Is This a Moment for Strategic Hibernation?

In 1919 the United States Congress passed an amendment to the Constitution prohibiting the manufacture, sale, and transportation of intoxicating liquors. Not surprisingly, prohibition devastated American breweries. Of the more than 1,300 brewers in operation in 1915, fewer than 100 survived. Yet some that made it through remain among the most iconic names in the business, such as Anheuser-Busch, Coors, Miller, Pabst, and Yuengling.

They survived by implementing a concept I call strategic hibernation—a form of purposeful retreat that allows companies to preserve capabilities critical to their missions during hostile political and cultural cycles, and then quickly ramp up again when the tide turns. Some brewers, for example, repurposed equipment to produce soft drinks, malt extracts, or even dyes, which were in short supply after World War I. Anheuser-Busch sold dozens of nonalcoholic products, including infant formula and ice cream. Miller produced Vivo (a “near beer”), soft drinks, and malted milk. When prohibition was lifted, these brewers came roaring back into the alcohol business.

In an era marked by economic turbulence, business leaders today find themselves navigating a whiplash of regulatory measures on issues such as trade, climate change, and diversity and inclusion. These executives would be well served by examining how companies have successfully managed historical moments of sharp political change, such as biotech firms amid the George W. Bush–era stem cell restrictions, Indian banks during the period of intense regulatory oversight that started in the 1980s, and Chinese tech firms under Xi Jinping.

Conventional strategy responses to such challenges typically include exit, voice, and loyalty. For example, Uber exited several Southeast Asian markets in 2018 by selling its operations to local rival Grab, recognizing the significant regulatory and competitive hurdles. Tesla used its voice by lobbying against dealership protection laws in multiple U.S. states to preserve its direct-to-consumer sales model. Apple showed loyalty by agreeing to host Chinese users’ iCloud data on local servers managed by a state-affiliated partner to comply with Chinese cybersecurity law. These firms used predictable, differentiated responses to complex political and regulatory landscapes.

All three responses, however, can have drawbacks. Exit may mean losing competitive footholds. Voice could escalate conflict, opening firms up to attacks by politicians and consumers. And loyalty may dilute a company’s reputation for ethical behavior.

Strategic hibernation offers a fourth option: quietly preserving internal capacities while reducing external exposure. This approach is not simply about cutting back—which is often executives’ instinct during turbulence and uncertainty—or pivoting away from the challenging area. It’s about building flexibility and discreetly preserving the firm’s options—knowing when to turn down the volume without walking away. In our politicized environment, that might mean reworking DEI departments to focus on culture or talent, or continuing climate initiatives under the umbrella of resilience or future-proofing. The point is that the activities continue, at least in a minimally viable form. Such a strategy allows firms to retain what they need to reenter key areas with momentum once the environment becomes more favorable.

In this article I discuss three examples that demonstrate the keys to a successful hibernation: first, maintain core assets; second, invest in political risk analysis; and third, be disciplined about external visibility.

Keep the Lights On

The first step in strategic hibernation is to maintain the company’s core assets. One of the most illuminating examples comes from 2001, when the Bush administration imposed limits on federally funded embryonic stem cell research, a decision that was driven by the politics of abortion. To respond, many biotech firms adopted strategies to preserve their scientific capacity while avoiding political firestorms.

This decision to pause rather than pivot to new research areas or abandon their missions, which included the research and development of cutting-edge therapies that relied on stem cells, was driven in part by the firms’ core values. Many were grounded in the belief that embryonic stem cells had transformative medical potential for a range of uses, from treating spinal cord injuries to curing or managing degenerative diseases. The approach also reflected the foresight that the government’s policy would likely be reversed. In retrospect, we can see the following pattern in the tactics deployed to maintain core capabilities.

First, biotech firms recognized the ideological nature of the opposition and believed future administrations would be more supportive of scientific freedom and biomedical innovation. They understood that the Bush-era restrictions were rooted in the Republican Party’s religious and pro-life base, so they expected that a future Democratic administration might reverse these policies, which occurred under President Obama in 2009.

How could they be confident in this prediction? Public opinion polling and the federated nature of the U.S. political system both clearly demonstrated that opposition to embryonic stem cell research was not monolithic. Several states countered the federal restrictions with public funding initiatives, such as California’s Proposition 71, passed in 2004, which committed $3 billion in state funding for stem cell research. Companies like ViaCyte, based in San Diego, leveraged this funding to advance diabetes therapies.

Second, it was clear that many other countries were enthusiastic about this line of research, as they stepped in to offer funding. While their resources paled in comparison to what was being withheld in the United States, they still provided a lifeline for firms. These signals—from state-level investments to global partnerships—indicated that stem cell research was not only surviving but thriving outside U.S. federal constraints, reinforcing the rationale for a strategic pause rather than a strategic pivot.

