The Idea in Brief
Corporate success has never been so fragile. Technology breakthroughs, regulatory upheavals, geopolitical shocks—these are just a few of the forces undermining today’s business models. With the world growing increasingly turbulent, perennially successful companies are failing. Corporate earnings are whipsawing. Performance slumps are proliferating.
Firms can no longer count on the flywheel of momentum and incumbency to sustain performance. Instead, they need strategic resilience: the ability to dynamically reinvent business models and strategies as circumstances change, to continuously anticipate and adjust to changes that threaten their core earning power—and to change before the need becomes desperately obvious.
The quest for resilience starts with these bold aspirations: a strategy that’s forever morphing in response to emerging opportunities and trends; an organization that’s constantly remaking its future rather than defending its past; a company where revolutionary change comes in lightning-quick, evolutionary steps—with no calamitous surprises, indiscriminate layoffs, or colossal write-offs.
Fantastical, you say? Not if your company addresses four major challenges.
The Idea in Practice
Any organization striving for strategic resilience must master four challenges:
Conquer denial. Though warning signs of dramatically changing circumstances abound, many of us refuse to acknowledge them because the implications are unpalatable. To boost your corporate resilience, replace “That can’t be true” with “We must face the world as it is.” Become deeply conscious of what’s changing—and perpetually consider how those changes might affect your firm’s current success. Here’s how:
- Witness change close-up—and often. Visit cutting-edge labs, talk with fervent activists—and anyone under 18. Ask, “What are the potential consequences of the changes I’m seeing?”
- Find out who in your organization is plugged into the future and understands its implications for your business model. Ensure that they have access to you. Go out to dinner with your most freethinking employees. Talk with potential customers who aren’t buying from you. Review proposals that make it to the top.
- Acknowledge that your company’s strategy will inevitably get replicated by rivals, supplanted by better strategies, exhausted as markets become saturated, or eviscerated when power shifts to new players.
Value variety. Variety is insurance against the unexpected. Instead of making a single billion-dollar bet, launch a swarm of $10,000–$20,000 bets—smaller, lower-risk experiments. Thousands of ideas will produce dozens of promising ones that may yield a few huge successes. Test promising ideas through prototypes, computer simulations, and customer interviews. Most experiments will fail. But it’s your experiment portfolio’s performance that matters. Example:
When domestic-appliance maker Whirlpool invited 10,000 of its 65,000 employees to brainstorm product breakthroughs, they generated 7,000+ ideas that spawned 300 small-scale experiments. Results? A stream of new products—from Gladiator Garage Works (modular storage units) to the Gator Pak (an all-in-one food and entertainment center for tailgate parties).
Liberate resources. To avoid overfunding moribund strategies, get cash to people who can bring new ideas to fruition. Create an investment market inside your firm by giving everyone who controls a budget the ability to provide seed funding for ideas aimed at transforming the core business. “Investors” could form syndicates to take on bigger risks or diversify their “portfolios.”
Embrace paradox. Dedicate as much energy to systematic exploration of new strategic options as you do to the relentless pursuit of efficiency. Reward people for strategic variety, wide-scale experimentation, and rapid resource deployment. Your reward? An organization that responds to change continuously—without destructive turmoil.
Call it the resilience gap. The world is becoming turbulent faster than organizations are becoming resilient. The evidence is all around us. Big companies are failing more frequently. Of the 20 largest U.S. bankruptcies in the past two decades, ten occurred in the last two years. Corporate earnings are more erratic. Over the past four decades, year-to-year volatility in the earnings growth rate of S&P 500 companies has increased by nearly 50%—despite vigorous efforts to “manage” earnings. Performance slumps are proliferating. In each of the years from 1973 to 1977, an average of 37 Fortune 500 companies were entering or in the midst of a 50%, five-year decline in net income; from 1993 to 1997, smack in the middle of the longest economic boom in modern times, the average number of companies suffering through such an earnings contraction more than doubled, to 84 each year.
