In the past, when businesses talked about resilience, it usually meant “IT resilience.” However, what would happen if a disaster occurred and employees couldn’t get to work, for example? What would happen if company data became corrupted or cyber criminals encrypted it to make it unusable? What would happen if the network went down? These potential risks are dealt with by investing in system redundancy, back-up, cyber security, and allowing employees to work from home over VPN connections across the internet.
Times have changed! Not that IT risks have diminished; on the contrary, the risk of cyber-attacks continues to grow. However, many new threats have emerged that require the establishment of contingency plans and a significant change in organizations’ approach to business. Moreover, today’s issues can stretch way beyond technology to the core of each company and its operating models.
With social media speeding up information distribution, consumer and business preferences change much more rapidly than in the past. Whether moving from dairy to plant-based milk, big brands to boutique beers, on-premise, persistent-licensed software to subscription-based software as a service, global brands to local brands, or gas cars to electric vehicles, change is accelerating. As a result, demand for products that were once strong can quickly decline while being replaced with a need for “hard-to-switch-production” alternatives.
The business environment is also changing rapidly. Startups with much lower costs or a different business model can undercut the price of core functions or deliver better capabilities and eliminate competitive advantages that took decades to create. Examples are Amazon in retail, PayPal in payments, and Rocket in mortgages. In addition, firms must deal with fast technology advancements, regulatory changes, the impact of the economy, inflation, employment, global warming, and a host of other knock-on factors that can rapidly change buyer behaviors and needs.
Understanding customers’ needs in-depth and continuously is the key to success
Businesses must keep abreast of market trends and risks and decide how to deal with them. Big firms can’t suddenly become small but can invest in startups. Dairy farmers can’t suddenly grow almond groves but can explore alternative products or ways to use their ingredients. Auto manufacturers can re-engineer their cars to run on electricity, but not quickly. Although technological change can happen rapidly, the key to success is understanding customers’ needs in detail. Which customers/where/when will want to switch to new products? What will be the trigger points, and can they be predicted? Innovation without direction and frequent reality testing can lead to disaster. Innovation focused on a continuous assessment of customer needs is the key to success in such turbulent times.
But building business resiliency requires investigating the impact of potential changes across the organization, not just on IT or product development. How will each department change to meet customers' new needs? How will the tried-and-tested methods and processes used today need to change? Who will design and lead those changes? If you have spent years honing your business to be successful in today’s market, how easy will it be to change for tomorrow’s? There’s a reason over half of the year 2000 Fortune 500 companies no longer exist.
A solemn analogy regarding the consequences of lack of preparation and planning
On November 20th last year (2022), Emily Sotelo set off to hike in the New Hampshire White Mountains for the first of three one-day hikes. Her goal was to complete the summiting of the 48 4000+ foot White Mountain peaks by her 20th birthday. Demonstrating incredible persistence, she had already hiked to the top of 40 of them over the previous two years. She checked the weather and had a battery backup for her cellphone. According to the Portland Herald Press, she had granola bars, a banana, and water and wore long underwear but only light pants and a jacket. She had heated gloves and a neck warmer, but no hat and her shoes were for trail running or trekking.
Her experience was that she could easily make it up and back in around 8 hours to one or a few closely situated peaks by traveling light. Starting at 4:30 am that day, she planned to return by lunchtime to eat with her mother. Unfortunately, the weather in the mountains was very different from that in the valley where she had been staying. Temperatures dipped towards 0° F, the wind gusted up to 95 mph, and it was snowing. Very sadly, Emily never made it back. She was found dead ¾ of a mile off the trail three days later, on her birthday.
Emily had had little experience with winter hiking and needed to prepare. Unfortunately, she carried only a few essentials recommended for day hikes, even in the summer. No map, compass, or matches. No safety blanket for shelter or adequate wet weather gear. For businesses, the equivalent to Emily’s experience is continuing to operate in the same ways and heading down the same development paths as in the past without regard for the changing business environment and customer needs and without the essential capabilities needed to maintain business resilience in the face of rapid change. There is a history of large companies that built robust and sustainable businesses but didn’t look closely enough at the forecasts and were overcome by rapid changes in conditions. Examples are Kodak, Blockbuster, Polaroid, Toys ‘R’ Us, Pan Am, Borders, Compaq, and Tower Records.
What are the essentials required to manage business resiliency?
Just as organizations must develop and invest in a contingency plan to deal with IT risks, businesses must develop and invest in business resiliency if they want to thrive and grow in today’s turbulent market conditions. Here are some of the fundamental essentials:
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- Agility: When the unexpected happens, the organization must be agile enough to respond quickly. Nimbleness requires a culture of trust and flexibility so that when there are alarms, they are raised without concerns, and employees are empowered to respond as needed. During the pandemic, businesses that survived the worst disruptions were often able to bring entirely new products or capabilities to market in days and weeks, not months and years.
- Innovation: Indeed, the ability to innovate, stay ahead of competitors, and be a leader in meeting customers’ needs, is at the core of business resiliency.
- Data: Intelligence about the market and the trends in customers’ needs. The most important key to survival is accurate data that can define the landscape sufficiently for critical decision-making. Who and where are your most important customers, and what are their current and future requirements? How are they affected by economic, social, and competitive movements? How might they be impacted by major events such as pandemics, severe weather, and wars? What more can you do for them to retain their loyalty, even during challenging times?
- Intense customer focus: The key is to put customers’ needs ahead of short-term profits or be willing to drop plans when they no longer meet those needs. Organizations who have not adapted to the digital era have failed due to the lack of a customer-centric strategy.
- Skills: Do you have, or can you quickly acquire, the skills and human resources needed to cope with technological change? Do you have the capability to analyze your customer and market data on an ongoing basis? And if you don’t have the in-house skills, are there external tools and resources you can engage?
- Back-up and redundancy: Critical system redundancy and cyber security remain a requirement, but contingency planning should extend to critical personnel, finance, and other business necessities. How long can you survive without customers? What if your area's internet or power supply goes down for days or weeks? Will your cash flow sustain you through a disaster?
- Business resiliency plan: Now we know it’s essential to look at every part of the business and to make plans to minimize the significant risks. What to do should you lose a major supplier or several? How to encourage innovation on a broad front so that you have a healthy, thriving business and alternative revenue sources should central products or services become uncompetitive. What about alternative production capabilities, logistics, marketing vehicles, and energy sources?
Business resiliency isn’t just about risk analysis and planning. Keeping your business healthy and maintaining operations while minimizing risk factors is vital to the ability to bounce back quickly and thrive when the going gets tough. For example, have you automated the fundamentals of your operation to increase quality and efficiency? Have you reduced your technical debt to make moving on to new technology an easier choice? Have you reduced your exposure to regulatory and environmental risks?
Experian can help ensure your data is trustworthy and automate how you manage data accuracy so that you can make fast decisions when needed.
