Business resilience is the buzzword now. After 2020, is that a surprise? Most businesses don’t have to be told that they need to do things differently – many are actively searching for a way to “build back better” as the economy recovers. But how do you do that?
A good way forward is to look back.
While 2020 was a challenging year, it was also a rare opportunity for organisations to learn more about their businesses. The pandemic was a pressure cooker, exposing fissures in business models and operations, sometimes breaking them entirely. It also revealed surprising capabilities. Many organisations discovered that they could pivot quickly to remote work.
However, during the time when services were being labelled “essential” or “non-essential”, many found themselves unprepared. Systems broke down. Customers were lost to more prepared competitors. Profits disappeared. And many were not resilient enough to survive the crisis.
For those that were unprepared yet survived, these hard lessons can be used to reflect and reshape for a better future.
But first, what exactly is business resilience? It can be defined as the ability to recover from setbacks, adapt well to change, and to continuously improve despite challenges. With new technologies emerging, geopolitical and environmental disruptions, market and consumer demands evolving, this ability is fundamental for business continuity.
As a business owner myself, COVID-19 was a wake-up call to revaluate my company’s resilience, which is why we are currently undergoing a transformation exercise where we put our systems and business models under the microscope. For months, we asked ourselves:
- What are we doing badly?
- How can we do things better?
- What can we do to make the change?
- What potential crisis may we face in the future? Are we prepared for it?
These questions are confronting, but they are a necessary part of building a more resilient business. In my opinion, we should focus our efforts on revamping these three areas:
1. Business models
Does your current business model create value for your customers? Does it meet their needs? Or is it dangerously outdated or irrelevant?
To answer this question, we need to be hyper customer centric. We should constantly ask ourselves how we can better customer expectations. The ideal scenario is to always be ahead of the curve and to offer them something they don’t even realise they need. The key is to diversify one’s portfolio of products or services so that if one fails, there are always fallbacks.
Netflix famously pivoted from renting out DVDs to being the entertainment streaming phenomenon that it is today. And now, with competitors climbing onto the streaming bandwagon, they are reshaping themselves into premium creators of entertainment. But all this happened because their leaders were unafraid to attack their business model again and again. It also required significant investments in untested technology, talent and an experimental attitude.
2. Operational resilience
The pandemic has shifted change into a new high-speed gear. Companies with accelerated innovation practices and operational agility are those that will gain a competitive edge. Digital transformation is a big enabler, so it’s also imperative to review legacy systems.
Here is a dead giveaway to know if your organisation is behind the times – ubiquitous spreadsheets. Just as using paper and pencil was seen as behind the times 20 years ago, spreadsheets are a sure sign that too much manual work is still being done.
The pandemic also highlighted that a lack of diversity in suppliers is a major risk. However, this is nothing new. Over 20 years ago, a well-known cell phone company had their only source of chips disrupted when their supplier’s factory burnt down. The company was unable to source the required microprocessors from other vendors. This severely disrupted their ability to manufacture and allowed competitors to overtake them. Eventually, the company was bought over by a competitor.
History is repeating itself. On March 19, one of the car industry’s major chip suppliers suffered a major fire in one of its factories in Japan. This came at a time when the industry was already facing a shortage in chips, so this is expected to have a massive impact on the industry’s ability to fulfil orders.
The lesson here is to always have a backup and to diversify products and suppliers so that if anything happens to one, the others can still support you. A company can also expand its capabilities and offerings through acquisitions, mergers, partnerships or even by spreading out to different regions.
One of the ways my company survived the various global crises was by expanding our reach to different countries. I started my business in the UK in the mid-90s, but quickly realised that for us to survive the cyclical economic downturns, we needed to generate revenue from more than one market.
So, we began to spread out geographically, offering our services in the United States, Brazil, South Africa, India, the Middle East and South East Asia in addition to Europe. This geographical diversity allowed us to withstand the global financial crisis of 2008 and hold out against the troubles caused by the pandemic as different regions of the world have dealt with it differently. We, too, have pivoted to a more remote way of working, making our services more fit for purpose in this post-pandemic world.
3. Organisational culture
The next question to ask: Does the organisation’s culture support agility, innovation, and swift decision making? Is there, for one, a culture of continuous change in the organisation?
Hierarchical companies that shun employees questioning the status quo are wasting their most valuable resource – intelligence. Companies that embrace a diversity of skillsets and viewpoints, and focus all their employees on change using structured facilitation programs stand a much better chance of outwitting their competitors.
The response to failures is also important. Failures should not be feared but embraced as a signal to move in a different direction.
To make this happen, management must walk the talk, inspire and follow through. People need vision, direction and facilitation to succeed. And it is up to the leadership to create an environment where employees are unafraid to fail, question and innovate.
Building business resilience requires commitment from leadership to hammer the company into a new shape and to forge ahead despite opposition.
There will be difficult decisions to make, so leadership needs a healthy dose of courage to make investments in new technology, rework or even scrap legacy systems, and walk away from business models that no longer work.
However, businesses that dare to revamp will reap great rewards. They could be the ones to capture new markets, create a new demand where none existed before, and thrive in an uncertain future.
This calls for visionary leadership. How can we emerge from our comfort zones to lead our companies to more innovative futures?
Krishna Paupamah has worked with companies globally to transform their business for over 35 years. He is the Founder and Group CEO of Renoir Consulting. He can be reached at [email protected]
This column was first published in Business Today Malaysia.