“It could work out! If …”
Resilience – the ability to hold one’s ground against external disruptions. That’s what matters in economically turbulent times. Pandemic, war, climate crisis – those are “events” that affect the business models of practically all companies. Massive turbulence can often be managed only by means of massive shifting – talking about transformation and change. Together with Andreas Hoberg we’re going to take a walk through the thick forest of vocabulary and context pertaining to our focus topic in this issue: resilience.
What the expert says about …
… putting current change into a historic perspective
As humans we tend to say that precisely the times in which we live are the most challenging ones with the greatest change. However, looking at things from a perspective of larger cycles shows that there have been more radical changes and more epochal transformation boosts in the past. The invention of the steam engine or the use of IT and computers are cases in point. The major difference to today is that the cycles have become shorter, much shorter. Companies, today, practically have no more lead time and therefore cannot position themselves properly in terms of strategy and processes. Companies find themselves in a supine position far more often and that results in clearly different – higher – demands to be met by the company’s leaders and executives. The cycles are shorter and thus the necessary response speed. My impression is that particularly the last three years with the pandemic and the war have exhausted many leaders and companies. They were caught in a permanent feeling of being in a supine position even though things had really been going well up until that time and they had been in a positive and strong position to align for transformation.
“External assistance and opinion in phases like these – with multi-dynamic influences – are accelerators that enhance efficiency extremely.”
… the origin of the term resilience
I think it has been around for as long as bamboo has been cultivated in China. Bamboo is characterized by extreme flexibility combined with stability. That’s the synonym for resilience from nature.
In business, the subject of resilience has always been present but moved out of focus to some extent. Now, in view of the crises following each other in very short cyclical succession, some of which were or still are existential, the factor of resilience has suddenly become more important again.
… the current significance of resilience
Companies need to examine the state of their stability and flexibility. What is the foundation, what is our original, individual strength? What do we stand for? What is our core? What is our innovative prowess? And based on those answers, strengths need to be strengthened. From that, the company can build motivation toward the inside and say to the customer, “Look, that’s what we’re doing now!” That positive energy is necessary in an environment with so much bad news.
I feel that it’s appropriate and important that the factor of resilience has increasingly moved into focus again because nothing about the approach of combining stability with flexibility has changed. Of course, there’s a wide variety of perspectives and dimensions to increase resilience.
Transformation can be driven by strength: a company knows where it stands in a business ecosystem and pursues change in the spirit of further development. That’s the way I see it for some sectors such as machine tools, mechanical engineering, or process engineering. Out of this strength, a lot can be done for stability and flexibility.
However, transformation and resilience can also be an anchor of hope when a company, like a frog, is hanging onto a straw swaying in the wind in hopes that it won’t break. That is the case, for instance, where the current changes or crises are impacting on entire industries or branches of industry. Two examples to illustrate the point: First, the automotive industry that’s going through a process of massive transformation. What’s happening there and what of that is politically driven? What effects does that have? Second, the classic department stores where we as consumers with our new purchasing patterns massively pointing toward online retail are making the changes. Particularly in the case of the latter, the call for resilience and transformation does not emanate from a position of strength.
Such a transformation process always has several dimensions as well as a superordinate level: That’s the processes and workflows and the roles and people primarily related to them. Ideally, a conscious strategy process resides above all that. We need to look from all these angles before and in the process of transformation. Talking about resilience in that context always refers to the overall resilience of the company: how strong is it, how weak and how flexible?
“Compared to the past, cycles have become shorter. Companies, today, practically have no more lead time and therefore cannot position themselves properly in terms of strategy and processes.”
… the biggest mistakes in building resilience
Arrogance and ducking away in line with, “Oh well, that doesn’t concern us.” That again has a lot to do with executives and their experiences. The crux of the matter is that it concerns business models that have worked for years or decades. The German “mittelstand” is a perfect example: to some extent, we have a highly diverse dovetailing supply chain. The parties know each other and it works – a German specialty and strength of the mittelstand. I continue to see that as a positive. But suddenly the overall conditions have radically changed and some products are no longer needed – that can lead to change posing an existential threat to a dependent supplier. We’re also seeing in the automotive industry with its interlinked structures that the supply chain is completely resorting itself in some areas. There’s no point in beating around the bush: some companies are going to fall by the wayside.
… key factors in building resilience
Decisiveness, willingness to take risks, error culture, conclusiveness, involvement of employees and precise, transparent information for the workforce: “That’s what we want, that’s what we’re going to do.” That releases energies. Those are the key factors in my view.
… the game changers waiting in the wings to enhance resilience
Digitalization, without a doubt. It’s still not being used the way it should and could be. I need transparency for my decisions, digital solutions can create that and generate valuable data. With that, I can analyze and better understand my company. And then – following the analysis – I can also use digital simulation for predictive actions. That’s the be-all and end-all. We’re still far from any kind of automatic action or self-controlling state in that case though. Digitalization can and will be the transformation accelerant.
“Decisiveness, willingness to take risks, error culture, conclusiveness, involvement of employees and precise, transparent information for the workforce – those are the key factors in my view.”
… the process of transformation
Today, that’s a strategy process that needs to be moderated and supported by a CEO, and the transformation process must advance clearly faster than before. Decisions must be made quickly even if they’re headed in a totally different direction than before – that includes quite a bit of resilience. Things often take too much time, with too many considerations and contingencies being thought through. While that’s taking place circumstances have changed again or the competition makes decisions faster, thus gaining an advantage in the strategic transformation process. An automotive executive board member told me that during the coronavirus pandemic the whole board would meet for a 20-minute conference call every day, producing all decisions in a relatively short time. Now, he says, they’re debating and discussing again in monthly board meetings. That goes to show that it’s better to part with certain attitudes – by clearly addressing the question of what and where the current crunch points are.
… the difference between theory and practice in building resilience
In a nutshell: The actions must work. Implementation and integration into corporate routines are the crux of the matter. That’s what counts at the end of the day. But, naturally – depending on the client – there are starting bases that vary significantly. In the last three or four years, the major guidelines were always defined by severe external effects. Entire business models have changed, plus many overall conditions. If you want to remain successful as a company under such circumstances you need to go ahead and implement the actions for transformation. Using the automotive industry as a case in point: if I want to or need to part with IC engine passenger cars, moving toward electric mobility, then it’s not enough to just talk about it but calls for concrete action. So, implementation is the key aspect going forward – for the companies themselves and for the consultants. With our clients, we always summarize that positively in our credo: “It could work out! If …” And we need to find solutions for the “if.” Unfortunately, there’s no such thing as a single straight and right pathway in transformation and for optimizing resilience. You need to approach solutions carefully because there’s a lot of new ground involved in terms of content.
… the reasons why companies contact business consultancies
In most cases it’s not because they’re up to their necks in water, but there are different reasons. Often it’s a lack of capacity – capacity to create transparency for decision-making. In other words, for examining one’s own organization for a fundamental analysis. Or the capacity to execute the resulting decisions is lacking. That’s particularly the case whenever industries are subjected to, let’s say, multi-dynamic influences as they are in this phase. In that case, external assistance and opinion are simply accelerators that enhance efficiency extremely.
Andreas Hoberg studied production engineering in Ulm. Since 2005, he has been with Ingenics AG, a consulting firm with more than 500 employees at 20 locations in nine countries primarily serving manufacturing and logistics companies. Since 2011 he has been a managing partner with responsibility for strategy consulting, process and organizational consulting, and digitalization, among other things.