The alternative sources of funding also let biotech firms maintain the infrastructure and workforces that later allowed them to resume the paused work. Importantly, firms faced with these restrictions did not play a passive waiting game—they managed their risk dynamically to preserve their values and options, such as by offshoring key operations to more-permissive environments. For instance, California-based biotechnology company Geron collaborated with the University of Edinburgh on therapeutic stem cell research. Many leading U.S. stem cell researchers and companies moved their research to Singapore, which had a more favorable regulatory and investment environment.

U.S. biotech firms also retained core teams, managed IP portfolios, and continued research that did not require direct work with stem cells. They focused instead on areas including data analysis, bioinformatics modeling, protocol development, and intellectual property planning. This way, the firms could sustain scientific progress, protect knowledge capital, and remain ready to restart high-cost experimental research as soon as the policy barriers lifted. Douglas Melton, codirector of the Harvard Stem Cell Institute, explained that complying with the Bush-era restrictions in a way that did not abandon the work required extreme care, such as by creating new ways to segregate and label experimental materials and procedures.

These strategies allowed research ecosystems to stay intact—albeit partially inactive—until federal support could be restored. And while they kept their heads down in the United States, the firms weren’t entirely silent. When they did speak, they often did so collectively, issuing group statements to diffuse their individual exposure. For instance, in 2001 executives from the Massachusetts biotech company Advanced Cell Technology (ACT)—notably Michael West, Jose Cibelli, and Robert Lanza—secured the signatures of eighty Nobel laureates in a letter to Science advocating for federal funding. Their public engagements extended to testimonies before the National Bioethics Advisory Commission and the U.S. Senate. It’s not clear if this effort actually had an impact, but it showed that lobbying doesn’t need to stop during periods of hibernation.

As a result, many of the biotech firms were able to thrive when the policy was reversed in 2009. For example, in 2014 ACT rebranded as Ocata Therapeutics and in 2016 was ac-quired by Astellas Pharma for $379 million, reflecting the value of its preserved capabilities and foresight. In 2022 ViaCyte was acquired by Vertex Pharmaceuticals for $320 million, with clinical trials underway using embryonic stem cell–derived pancreatic progenitor cells.

Keep Your Ear to the Ground

Strategic hibernators must make a risky gamble—they may find themselves waiting indefinitely for their ship to come in instead of taking steps to pivot their businesses. Thus, the strategy works only if firms see the possibility of aligning their core commercial activities with regulatory policy in the future. The second element of strategic hibernation is political risk analysis, including monitoring political signals, identifying policy inflection points, and planning for a shift in the wind.

Starting in 1980, Indian banks faced enormous constraints initiated by the government, including tightly controlled interest rates, credit allocation, and state-dominated banking. Many private banks had little room to compete. Yet rather than exit or conform completely, some firms maintained their organizational structures, management practices, and lending expertise in anticipation of the sector’s eventual liberalization.

A research study published in Organization Science found that banks headquartered in politically pluralistic environments, particularly Delhi, were more likely to lie low as a proactive strategy, because these firms had closer proximity to regulatory discussions, enabling them to better anticipate the direction of reforms. For example, the Jammu & Kashmir Bank (J&K Bank) managed not only to survive but also to embed itself deeply into the economic and social fabric of the Jammu and Kashmir state. When national banks like the State Bank of India and Punjab National Bank started to shut down branches in the late 1980s, J&K Bank, which is owned by the state and classified as a private bank, remained operational by carefully monitoring and anticipating the national government’s requirements, particularly with regard to servicing rural areas through loans to farmers, small businesses, and households, often with flexible repayment terms. Because the bank is owned by the state, it functioned as a quasi-government institution that disbursed government salaries and funded local infrastructure. These efforts maintained trust among locals and contributed to the bank’s becoming a “lender of last resort.”

In another example, Vysya Bank, an Indian private bank founded in 1930, established two independently operating subsidiaries in 1987 to provide equipment leasing (Vysya Bank Leasing) and home mortgaging services (Vysya Bank Housing Finance). Despite constraints on its core banking operations, these ventures allowed Vysya to retain credit expertise, internal underwriting systems, and revenue channels.

When India initiated financial liberalization in the 1990s, the banks that hibernated and had an eye toward that future were able to scale quickly, regain market share, and introduce innovations. Quantitative results from the Organization Science study confirm this: Banks that laid low during the 1981–1990 period saw significantly higher return on assets post-liberalization than peers that adapted too fully to the prior regulatory regime. Banks that were not as plugged into the regulatory scene did not fare as well. For example, the research points out that two less politically connected private lenders—Bank of Madura and Nedungadi Bank—were ultimately absorbed by larger competitors (ICICI Bank and Punjab National Bank, respectively). Observers suggested that their lack of informational advantage, based on political proximity, may have put them at a disadvantage.

