The year 2020 showed business owners, CEOs and boards across the world the value of the business continuity plans that were dusted off and put into action.
Three elements underscored the winners versus the losers in this crisis. Preparing for failure by seeking it out, planning for tough times by having adequate cash reserves and using technology to understand all of the links in the chain of supply and decision making.

Reserves as redundancy

While efficiency of capital has long been a measure of success used by investors, in volatile markets the existence of cash reserves has been a key aspect of resilience. Samsung and Hyundai, once criticized for failing to increase dividends or pursue share buybacks, have been in a fairly good position for survival despite reduced demand for their electronics and automobiles, respectively. Other companies with less volatility, but less of a buffer, have found themselves less resilient.

Expectation of failure

One of the companies I invested in once had a promising future as an alternative to clinical training for children with ADHD. A great technology spun out of one of the top local universities, the company partnered their software with a neurofeedback headset manufacturer to make things affordable and easy for customers. Amid a huge launch and much media fanfare, the hundreds of unit that began shipping had one fatal flaw. Almost 80% of the headsets were faulty. Like most start-ups, the margin for error was thin and the start-up folded.

What might have been done to ensure success? Expect failure. Netflix does just this with its Chaos Monkey program. Knowing that the worst thing that can happen, be it data hack or interrupting the final scene of Game of Thrones, will happen. The Chaos Monkeys sole aim is to find as many ways to fail as possible, in order to find proactive solutions and reactive remedies.

Networked problem solving

The inclination of most companies in a crisis is to ramp up central control. Toyota weathered prior crises that showed them that just the opposite can actually make a company more resilient and responsive.

Toyota’s reaction to the Japan Tsunami in 2016 relied on a system called Rescue to trace tens of thousands of parts. As they had learned in the 2011 earthquake, with just-in-time assemblies, the loss of just one factory could throw off the entire production chain. After the earthquake, they completed a survey of suppliers to pinpoint weak links and now use a database known as Rescue.

Rescue stores information about thousands of parts stored at 650,000 supplier sites, helping the automaker bypass bottlenecks when one supplier gets knocked out of commission. This data-driven crowd-sourcing, often pushing decisions and systems across the network, allows any break in the chain to be filled in by other suppliers or stop gap measures.

What all of these companies had in common in preparing for the crisis is placing a value on the investments – in cash, testing or technology – that make a company more resilient.

If you like this article, you can download Diana’s “11 Ways to Future Proof Your Career and Life” here.

Share this article

Leave a comment

2 × five =

Related Posts

Befriending adversity

The gem cannot be polished without friction nor man without trials ~ Confucius Avoiding adversity is taking away one of the opportunities to experience your […]

04 Nov 2020