they commit their work and judgment to producing that future, and the results of that effort give the belief a stronger basis.

A stable understanding of the enterprise’s viability also gives the CEO a foundation to be strategic about its future. Understanding why the enterprise has a place in the world can reveal additional needs it is positioned to meet, capabilities it can extend, or adjacent forms of value it can produce. That foundation also allows the enterprise to change without requiring a new explanation of itself each time. A strategic shift may alter products, markets, capabilities, or the allocation of resources while remaining understandable as a development of the same enterprise. People can see why an old activity is being deprioritized, why a new one makes sense, and what stays stable after the change. Without a clear account of viability, strategy can feel episodic to the broader organization because each initiative arrives with its own justification, and the organization has to infer whether it represents a development of the company, a contradiction of its prior direction, or a replacement for it. The individual decisions may well be reasonable, but their relationship to the whole is unclear. This weakens the belief that the enterprise has a coherent future, even before any decision or initiative has failed on its own terms. The CEO should revise this account when new facts call it into question. Until then, it helps employees, investors, customers, and others understand why the company is changing and how the new direction follows from its answers to the viability questions. The CEO can change the business without having to redefine the company with every decision.

This first essay has defined enterprise viability and explained why a belief in it organizes a company’s choices. In the next essay, we will look at what things could look like when enterprise viability is not contemplated or projected enough, including the scenario in which a company may continue to create enterprise value even as the logic that makes it viable progressively weakens.