The Indian banking case underscores a central lesson: Hibernation creates an advantage only when firms have the external awareness to seize a future opportunity and retain the right internal capabilities. Doing so can mean closely monitoring political signals, understanding policy inflection points, and investing in the preservation of assets such as talent, market relationships, and core systems.

Be Strategic in Your Speech

A third key element of strategic hibernation is being disciplined about external visibility. In politically volatile environments, firms in strategic hibernation can rarely afford to speak freely—or to stop speaking entirely. The most resilient organizations learn to walk a careful line: speaking just enough to signal their alignment with the party line, but not so much that they lose internal coherence. In China under Xi Jinping, for example, the state has increasingly asserted control over private enterprise, and leading technology firms have had to master the art of flying below the radar.

Since 2020 China’s crackdown on tech firms has pushed companies like Alibaba and Tencent to adapt their messaging to state priorities. Alibaba cofounder Jack Ma’s outspoken embrace of Western-style disruption backfired: After criticizing regulators, he mostly vanished from public view until early 2025, and the $37 billion IPO of his financial services company Ant Financial was suspended. In contrast, Tencent kept a lower profile, emphasizing state-aligned themes like “common prosperity” and its role in digital public infrastructure (for example, WeChat’s integration into e-government), and voluntarily curtailing youth gaming hours even before regulatory mandates for it were imposed. That strategy appears to have paid off. While Alibaba’s market value has plummeted by over $600 billion from its 2020 peak, Tencent has been far more resilient. Its valuation also fell following the crackdown, but in the last three years its stock has averaged more than a 15% annual return, while Alibaba’s has fallen more than 3%.

Along similar lines, sustainability-minded firms in the United States must decide how to handle the political backlash against climate action. Do they continue investing in green technology? Do they draw attention to it if they do? In recent years a number of companies have continued to keep their ESG activities ticking along behind the scenes but have become less outspoken about them. For example, a recent global survey of 1,400 sustainability executives found that many companies were “actively decreasing their climate communications.” This backtracking has been particularly pronounced in the United States: Among a sample of S&P 500 firms, only 49% issued press releases about their sustainability reports in 2024, down from 75% in 2021.

But in such an environment, simply decreasing communication carries risks. A key challenge of strategic hibernation, for instance, is avoiding mission drift, such as through “greenhushing”—when companies soften or withdraw their sustainability messaging to avoid scrutiny. Poorly executed hibernation strategies can deter top ESG talent, attract misaligned investors, and erode the company’s internal conviction, creating confusion about priorities and cynicism about values. Leaders must resist thinking that silence is safety; instead, they need to carefully consider how to maintain the company’s values and long-term objectives.

For many organizations, even if they’re talking about the topic less, their climate investments are continuing and are a clear signal of their commitment. In the tech industry, Microsoft, Google, and Salesforce have all continued investing in decarbonization and sustainability-related businesses. For instance, they’ve created tools to help other companies both manage their progress in developing lower-carbon energy sources for data centers and maintain their net-zero goals.

Similar processes are taking place in the DEI arena. In the wake of legal rulings, legislative rollbacks, and ideological backlash, firms are scaling back their public-facing comments. Yet they’re continuing internal investments to retain robust hiring pipelines, support employee resource groups, and expand mentorship and leadership development for underrepresented groups. CNBC reports that some companies are continuing their DEI work by rebranding the efforts with terms such as “belonging,” “cultural competency,” and “employee engagement.”

Across the climate and DEI domains, firms appear to be operating not only with the understanding that much of the world still cares about these issues but also with the expectation that the current resistance in the United States may be ideologically driven and so is likely to wane over time. Thus, these moves reflect recalibration rather than abandonment. They also signal to investors and employees that the firms haven’t lost their sense of direction and that their missions endure, even if press releases are fewer and branding is less explicit.

. . .

In a world where political headwinds are growing stronger and reputational risks more volatile, successful strategic hibernation depends on three things: maintaining core assets, investing in political risk analysis, and being disciplined about external visibility. The goal isn’t to stand still—it’s to build quietly, align deeply, and prepare to reemerge when conditions shift. The firms that will lead in the long run are not those that are loudest in challenging times, but those that navigate such periods with clarity of purpose and control of their exposure. To respond to an age of backlash and whiplash, the smartest strategy may be to advance steadily—just below the radar.

Copyright 2025 Harvard Business School Publishing Corporation. Distributed by The New York Times Syndicate.

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