What Resilience Means for Business ?

Every business knows how digital technologies like big data, AI/ML, 3DP, IoT, AR/VR are radically transforming interactions with consumers and business partners. A growing number of businesses are also increasingly experiencing in very concrete terms the way environmental constraints are impacting their competitiveness. Cost of energy. Carbon valuation of assets. Access to water. Stringent regulations to protect biodiversity. Several industries know more than others the value of social acceptability for a business to run successfully. Construction. Extractives. Food. Healthcare industries are good examples. No business will survive without adaptation to these digital transformations, environmental pressures and social dynamics shaping acceptability. This is business resilience today.

Resilience – A Business Definition

Resilient is a Latin word (leaping back). It has been an English word since mid 17th century. A person or animal is resilient when able to withstand or recover quickly from difficult conditions. A substance or object is resilient when able to recoil or spring back into shape after bending, stretching or being compressed.

A business is resilient when able to recover quickly from an incident (e.g.: fire in a warehouse impacting logistics) or an event (e.g.: a major IT system hacking impacting availability of services for clients). At a larger scale, a business is resilient when able to spring back into competitiveness and value creation after bending and being compressed by external factors.

Nokia has been in business for 150+ years. Nokia is therefore good illustration of resilience. Back in the 1960’s, Nokia was known for its business making and selling rubber boots and forestry pulp products. When the businesses became too competitive, Nokia explored defence technologies in the 1970’s, and started to make and sell consumer good televisions, then mobile telephones in the 1980’s. When Nokia found it difficult to adapt to the smartphone business, Nokia focused on IT infrastructures and Internet of Things activities in the 2010’s. Nokia is good example because business transformations have always been driven by multiple factors (e.g.: competition and competitiveness, geopolitical considerations and business imperatives, customer demand and adaptability to reinvent a model and identify new areas where to generate margins for the company and value for the customers).

Nokia may succeed or not in its new venture. Resilience is an organic process which may come to an end at some point for any organization. But Nokia is doubtless good illustrative example of business resilience.

Business Resilience – Solving a 3-Level Equation

In discussion with several clients across multiple industries, it sounds very clear that the following 3-level equation is all interconnected, and shaping most of what’s needed for any business to transform and spring back.

1. Digital Transformations Shaping Very Different Business

A client in the logistic business told us recently to be saving 80% of cost processing orders through digitalization. Among many things:

• Orders are increasingly placed through web based platforms – Call centers are less needed.
• IoT is increasingly deployed to connect multiple processes and operations together – System is operating 24/7 with less human interactions and less human or organizational errors.
• AI is getting better and better to optimize cost selecting subcontractors needed to help to deliver on some activities
• Robots are drafting contracts, billing and customs documents

80% of cost reduction is generated through the combination of leaner processes operating involving less people focused on coding, maintenance and supervision activities.

This example is illustrative how digital transformations are shaping the way businesses are operating and able to remain competitive in different terms. This example remains shocking at multiple levels :

• Agility has a cost. Sizeable investments in IT, coding and change management are doubtless needed to make such digitalizations successful. The WEF estimates that by 2022 we’re going to create 133 million jobs in artificial intelligence. There are huge needs to upskill workforce at stake, and other WEF studies tend to show that companies are overall not prepared and don’t invest enough in people development and recruitment to adapt to the digital transformations impacting their business
• The less there are human interactions between clients and customers, the less there is space for emotional intelligence. This may not be needed. This might indeed be critical to secure satisfaction and retention of clients. Otherwise clients may just switch across platforms without finding solutions genuinely adapted to what they really want
• The whole approach is doom to become standard in the years to come. This is good to optimize costs. This is insufficient to differenciate from competitors. Limited human interactions doesn’t allow good level of innovation and capacity to provide more creative solutions to address client requests. This basically creates primarily value for the company maintening margins. This doesn’t generate much value for the customer

We think this is good example how companies are currently adapting to digital transformations. This is also good example why adaptation to digital solutions doesn’t generate resilience alone. This only is a reactive approach to adapt to market needs and remain competitive. Adaptation to digital transformations needs to go hand in hand with more proactive approaches anticipating and addressing client needs to capture innovation and generate new margings. That’s where digital transformations can work very well with proactive review of environmental constraints and good management of social dynamics shaping acceptability – and customer needs.

2. Adaptation to Environmental Constraints

3. Social Dynamics and Acceptability

4. Conclusion : Navigating Business Resilience

As part of this global dynamic underway, business is part of the problem as much as part of the solution. Pressure is calling for clarification.

• Business creates jobs and wealth. Business has excellent capacity to influence governments. On several environmental and social issues, there is a risk for business to miss disruptions and radical changes expected by markets if overall primarily lobbying governments to move slowly on reforms and maintain positions. There have been intense discussions like this related to carbon across the past 15 years for instance.
• Business creates solutions addressing market needs. Market expectation is moving fast. For instance, acceptability for highly carbonized solutions is likely to change quickly. Pressure on business is about innovation and satisfaction of clients increasingly seeking for solutions aligned with environmental and social issues. Business can also encourage governments to move faster and smarter to generate a level playing field incentivizing sustainability friendly innovation and their adoptions by markets

All in all, businesses need to align innovation and the way products and services generate genuine sustainable services with the way the very same businesses are selecting their business partners and the way the very same businesses are also lobbying government for changes encouraging more sustainability performance. Pressure on business is coming with this internal alignment needed all along the chain to accelerate delivery of sustainability solutions to citizens at large scale.

Resilience – A Pathway for Business

Acceptability of highly carbonized solutions is decreasing rapidly. Just think of the growing ESG movement across investors already in place. Or the growing school strike movement showing how next generation of citizens is likely going to have even lower acceptability than current citizens able to vote and buy. No matter the business segment, if a competitor is able to provide pertinent low carbon affordable solutions to clients, let’s wonder why clients would continue to buy highly carbonized solutions in context where acceptability of carbon is decreasing very fast. From a broader sustainability spectrum, the very same rational can apply easily to plastics and biodiversity depletion, or water. There are many factors making business resilience, out of which sustainability is no doubt going to play a growing role for competitiveness in the decade to come.

• Digitalization can of course help to provide much greater level of data to use and explore to understand broad sustainability performance, for example at the nexus between climate and water. Or connecting the dots between local infrastructures and child labor. Or connect mass level of social audits conducted in some instances for 20 years to define greater predictability of occurence of social risks… On the one hand, there is no doubt digitalization will help to systematize data collection and sustainability performance monitoring at large scale.

On the other hand, systematization will generate its own risks. A very same sustainability performance across different contexts may not lead to same business decisions. Water again is an interesting illustrative example: good water practices wherever in Mali or Mexico certainly is much more important overall than in Canada or Sweden where scarcity is much more relative. Sustainability remains fundamentally a qualitative approach calling for nuances and asking some brains and expertise to confirm what data may have to say.

So, how to lead with purpose and disrupt for resilience?

Acceptability of products and services, which consumption has strong impact on climate, biodiversity and water can decline fast – plastic bottle business knows something about this. Business resilience is all about finding the pathway to maintain and grow value for consumers whilst disrupting production and consumption pattern through transition to level of climate, biodiversity and water impacts aligned with science in a 2025 – 2030 trajectory.