It’s not enough to prepare for the worst. Resilient companies also know how to reinvent themselves.
Usually, when business leaders think about corporate resilience, they think about operational resilience (OR)—the ability to respond to emergencies. OR is critically important, but it doesn’t really give them a sustainable competitive advantage.
To continue growing, companies also need the second component of corporate resilience: strategic resilience (SR).
Whereas OR is situational, SR is a continuous renewal sparked by opportunity, instead of by episodic turbulence. As changes accelerate in your industry or market, the evolution of your strategy should accelerate, too.
As Gary Hamel, a world-renowned management educator, and his co-author, management professor Liisa Välikangas, wrote in Harvard Business Review, “To thrive in turbulent times, companies must become as efficient at renewal as they are at producing their products and services.”
How to Evolve Faster
The ability to evolve at an accelerated pace comes from the five phases of strategic resilience:
Awareness // It starts by taking a closer look at external and internal factors.
Internally, you need an honest assessment of the underlying assumptions and biases that guide your strategic decisions and collaboration. Are you investing in product lines that you know have diminishing returns? Are you married to legacy strategies that no longer make sense?
Externally, you need to seek out and recognize market disruptions early. If you rely on clients to tell you what they want, you will miss opportunities. You can speed the time it takes to go from, “Oh no, that can’t be happening!” to “Let’s go!” by recognizing changed circumstances and strategic decay quickly.
Strategic Alternatives // Come up with options before you need them. What kinds of new products, new pricing strategies or new marketing positions could you introduce?
There are several different ways you can identify these alternatives: brainstorming sessions, innovation process audits or even a budget review.
Preparing strategic options in advance will dramatically speed up your response time when “turbulence” eventually strikes. It’ll also have a positive impact on your leadership, engagement and morale.
Resource Allocation // Once you identify strategic alternatives, dedicate a responsible amount of money, time and talent
Do not invest only in new ventures. You should also devote resources to known opportunities that are still successful, so your company can keep up with and outperform competitors.
A review of talent management
practices can help ensure you have the right resources available for strategic changes. For example, how long does it take to reassign staff from one project to another? Does your hiring process support innovation?
Governance // Small business leaders are used to working quickly—a trait that’s essential when evolving strategically. But you also should instill some governance practices to help ensure that your faster pace doesn’t cause a loss of focus, missed market changes or erroneous priorities.
You could create an advisory board that consults on your strategy. (Or update how an existing board uses its time.) You could work with a consultant to establish an Enterprise Risk Management process or to audit your operations.
Renewal // The purpose of strategic resilience is a continuous strategic response to trends. Every year, you also should make time to assess how your OR and SR practices are working for you. Are you creating positive change for your company? Or are you wasting time on minutia and subjecting your team to a state of perpetual reorganization?
Why It Matters
Nokia’s sale of its smartphone division to Microsoft in 2013 perfectly illustrates why corporate resilience is so crucial.
At the end of his speech announcing the sale, Nokia CEO Stephen Elop tearfully said, “We didn’t do anything wrong, but somehow, we lost.” After uttering those words, he and his management team shed tears.
Although the CEO and his team were bewildered, others were able to see clearly what they did wrong: Nokia did not evolve as quickly as the market did. Prior to the first iPhone, half of the world’s mobile phones were from Nokia. Within a few years, their share was less than 3 percent. The competitors changed quickly, and Nokia did not keep up. Nokia missed the changes happening, and by not changing itself, the division lost its chance to make big bucks and to survive at all.
Big businesses like Nokia overlook changes because they get blinded by their size, as if their size means they are invincible. Small businesses get blinded by their success, as if it will self-perpetuate. No one is invincible, and success is not guaranteed.
Clients are executing faster, expanding their knowledge faster and communicating faster. And so are your competitors. The companies that are best able to predict, observe and respond to changes will outperform their competitors.