The Art of Bouncing Back
In some respects, 2021 could be a continuation of 2020. Bulldozed by gamechangers with a demanding expectation to dust off your shoulders and adapt. In response, organizations will need Operational Resilience; the ability to rebound in the midst of dramatically altered circumstances. From customers with reduced mobility to the virtual negotiation of multinational deals; concepts that were once farfetched, are now the makings of a new playing field.
Organizations are quickly realizing that the traditional tools used to cope are no longer ideal. A different toolbox is needed to respond to stress and unexpected disruptions. Failures of organizations or territories to address risk can quickly becomes a global problem. Think Financial Crisis 2008/2009!
Some of the reasons for this surge in shocks can be attributed to increased urbanization and global economic integration. This has been facilitated by transport mobility and communication (OECD). This interconnection of global value chains has led to the cross pollination of risks across territories. From animal induced disease transmission to climate uncertainty, the ability to bounce back will have to become an innate part of survival for both the individual and the organization. These tools of survival will be needed in an environment where what you know bears lesser weight than your ability to grapple the unseen.
Six Key Actions Toward Building Operational Resilience
1. Get to know your organization better
A culture of resilience cannot be built without understanding people, processes and systems and the relationship amongst them. Such knowledge provides a clear picture of the interdependencies that exist within a corporate ecosystem. It also offers a holistic view that provides a deeper understanding of the interconnected nature of risk that pervades the organization.
Whilst searching for this clarity, organizations would do well to identify their most important business services. Those services, that if crippled, would impede the business from producing its product or service. Each of your listed important business services would be supported by people, processes, technology, facilities and information that enables the performance of that function. Identify the weak spots and envision how disruption within any of these critical processes could harm the financial stability of your shareholders, customers and markets. This awareness together with your perspective on the likely outcomes should clarify your tolerance level for disruption empowering you to put measures in place to safeguard your business to your level of acceptance.
2. Change your Perspective
Building an operationally resilient organization requires the building of screening systems that operate like a unit. Often best practice exists within some segments of an organization however lack of collaboration or destructive power dynamics limits the organization’s ability to harness it in a way that amplifies it uniformly throughout the organization.
Risk is therefore managed in silos with each department having its own culture, risk appetite and management systems. Fragmentation makes functional units unaware of how their actions enhances or impedes the operations of others. This ultimately undermines resiliency when the unexpected occur. Due to lack of coordination, risks are either not identified, mis-categorized or unmitigated. Managing risk this way leads to misalignment, missed opportunities and unintended consequences.
Reporting and communication are important elements to gain common ground in a organization. The shattering impact of hurricanes Harvey, Irma, and Florence illustrated the role that communication plays in disseminating information for preparation, response, and rescue. An internal and external communication strategy not only relays information but is an important aspect of building a strong culture within the organization. It sets expectations, establishes consistency and creates trust. Transparency and timely disclosure also build goodwill.
In 2021, focus on building a common language. Get clear on your risk philosophy and over communicate your plans for a resilient future. If risk is viewed, measured or discussed differently within an organization, the potential for under or overestimation could be costly. Different risk philosophies create conflict during the decision making process and halts progress. If boundaries are neither established nor articulated, subjectivity and bias sets in. Risks may only be viewed as threats making decisions skewed towards the risk adverse. Without the developed capability to look at the positive attributes of a situation, the organization may not take enough risk to thrust its business forward.
4. Serving spuds Creativity
A key part of resilience is coming up with ways to serve your customers regardless of the circumstances. Doing this in an age of disruption cannot occur unless you are always in a mode of continuously improving how you can best reach and serve them. Equally important is building the information gathering systems that allows you to anticipate their changing preferences. This constant focus on service, unleashes creativity. It makes you more prepared for the unexpected and primed to seize opportunities even when staring at a dead-end. Consider Garcon wines which was the first to develop the concept of the “flat wine bottle” allowing consumers to receive bottles of wine in more convenient packaging.
Their original intent was to reduce carbon emissions and offer a product that was lighter and could be recycled. Their focus on a creating a more environmentally friendly product for their customer inadvertently led to a creative solution for mail delivery that did more than provide a sustainable purpose. Given their product could now easily fit through a mail box, they were able to serve their customers who have to stay indoors due to the pandemic.
"Its genius is in its simplicity, but yet within that simplicity are solutions to complex design and engineering, clever messaging, safe distribution, and environmental responsibility.”
— DAVID LUTTENBERGER, GLOBAL PACKAGING DIRECTOR, MINTEL
5. Build Agile Assets
Human, physical, financial and technological assets are not just types of capital that can be used to generate revenue. If designed and structured the right way, they can also be wielded to make the organization more agile in its responses.
That is why it is always important for organizations to map their resources and determine which ones are more critical for it to respond to likely market changes. In this volatile world, would you rank physical assets more highly than intellectual property assets.
That decision depends on not only what your business is now but what you want it to be in the future. This resource view and awareness of critical assets positioned Chipotle restaurant in the US to be able to invest at the right time in high margin drive thru pickup lanes to serve mobile pick up orders. It also enabled them to continue delighting their customers amid a pandemic.
Freebird Restaurant in Trinidad and Tobago also understood their assets and the limitations of the market's ability to interact with their restaurant in the traditional way during the pandemic. They were therefore able to offer themed meals for pick up and offer their restaurant space for micro weddings and private picnics.
This ability to harness asset power has also allowed fashion designers to quickly expand their product base to include couture face masks.
By being intimate with the strengths and weaknesses of their resource map, they understood the strength of their creative assets and leveraged it in an alternate way.
6.Plot the Future
Scenario testing gauges a business’s ability to withstand the unexpected and stay within its impact comfort zone for each of its important business services. The scenarios used must not only be plausible but also include some elements of the "perceived" unlikely to make it more robust.
Business should identify an appropriate range of adverse circumstances of varying nature, severity and duration relevant to its business and risk profile and consider the impact to delivery of the firm important business services. This process will highlight how services can be disrupted. It would highlight third part risks (suppliers, customer and other stakeholders) and potential multiple sources of failure. Businesses can then make the appropriate decisions on how to move forward so that the risks are managed within a range of acceptability.
When seeking solutions to these scenarios, consider deputizing your systems. Having redundant or alternate systems in place are not optional when navigating volatile systems. They create systems of adaptability and enables swift improvisation if circumstances change. Cross training, succession planning, spare parts, multiple suppliers, offsite storage and cloud systems reflect some Plan B options at your disposal. These safeguard your business if one resource cannot fulfil its responsibility.
Operational resiliency requires a holistic view of the drivers of the organization. It also requires a discerning and anticipatory mindset. Without the understanding of how risks are interconnected and correlated within an organization it would be difficult to put systems in place to predict and detect risk for an agile response. As we delve into 2021 and prepare for what it has to offer, let’s continue to be vigilant and design our businesses to be future proof.
The Art of Bouncing back is like a game of fortune. It never favors the unprepared!
No part of this publication may be reproduced, translated, stored in a database or retrieval system, unless permission is granted by the author.