Resilience is new imperative for businesses to survive a fast, unpredictable future

The importance of resilience for companies has been called into stark relief by the COVID-19 pandemic, and it will become even more urgent as globally disruptive events begin to unfold more quickly and in less predictable ways, according to a new McKinsey & Co. analysis. 

Geopolitics, global warming and the digital revolution will compound the global uncertainty that has proliferated since 2000, but many are not preparing accordingly, the report’s authors write. 

The majority of businesses continue to stay focused on short- to medium-term earnings and rudimentary organizational health under the assumption that business conditions ahead will remain relatively smooth. But focusing too much on growth or financials is a risk that jeopardizes long-term success, because it doesn't recognize that the global landscape is changing so fast and in more pronounced and chaotic ways.

Six types of resilience your business needs:

In order to withstand an increasingly unpredictable future with more disruptive events, companies must embed resilience into the way they work. This will not only help them work better in normal times, but it will also prove indispensable in times of turbulence. Resilience for a business encompasses six facets, per McKinsey.

Financial:

Organizational:

Operational:

Business model:

Reputational:

Three ways to embed resilience in your firm (and one clear winner)

1. Add-ons

Equipment that decreases the risk of failure, such as backup servers, emergency generators and network redundancy achieved by adding more network devices and lines of communication.

2. Trade-offs:

Buffering the business to build resilience in ways that present an explicit trade-off to another part of the system, such as productivity. Examples include establishing a capital bumper, overstaffing your call center or overstocking products.

3. Baked-in:

This is the “sweet spot” approach that strikes the optimal balance. Resilience is baked-in throughout the organization in a way that aligns with what’s also best for your other business aims. Characteristics such as staff with diverse skills and experience and an environment that fosters innovation will serve companies well in good times and prove crucial when times necessitate nimble adaptation.

Takeaway:

This McKinsey & Co. analysis' “resilience imperative” calls for businesses to prioritize resilience to succeed in uncertain times. Businesses that imbue resilience throughout their organization are much better positioned to withstand continued uncertainty and emerge stronger afterward. Those that don’t prioritize resilience are unlikely to succeed in the rapidly changing circumstances implicit to the world today.

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