A Recipe for Resilience – Three Ingredients and a Secret Sauce
Resilience. It’s the flavor of the month. What does it mean to be resilient? How do we become more resilient? It’s an urgent topic of discussion among government officials, businesses large and small, and individuals in the midst of the COVID-19 pandemic, as we see supply chains creaking under unprecedented demand and supply shifts across all sorts of commodities, from food to crude.
It seems to me that there are three basic strategies to increase resilience. I should note at the outset that these are not recommendations for what to do in the midst of a crisis. Rather, as we begin to shift our focus from short-term survival to laying a foundation for the future, this is a recipe for building resilience before the next (inevitable) crisis.
The ingredients
1: Strengthen core operations. Stop living at the edge of the “efficient frontier.” Maintain cash (like many of the largest tech companies have done) and inventory buffers to ride out supply disruptions. Build slack into manufacturing and distribution systems to respond to demand spikes. In addition to taking care of customers and employees, support strategic supply partners – your survival is linked to theirs and the loyalty earned will be worth the investment.
2: Diversify. Identify alternate sources of supply. Pursue alternate sales channels (eCommerce and direct-to-consumer are having a moment). Even explore new lines of business. Having options is always a good thing.
3: Reduce reaction time. Shorten supply chains. Empower and incentivize employees closer to the front lines to make decisions. Automate analytics and monitoring processes to flag issues in real time. Create (and regularly update!) playbooks to enable a rapid response like H-E-B did in the midst of the current pandemic.
While these approaches are not equally applicable to all organizations, they aren’t mutually exclusive either, and at least some of them can be applied to any organization regardless of size or sector. A large multi-national may be better able to afford inventory buffers or better resourced to manage diverse sources of supply. Google and Microsoft are accelerating partial production shifts from China to Vietnam and Thailand, for example. Smaller businesses, on the other hand, may be better at rapidly reacting and diversifying lines of business, the way many sit-down restaurants are pivoting for the first time to take-out & delivery and even grocery sales to mitigate losses in on-premise revenue.
The secret sauce
Underpinning all these strategies is a mindset of adaptability, and adaptability, as evolutionary theory teaches us, is fundamental to survival. Adaptability speaks to how well we adjust to and deal with the realities of whatever situation we find ourselves faced with, good or bad.
Building that mindset requires a combination of paranoia, acceptance, and determination. Paranoia to constantly scan the landscape for changes, acceptance of the realities of the situation you find yourself in, and determination to do whatever it takes to tackle them. These qualities are most evident in young organizations, but often erode into comfort, complacency, and ultimately overconfidence as they grow.
So, if there’s one thing this pandemic has taught us, it is this: it pays to stay paranoid! Because as it turns out, we don’t really know what is around the corner or who is lurking in the shadows. But we can prepare, react, and live to fight another day.