Resilience is top of mind for business executives and will be a key factor in the current decade. As the business becomes more uncertain, resilient companies are likely to survive.
Companies resilience are being tested like never before especially in times of epidemic. Most of the supply chains(75% as per one estimate) are disrupted due to lockdown brought about by the rapid spread of the epidemic.
Consumer priorities and touchpoints are changing rapidly and the shift to remote work is testing the IT capabilities of companies, especially data security.
Under these circumstances, resilience is a key driver of value. Some companies thrive but most companies decline. Even before the epidemic, many companies were struggling to keep pace with changes in technology. The future of business will be more digital than previously imagined. Almost every organisation will be critically dependent on data, analytical tools, digital tools, and this will become a crucial component of resilience in business.
Phases of resilience
Resilience is not only about bouncing back from a crisis but also springing forward into a new reality. A resilient company responds immediately to safeguard itself from any exigency, recovers from adversity so that it is in a position to perform better than its competitors, and reimagines business to stay ahead of its rivals. There are three phases to resilience - Respond, Recover, Reimagine
During the present epidemic crisis, most of the companies have completed the respond phase, keeping employees safe, changing their ways of working, dealing with key operational issues especially the supply chain disruptions. Their focus is now on restarting and rebounding business by quickly adjusting to the ground realities.
During the recovery phase, companies will have to adjust to the uncertainty in demand, supply, labour and credit. Traditional forecast models are unlikely to be effective and companies must develop data-driven models to tackle volatility and learn to adjust to quickly changing scenarios.
The final phase reimagine phase is critical, which involves preparing businesses for the future. The current epidemic is likely to cause permanent shifts in consumer and employee behaviour and some businesses and industries are likely to be permanently disrupted. As the nature of business changes, resilient companies will have an opportunity to emerge stronger. hence companies should start laying the foundation of sustainable advantage by building resilience now.
Why digitally-enabled resilience matters
A company needs to embed resilience in every aspect of the organisation, from its go-to-market approach to its most critical infrastructure. Vulnerability in any area could affect the business's ability to survive and thrive. There are six dimensions of resilience that companies must focus on
- Protecting and growing companies top line - rapidly identify and address changes in consumer needs with data-driven, digital marketing, sales and pricing.
- developing agile operations - react quickly to manage disruptions in the supply chain, logistics, across various functions.
- enabling people - empower employees to work and collaborate effectively, adopt new approaches to talent management
- accelerating the adoption of data and digital platforms - increase modularity and availability of core IT, applications, enable data-driven decisions across silos.
- enhancing cybersecurity - safeguard digital assets, react quickly to security breaches, use secure technologies and procedures
- strengthening financials - ensure financial liquidity, reduced cost of ownership, data-enabled policies to manage cash and working capital
Technological capabilities are instrumental in building resilience in all six dimensions. Resilient companies adopt an integrated view of the relationship between people and technology (bionic company). Hence digital transformation has become more crucial than ever. As every company becomes dependent on digital technology, adopting and managing digital technology will be critical to business resilience. Digital transformation will build long-term resilience, increasing speed-to-market, productivity and stability.
However, the success depends upon defining a clear vision that is closely linked to strategy and value, ensure leadership commitment and governance of results, building technical and human capabilities.
Three steps to develop digital resilience
Companies need to build resilience when and where they need it the most. Many have already increased investments in secure remote working technology and reduce capital expenditure. Prioritisation is critical. Companies can follow a three-step approach to tailor their approach to their needs.
Address issues to respond and recover - The first thing to do is to respond to the lockdown imposed by the epidemic and to support business performance as markets recover.
- Focus on business outcomes that will deliver the most value in the shortest time.
- Grow and protect your topline and develop agile operations.
- Switch to digital marketing and e-commerce and develop the data-driven supply chain.
- Focus on tangible and short-term opportunities.
- Employees should develop new skills and adapt to new ways of working.
Reimagine the future and set ambitions - Once the immediate priorities are taken care of, prepare to win the new reality, the future. Determine the scope and the pace at which they must develop resilience. Identify specific, critical factors to differentiate themselves. Two key factors will determine the urgency and need for resilience. One is the expected financial impact of the current crisis and the other is the potential for digital disruption. Companies with lower financial distress and digital disruption can afford to take a more focussed and pragmatic approach to invest in digital resilience. Companies with high financial stress and/or digital disruption must immediately invest in digital resilience.
Build a sustainable advantage - Finally, companies must build long-term resilience to gain a sustainable advantage. They need to identify the gap between their goals and current resilience maturity. Each resilience comprises rising levels of maturity at three distinct levels - exposed, viable, future-ready. Digital Acceleration Index helps business leaders to gain insights into their current status and what action they should take for maximum impact.
The company should take immediate steps to tackle dimensions on which it is exposed. The minimum goal is to be viable on all six dimensions, especially in finance and cybersecurity where the vulnerability could spell disaster. Next, it can work to become future-ready on the dimension it believes is necessary to differentiate itself.
Finally, it must rethink its digital strategy and roadmap and reset its investment portfolio.
The current crisis has turned the attention on the companies resilience to weather any storm and only a few resilient companies would be able to capitalise on the opportunity to grow stronger in the face of uncertainty. Investing in digital resilience would help companies recover quickly and create a sustainable competitive advantage in the new reality.
THE DIGITAL PATH TO BUSINESS RESILIENCE
By Karalee Close, Michael Grebe, Phillip Andersen, Varun Khurana, Marc Roman Franke, and Roelant Kalthof
BCG May 2020
Comments
Post a Comment