The pandemic forced most companies, big and small, to change—whether they wanted to or not. Those that steered most successfully through the worst months of the crisis were those that already embraced change as a fact of life and that were ready to adjust their operations and strategies. The core characteristics they displayed were adaptability and resilience.
Martin Reeves, chairman of Boston Consulting Group’s BCG Henderson Institute, defines resilience “as a company’s capacity to absorb stress, recover critical functionality, and thrive in altered circumstances”. Adaptability, meanwhile, can be described as “the ability to change and maintain effectiveness in a changing environment.”
According to Reeves, these capabilities have become a competitive edge in a fast-changing world, even more so than the products or business model enterprises may once have considered to be their advantage. “Instead of being really good at doing some particular thing, companies must be really good at learning how to do new things. Those that thrive are quick to read and act on signals of change,” he writes.
These qualities were on display among the businesses that have best weathered the pandemic so far. During the first weeks of lockdown, we saw organisations show remarkable adaptability, whether it was breweries making hand sanitiser, banks retooling massive workforces for remote work, or factories maintaining productivity while adjusting to new social distancing rules.
Even before the pandemic, both resilience and adaptability were setting the best businesses apart from the weak and the mediocre, and they will remain important beyond the worst of the COVID crisis. The reason for this is that we’ve entered a time of unrelenting change, with famed management consultant, Gary Hamel, setting out three urgent competitive threats companies need to overcome if they are to survive and thrive:
- Relentless change—Disruptive, high-velocity change to the business landscape.
- Hyper-competition—The constant rise of new competition, often from unexpected directions.
- Knowledge commoditisation—Easy access to information means companies can no longer compete on what they know.
There is a growing body of research and many case studies that illustrate how adaptable, resilient companies outperform the rest. Just think of Apple and how it bounced back from near business failure in the 1990s, only to reinvent itself several times over the past 20 years, or how Warren Buffet’s Berkshire Hathaway has weathered repeated market downturns.
MIT Sloan Management Review’s 40-year study of 22,000 organisations’ performance found that among companies that significantly outperformed their sector average, only 17% were also able to maintain that performance advantage over the following five years. These companies, which include the likes of Apple and Alphabet, “continually find new sources of competitive advantage by reinventing their businesses and adapting to evolving market conditions.”
Resilience and adaptability at every level
With some inspiration from McKinsey, it’s important to note that resilience and adaptability are needed at several layers of the business:
- Financial—Does the company have the capital position and liquidity to drive proactive change to its business model or to endure stresses such as unexpected market downturns or business interruptions?
- Operational—Can the business’s day-to-day operations absorb changes and disruptions, for example strikes, supply chain disruptions, cyber-breaches or an explosion in customer demand?
- Technology—Is the IT infrastructure robust enough to mitigate against disasters or breaches, and can it bounce back if there is a crisis? Is the architecture flexible enough to accommodate new business models, employee needs and customer demands?
- Workforce—”Resilient firms foster a diverse workforce in which everyone feels included and can perform at their best,” says McKinsey. I would add it’s important to promote a culture where innovation is valued and sacred cows can be questioned. Is there ‘psychological safety and do employees have the tools and learning opportunities to keep up with a changing world?
- Values—Even if the world, technology, customers, products, and business models change, each business needs a core purpose and a set of values to guide it.
- Business model—Adaptable and resilient businesses need to maintain business models that can adjust to constant shifts in customer demand, the competitive landscape, technological changes, and the regulatory terrain.
As Reeves notes, it’s difficult for businesses to become resilient and adaptable because they are often focused on short-term returns and have traditionally focused on creating and executing stable plans. Yet as we have seen over the past few months, we live in a world that can be volatile and unpredictable—and those that embrace this reality will outperform the rest.
[Photo by Diggity Marketing on Unsplash]