Over the past 5+ years, resilience has become a hot topic in almost every area of life. From best-selling books such as “Option B” by Sheryl Sandberg and Adam Grant on the topic of building personal “resilience” after the tragic loss of her husband, to the many examples during/post the pandemic of companies’ weathering major, unforeseen disruption, that all point to resilience becoming a necessary skill and competency that enhances both personal and business success. Business resilience and risk strategy are now regular discussion topics in most boardrooms, earning the distinction of being named Forbes Magazine’s “Word-of-the-Year” in 2021 and even “Word of the Decade” by some.
Consequently, most of the global consulting companies have picked up on this trend and have developed full-blown practices on honing your company’s Business Risk and Resiliency skills. So, the question you may want to ask yourself is, “What should I do differently to further enhance the resilience of my business? Have I done enough?” This article provides some information to help answer that question by first taking a look at some trends, lessons from the recent past, and then discussing some of the success traits from companies who are doing this well.
Background
The concept of Business Resilience (BR) has been around for some time. It was initially encompassed under the term “business continuity” (BC) whose focus was “keeping the lights on” in the face of a natural disaster, infrastructure failure or cyber-attack. BC plans have been around for decades, captured as both an ISO 22316 standard (as well as an ITIL 4 standard), and subsequently implemented globally in both the public and private sectors. Over time, it became clear that there is a difference between the two. Although, the terms are sometimes used synonymously, the difference is that BR speaks to your strategy, and BC (and the associated plans) are the tactics used for getting there. McKinsey defines BR as “a company’s ability to not only recover quickly from a crisis but to bounce back better and even thrive.” Being able to not just maintain operations during a major disruption but thriving (or even growing) should be the target for every business.
Lessons from Past
Many of us have run businesses through unexpected disruptions such as the recent pandemic (2020-2021), the Great Recession (2007-08), or even 9/11. Each of these experiences provided great lessons in resilience that have become necessary parts of running a business today. One of the biggest lessons from the Great Recession was to be prepared, but it was also a good reminder that there are things that are very hard to prepare for! Still, preparation is important, as is taking crisis management and planning seriously. Companies with good crisis management plans fared better overall than those that did not, or that had not updated their plans in some time. Another lesson learned was that events can unfold quickly (especially during turbulent times) and defy easy interpretation. In those situations, it helped to seek out external advice—strategic consultants, business advisors, and financial specialists with a specific expertise in navigating downturns.
A few other lessons from the Great Recession included the importance of having adaptable business strategies and financial resilience. The economic turmoil required responsiveness and agility. For example, budgets needed to be reviewed (more frequently) and promptly reassessed, the use and deployment of resources reconsidered, and many other examples. Financial resilience was key. How one communicated with stakeholders was also critical and on display during the financial crisis. Some did it well, while others struggled, causing irreparable damage.
Conveying clarity, competence, and resolve is an important component of crisis management, and business leaders used this opportunity to unify employees, customers, and local communities around a commonly shared business purpose. And finally, senior leaders learned the importance of fostering a culture of innovation and urged teams to embrace entrepreneurialism and ingenuity in the face of a recession. Entrepreneurial spirit and creative thinking cannot be in short supply when a business is looking for additional sources of revenue and more efficient ways to deliver products and services to its customers.
The pandemic was a unique crisis in many ways, and it taught us some additional lessons in resiliency. It became clearer what enabled some companies to thrive/grow, while others struggled. In a McKinsey survey of senior executives, about one year into the pandemic, an average of 42% of respondents reported that the crisis weakened their companies’ competitive position, compared with an average of 28% who said their companies increased their competitive edge. So, what was the secret to success? Business-model innovation emerged as the key differentiator for those that gained ground during the pandemic. Those who adopted new business models tended to focus on five areas and many of these our industry pivoted toward during the pandemic:
- Creative Digital experiences – changes in customer behaviors and needs drove new products and service offerings (i.e., Peloton and iFit in the fitness industry).
- Sales-Model Changes – businesses had to adapt the way they sell/market their offerings. For example, B2B businesses largely moved to remote and digital models, and multiple B2B/B2C companies shifted to contactless delivery.
- Supply-chain (SC) adjustments – shortening SCs via reshoring or even insourcing, expanding number of suppliers, and movement to remote operations all contributed to reducing risk.
- Faster product development – leveraging rapid and fewer iterations to test, pilot and ultimately go-live with new products (i.e., consumer-packaging companies transformed its product development and trial process leveraging immersive virtual reality technology).
- Non-traditional partnerships – there are many examples of companies both within and outside their own industries that partnered to get products to customers. There were no better examples than those found in the industrial gas industry in getting medical oxygen to hospitals around the world, and especially to places that didn’t have any oxygen infrastructure.
It is clear that these events have made risk and resilience much more important to companies. In the past, risk management was focused on a small number of well-defined financial and operational risks. Now, risk includes public-health and environmental pressures, societal uncertainties, geopolitical tensions, on top of the same or worse macroeconomic volatilities they’ve always faced.
