September 4, 2020

Unbundling Resilience

Zoja Kukic

These days, all everyone talks about is resilience, and it is the key to winning in the long-term. Here are a few examples to prove this:

  • McKinsey stresses that the focus of the operational changes in organizations will be around resilience and reimagination;
  • Creditors have even created a new index they will be monitoring, focused on checking resilience of an individual, FICO Resilience Index;
  • World Economic Forum is suggesting that to rebound stronger from COVID-19, companies should build in resilience in manufacturing and supply systems,

But what does resilience even mean?

According to the Oxford dictionary, the definition of resilience is the capacity to recover quickly from difficulties; toughness.

So, when we say that the businesses will focus on recovering faster or getting tough, does it always lead to similar actions?

What is the difference in companies saying that they are focusing on keeping their businesses afloat or increasing their long-term profits? It's too broad, and it can mean different things for different organizations. For some, it can be building new products. For others, it can be a quick reduction of cost (just like we saw with numerous companies laying off employees or closing some of their stores). And for some, this can be the time to improve and digitalize systems and processes to decrease dependence on geography, people, and physical space.

Running a business in this type of crisis and uncertainty is hard enough, and we owe it to the executives to be more precise when sharing insights and advice. Saying "become more resilient" is just not enough.

So, how can we simplify and categorize what resilience really means?*

1 — Pivot

In order to be resilient, you have to be always ready to pivot. There are two main ways how you can do this:

a) Build new or change existing product features to be better suited for the changing environment. Some of the examples of companies who did this are:

  • Security drone company which built-in temperature measuring sensors to response faster to COVID-19,
  • Zoom added new features for hosting online events and seminars,
  • A vending machine producer added voice ordering to its machines to decrease the potential of infection and added masks and disinfectants to their machines' offering.

b) Create a new product for the same target group, based on their existing or new needs. Some of the examples of companies who did this are:

  • A platform to schedule medical appointments, Zocdoc, in the pandemic created a telemedicine solution to serve both groups of their customers, patients, and doctors,
  • A photo cabin producer, with the primary revenue coming from (now canceled) events created a new product, disinfection cabins on its already existing infrastructure,
  • A waste collector and recycler for large offices and hotels started offering disinfection services to the clients still maintaining to work from their premises and kept part of their revenues.

Sometimes, to do something fast and well, we cannot do it alone. Collaboration is a super-power for those who are pivoting quickly — check out one of our previous blog posts about it. This is precisely how some pharmacies and retail chains enrolled online sales and delivery through partnerships with Glovo, and similar companies focused on delivery.

2 — Readjusting dependencies

This pandemic has taught us that even the most reliable partners can sometimes let us down and that we need to diversify all our key segments. Most of our supply chain should not be linked to a single geography or with a single supplier, also should we rely on one distributor or sales channel, or we should mitigate together with them.

Pandemic has made companies solve their most pressing dependencies as fast as possible, to ensure that their products reach their customers. Home-fitness equipment company Peloton is a great example — they experienced an unexpected surge in demand. They managed to organize their supply chain to accommodate it, despite the global production and transportation issues.

Those facing a high decline in demand most likely didn't worry about this, nor did they work on diversifying, while the ones with growing demand, due to speed, missed solving some other dependencies.

Going through the company's processes is an excellent way to start working on this segment. Ask yourself at every step what will happen with the whole system if this one partner or segment fails. For this self-assessment, you can look for inspiration in the current situation:

  • What will happen to your sales if retail shops are closed and don't have online sales?
  • How will you transport your goods if you have relations only with air transporters and they stop working?
  • Is the system enabling your employees to be productive from every location?
  • Do you depend solely on one regulator, or can diversifying locations aim to take the best from them?

3 — Cost optimization

Sometimes, no matter how flexible you are, you cannot increase your revenue enough to keep the current costs, or to take some action from the previous two steps, you need to decrease costs somewhere else. This is different for every business, but make sure that optimizing the costs is not the only thing you do.

Rarely this exercise on its own is enabling you to stay afloat. More often, it is a road to a slow death. Before you cut salaries, lay off people, or shut down some physical locations, be sure you know why you are doing it and what is your next step for development.

*These three strategies should not exclude each other and can be done in parallel.