Resilience Is the Decade's Main Business Strategy Theme

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Resilience Is the Decade

Most business executives have traditionally viewed business models as static constructs that work on a simple input-output method. And yet today, because of a variety of forces, from globalization to the information revolution, companies are being forced to face the fact that nothing is static anymore. All systems, including business models and strategies, are dynamic and ever-evolving.

This new business environment saps momentum and demands strategic resilience — the ability of organizations to dynamically reinvent business models and strategies amid changing circumstances. This means continuously reading the environment and adapting to it.

There are many facts of corporate life that work against resilience, including arrogance, denial, and a stagnant corporate culture, according to an article in the Harvard Business Review. As a result, four main challenges stand in the way of becoming resilient:

First, there is the cognitive challenge. Senior management must remain alert to change in the environment and must constantly analyze how those changes are going to influence the business model.

Second, there is the strategic challenge. Management must see strategy as a continuously evolving set of options that offer reasonable alternatives to the way business is done today.

Third, there is the political challenge. Managers must not let projects continue simply because they’re already under way. They must rapidly reallocate resources to support new projects that offer the best response to the changing environment.

Fourth, there is the ideological challenge. The long-standing mantra of “continuous process improvement” must be questioned when the environment changes. Innovation must replace perpetuation if a company is to be truly resilient.

Changes in the environment can take many shapes. For example, when a labor dispute closed seaports on the West Coast in September 2002, disrupted supply chains inflicted a billion-dollar loss on manufacturing companies every day the disruption continued.

This example highlights two important facts: First, a more resilient industry might have fared better. And second, in today’s networked world, disruptions at one small point in the value chain can have ramifications in many others.

Like it or not, every company has to become resilient or be at the mercy of the changing world. In response to this, a team at the Booz Allen Hamilton management consulting firm developed the following eight questions designed to help businesspeople assess how resilient their organization is:

• Can you identify what drives earnings across your entire enterprise, including the extended and networked elements that lie outside the corporate boundaries?

• Can you identify the interdependent relationships among those elements and how their interactions produce unique risks to your earnings?

• What precautions have you taken to safeguard the drivers of your earnings in the event that those risks materialize?

• Do you understand how well those precautions are aligned with corporate strategy as well as the compromises demanded by them?

• Have you analyzed how much you spend on making the business more resilient?

• What tools and programs do you have in place for monitoring your environment? Is there enough intelligence, and is it gathered from the most useful sources?

• Is that intelligence processed and used in the best way to allow you to adapt to changes in the environment that could affect your earnings?

• Who is ultimately held responsible for resilience? How are decisions about it made? What metrics are in place to measure progress toward a more resilient enterprise?

Those companies that don’t have clear, effective answers to these questions clearly need to focus on building resilience...

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