Choice between resilience and obstinacy
By its nature business follows cycles - there will be highs and lows recurring now and then. These cycles are usually because of the general market context within which the business operates. This context entails the competitive landscape, supply chain dynamics, level of effective demand, consistency of quality, inflationary pressures, and seasonality factors, among others.
Beyond the usual highs and lows though, there at times arise unexpected disruptions in the market environment. Natural disasters such as earthquakes, sustained pandemics like COVID-19, acts of war or civil unrest for example in Ukraine or parts of the Democratic Republic of Congo can imply significant disruptions to the flow of business activities. During such events, there will still be some winners depending on the sector’s inevitability and the nature of supplies required to sail through the disruptions. However, in general, most business enterprises will suffer during these times and the odds of survival will be pegged on not just the external aggressive or corrective influences, but internal factors as well.
During such fights for survival, especially within times of extreme economic distress, an enterprise internally needs to choose to be either resilient or obstinate. Resilience implies pliability that is, being able to flex an enterprise’s operations to fit within the form of the prevailing situation and still get (near) optimal results despite the circumstances. This touches every aspect of the business including inventory and supply chain management; employee effectiveness and safety; crisis management framework; tailoring of products/services to suit the prevailing need; the versatility of the enterprise’s infrastructure – its production lines, management information systems, logistics, and distribution network as well as general delivery capacity.
All the aforementioned relates to the internal environment. Resilience, therefore, calls for a proper diagnostic assessment of the enterprise’s internal environment to ensure that it is proofed against potentially disruptive external shocks (both the normal/usual and the unprecedented ones). This will require scenario testing for the core aspects of the business to check on the ability to withstand these shocks. Weak areas of the business are then buffered, adjusted, or replaced to ensure that they do not collapse under the weight of disruptive factors: technology, people, and philosophies can be enhanced, replaced, or supported. During the past two years of the pandemic, companies had to devise ways of ensuring that work continues efficiently regardless: some by adopting measures to make remote working effective while others had to adjust factory schedules and habits, explore remote contract manufacturing, introduce new products, minimize the production of certain products, etc. The greatest investments were in information technology, event response, supply chain, and last-mile delivery. Such measures were crystalized in a robust adaptable and actionable business continuity plan. It can be said that resilient enterprises are those that managed to keep afloat even without the business rescue measures employed by national governments. They maintained a strict working capital routine and maintained a steady healthy cash flow, and despite not growing optimally or running contracted operations, the adjusted cost structures meant that some cash was still left to keep the business running.
On the other hand, obstinate enterprises are those that insist on not altering their operations or business infrastructure believing that they will weather any storm that may come their way. Although this state of mind is important in some instances, it mostly applies under normal business cycles. In the event of extensive disruptive shocks, caution needs to be exercised to avoid a ‘Titanic’ situation where such enterprises stubbornly choose to stay the original course even though danger is imminent. By the time they realize they chose the wrong path, it is too late – cash reserves are depleted, employees are fatigued, products are no longer responsive to the market needs, customers are unhappy, market share has significantly fallen, and/or insolvency is knocking at the door. During disruptions like COVID-19 and its attendant lockdowns, most customers have been more responsive to their actual needs rather than to persuasive advertisement or branding. Every purchase was backed by a strong rationale rather than mere emotion. It has been a sustained life-and-death scenario in which every coin counted and every coin was counted.
Although unexpected disruptions like COVID-19 and others mentioned earlier are not commonplace, business enterprises need to evolve in such a way that they are not just fit to survive the usual lows and highs, but that they can also withstand the inevitable when it happens. The choice between resilience and obstinacy should be made with a clear mind, as it may be the determinant of long-term sustainability.
One may ask though, “is it possible to be both resilient and obstinate - as in - ‘obstinately resilient’ or ‘resiliently obstinate’?” Well, perhaps a stronger case can be made for the former rather than the latter. One thing for sure is business models need to be responsive to their changing environments. And now that the pandemic seems to be moving to our rear view, enterprises need to quickly evaluate the effect of their choices over the past two years and assess the need for business turnaround planning. I bet that this need has never been as palpable as it is at this point in human history.
The writer is a corporate and project finance specialist at Frontier advisory partners.