Over the past 10 years, resilience has become a buzz word. Yet, as the term has moved from academic literature to industry its use has tended to embody a commercial bias towards growth and profitability. This over-emphasis on growth has moved the concept away from its ecological systems-theory origins which involve options of decreased size, changed function and reorganisation following a significant system interruption.
The unprecedented scale, scope and impact of the COVID-19 pandemic will fundamentally alter our world, our lives and the business landscape. When the global economic freeze ends, not all business will emerge from lockdown — those that do will have major strategic decisions to make.
Organisational Resilience in the Age of Pandemic
The term resilience has gone from being an abstract concept to a vital consideration for businesses seeking to survive and recover from the pandemic. There are very real questions for industry about how to meaningfully apply a fascinating concept to the messy reality of business interruption and recovery. In the rush to translate resilience theory to business practice, bias and blind spots have crept into how the concept is applied.
Searching Google images for resilience helps to understand how the term is commonly conceived.
One of the simplest, yet immediately recognisable, depictions of the general understanding of resilience is shown below. It encapsulates many concepts — thriving, rebounding, bouncing back, building back better, bouncing forward — all commonly used phrases in industry discussion of resilience.
This visual representation shows a very different common understanding of the term, as opposed to technical discussions in scientific literature where the number of possible definitions run into the dozens.
The difficulty with these simplified meanings in the business context is that they equate resilience with growth. Accordingly, a resilient business is one which suffers an interruption and subsequently emerges stronger, more profitable and ideally with increased market share. However, this application of the concept diverges significantly from the underpinnings of resilience in ecological systems theory.
In short, resilience does not always equal growth.
A quick reference to the resilient system cycle shows the problem inherent with equating resilience to growth. Businesses most often occupy the exploitation or conservation phase. In the exploitation phase businesses are growing, acquiring resources and building new assets or markets and acquiring new ventures. In the conservation phase, businesses transition from rapid growth to stabilisation and maintenance.
When a major business interruption occurs, shown at X, the energy and resources held by the business are rapidly released. The business goes through a chaotic collapse and release of capital, with high uncertainty. Capital in this case is human, physical, financial and reputational.
The re-organisation phase follows an interruption and that phase involves innovation, restructuring and extensive uncertainty. Growth does not commence until the exploitation phase which sees businesses stabilising and again seeking to accumulate resources and seizing opportunities.
Directly equating resilience with the exploitation phase creates a conceptual blind spot that overlooks the necessary phase of release and bypasses the opportunities in the reorganisation phase.
Resilience & Adaptation Strategies Following a Business Interruption
A much-loved research theme in ecological resilience studies is insect behaviour — ants in particular. One such study considers the behaviour of ant colonies within their networks of interconnecting nests. Each nest serves as a node, connected by trails, forming a network with different properties. Observation and categorisation of the properties of these networks in different species identified three broad resilience approaches (below); resistance to interruption, redirection when interrupted and reconstruction post interruption.
Each of these approaches has costs and benefits in terms of upfront investment in construction, impact mitigation and speed of recovery. In an ant colony these decisions are determined by species type and instinct. In business, however, these options are all available if we maintain an open mind about what resilience can look like.
Adopting any of these approaches is contingent on a business’ risk awareness, financial position and risk appetite. Although resistance is used to respond to potential interruptions, it is effectively a pre-emptive approach to neutralising a potential interruption. This approach is most commonly seen in asset hardening of critical infrastructure. Redirection and reconstruction are built on the assumption that the full impacts of the interruption cannot be or have not been averted. Consequently, these two approaches are most relevant to the discussion of post-pandemic recovery.
The figure below uses these two broad approaches to develop a matrix of recovery strategies. Using these approaches as strategy variables, a business can adapt and subsequently exploit its new circumstances following an interruption.
Resilience Adaptation Strategy Matrix
The strategies of ‘bounce forward’ and ‘bounce back’ represent continuations of the same strategy the business employed pre-interruption, with varying levels of adjustment in terms of sophistication and capital investment. Bouncing back is essentially a strategy which focuses on restoring the pre-interruption status quo, perhaps with the addition of adapting business practice to the learnings of the interruption. Bouncing forward takes this adaptation further by investing into upgrading assets and capability to more effectively implement the same strategy.
The reflexive bias towards growth often sees businesses limit their recovery strategies to these two categories. This bias shuts out the option of using a significant business interruption as an opportunity to fundamentally reassess a business’ strategic direction.
The change in strategic direction, captured via the redirection axis, provides strategic options of divestment and diversification. Divestment as a strategy may range from selling assets to exiting a market entirely. Examples of this strategy can be seen in businesses which decide to remove operations and assets from high conflict zones when the price of conflict (such as lives lost, asset damage and reputation risk) exceed the return on investment. Similarly, divestment may be implemented through the sale/closure of business units and a full exit from competing in a given market. This approach frees a business to invest in more profitable or promising areas.
Diversification is the most strategically complex and financially costly adaptation option. It sees a business retain some element of the pre-interruption strategy, either by way of a product or a market position, and invest more capital into expanding the product offerings or market position. Yet this approach enables a business to retain profitable elements of pre-interruption strategy, off-set risks and create multiple opportunities for future growth.
Moving the discussion of resilience beyond hype to application requires the meaningful translation of this concept from theory to industry practice. An important first step is understanding that our inclination towards business growth and profitability is a human bias — not an inherent property of a resilient system. Applying a nuanced understanding of resilient systems theory to managing recovery can create a range of novel adaptation options.
Recovery strategies are frequently limited by a knee-jerk, simplistic desire to ‘bounce back’.
The strategies of divestment or diversification following an interruption are particularly difficult to implement in practice. Whilst a crisis represents a significant opportunity to reimagine and redirect business activities, it is challenging to think strategically under major operational pressure. Nonetheless, although it may be hard, the failure to contemplate the full range of recovery strategies is, at best, a lost opportunity for a business. At worst, this reflexive bias to bouncing back may embed the very vulnerabilities and risk exposure that gave rise to the interruption in the first place.
For those businesses who do survive the coming weeks and months, their competitive landscape will have changed forever. Their recovery strategies need to reflect this reality.
ABOUT THE AUTHOR
Lex is an industry leader in crisis management and business continuity. She has held senior roles in the public and private sector, leading the development and implementation of crisis and business continuity management frameworks. Her broad experience across crisis management fields spans mining oil and gas, natural hazards management, critical infrastructure protection and resilience and business continuity management in infrastructure and financial services. Lex is engaged as an Adjunct Industry Fellow within Griffith Climate Change Response Program at Griffith University, researching in the field of disaster resilience.