Lessons from the Best
There are companies that seem to not only survive these disruptions but actually grow and take significant market share in the process. If one excludes the vaccine company Moderna, which benefitted partially by the vaccine demand during the pandemic, the next best example was the company NVIDIA whose stock grew by 322% during the pandemic! Some think that they just happened to be serving the right market at the right time, but the key reasons for their growth were strategy, speed to market and a focus on resilience. Did you happen to know that NVIDIA has been regularly recognized as one of the top-10 most resilient companies in the high-technology space? They are part of a small group of companies known as the “gold standard for supply chain resiliency” because they outperform their competition, win market share and reduce cost with consistent supply chain performance. It should be no surprise that their growth has continued at high-rates four years after the pandemic ended.
Success Traits
Several other companies are in the same league (i.e., IBM, Eaton, Micron, etc.) and are known to be highly resilient companies. When you take a deeper look at what enables them to be successful in downturns as well as up cycles, there are some common traits that they possess, and resilience is at the center of many of them. In addition, they seem to view business resilience as a marathon and know it requires a continual long-term cycle to identify, adapt and mitigate external risks. Some of these traits include:
- Strategy – As with any new business transformation, it starts with commitment from the top and answering the question, “How does BR support and enable your business strategy?” This answer must be clearly understood and supported by the entire executive team, because if it doesn’t start from the top it isn’t going to happen. This step may require some education on your part. You don’t need to know the tactical level specifics for BC, but you do need to know the business aspects such as recognizing organizational/infrastructure/operational gaps, areas of opportunity and measuring success. In addition, it helps to understand (at a high-level) what the best companies are doing in this space, current/future resilience trends and potential barriers to success. Then establish well-defined objectives that enable your organization to measure the success of their resilience initiatives. By setting clear, quantifiable targets, it becomes easier to assess the impact of resilience-driven strategies and helps in evaluating the ROI and the effectiveness of those projects. I think for some companies this is a difficult step since they may not have to do a lot of risk or resilience planning to be successful in the past. So, there may be a need for external resources to assist and provide a fresh perspective during this step. Appointing a person responsible for resilience with a transversal view of the organization is something employed by the best companies. This does not necessarily imply creating a new position but ensuring a senior leader has a comprehensive view of relevant resilience efforts.
- Preparation and Anticipation – it may sound like a no-brainer, but executives who are more resilient recognize that resiliency is something that requires strategic investment and dedication. So, they’re the ones who understand there is a ROI for resilience investments in technology, processes, and people to ensure their organizations can handle whatever change comes next. And business leaders who are investing in resilience feel more prepared to tackle disruption than those not currently doing so. Data analytics and operational visibility play fundamental roles in better understanding the current state of operations and the SC, so leaders can be more proactive in helping organizations adapt to the unexpected. High-resiliency executives know this and are quick to turn to data (in support of gut-feel and intuition) in the face of disruption. In fact, very resilient businesses are more than four times more likely to implement near real-time data tools than their less resilient counterparts. Among the technology tools used by resilient executives are data and analytics, cloud-based applications, IOT devices on fleets and in their operations, data visualization, and augmented reality, which are all underpinned by a robust IT infrastructure.
- Measuring Success – entities that excel when it comes to resiliency have shown they are able to walk the walk, not just talk the talk. What gets measured, gets done! One can’t just say resiliency is an imperative, you have to convert it to measurable strategic initiatives. That starts with building a framework to measure how resilient your company is today. Start by simply looking at the areas of opportunity and consternation for your customers and employees (i.e., product runouts, stock outs, late/missed deliveries, equipment downtime, etc.), and establish a baseline. Then measure progress over time (to figure out am I getting better or not), root-cause the events/issues and invest in ROI-driven improvement. Also, over time, gradually embed the measures into your operational and strategic decision-making processes.
- Ask for Help – building resiliency is a team sport within your organization, and it’s probably one that we’re all working to write a playbook for while we’re playing the game. It’s okay not to have all the answers yourself, or even within your company. Be transparent and realize you don’t have to have to go it alone. What’s interesting and surprising is that executives higher on the resiliency scale also recognized they may need help driving their companies’ resiliency efforts. In fact, 81% of senior executives surveyed by Fast Company said their company needs guidance in creating and implementing an effective strategy. This call for counsel is higher among executives who consider their company “very resilient” (84%), suggesting that those who take resiliency most seriously are also most open to help.
Takeaways
Business resilience continues to rise in importance as the volatility of the macroeconomic environment, geopolitical events, environmental/social factors continue to increase in frequency. Change is one of the few constants in business and BR is both your best offense and defense to counteract its negative effects. So, if you haven’t reviewed the resiliency of your business recently, it may be a good time to do an audit of your BR practices and assess if your team is ready for whatever comes next.
