The current pandemic is a painful reminder that business resiliency can too easily be overlooked in favor of efficiency, leaving companies and employees vulnerable. Though it is recognized as an important investment area, lessons we thought had been learned from previous tragic events are often quickly sidelined when calmer seas prevail. This paves the way for business efficiency to dominate the focus. But COVID-19 is showing companies they must strike the right balance between resiliency and efficiency if they want to weather the storms ahead over the long term.
Lessons of the past
In the aftermath of 9/11, when supply lines were severed and trucks and planes sat idle, companies learned the importance of contingency planning and having safety stocks. But in less than half a dozen years, the pendulum swung back, we became complacent and looked to be even more lean and efficient, optimizing costs, increasing profits, and relying again on just-in-time systems.
The pandemic has shown us the need to adopt a balance between efficiency and resiliency, especially related to areas where business risk can derail business operations. To build in long-term resiliency, however, takes planning. A risk stratification process is critical, along with scenario planning using digital twins so that companies can identify their biggest resiliency risks and resist the temptation to return to pre-pandemic ways. It’s not an overnight task for CIOs and it requires the support — not just the financial backing — of the entire C-suite, from the CFO to the CEO.
What does it mean to be resilient?
A popular analogy among analysts is that fighting the coronavirus is like fighting a war. It may be more accurate than many realize, and one can look to the past to find their future. When Winston Churchill, for example, was faced with attacks on Spitfire manufacturing plants during WW II, he decided to parse up the manufacturing and assembly of the fighter planes and distribute production in such a way as to eliminate any single critical vulnerability. It proved less efficient in terms of quickly making these aircrafts, but it was more resilient to continued attacks. Indeed, Spitfires ultimately proved critical to defending the country in the Battle of Britain. That’s what it means to be resilient.
Building in resiliency: The matrix
To calculate the risks a company faces, from disasters to external disruptions, requires creating a matrix to perform risk analysis and stratification. Such a matrix is not only helpful in prioritizing which operations would benefit from more resiliency planning, but also, it is a critical tool to establish consensus among the C-suite related to aligning on the areas that pose the biggest risks and that will require more support and resiliency investment.
To estimate the size of and potential of particular risks, businesses should create a two-by-two matrix where the horizontal axis is the negative impact or consequence of an event, ranging from minimal to catastrophic. The vertical axis then represents the chances or probability of those events happening, ranging from unlikely to highly probable. Very quickly, this exercise makes it abundantly clear where businesses need to prioritize resiliency to minimize future business risk.
When the pandemic hit, for example, one multinational conglomerate with interests ranging from renewable energy to medical technology, found its traditional supply chains were grounded. It had to rapidly switch from its normal operations to charter flights to fill the gaps. It also needed to add in-transit visibility and traceability technology to create a more robust logistics solution. Using a matrix to assess this type of risk can reveal the probability of such future disruptions in the global supply chain and point to investing in new technologies to more accurately forecast logistical needs, improving supply chain resiliency.
Building in resiliency: Digital twins
Once an organization establishes and prioritizes its critical risks, it still needs to find the weakest links in each situation to properly target further investment and support. Digital twin modeling is uniquely suited to such scenario planning. Whether it’s a customer relationship management system, a supply chain, or a physical product, digital twins can be illustrative, revealing specific strengths given optimistic assessments as well as revealing weaknesses — even failure — given more pessimistic forecasts. Changing different elements within digital twin models helps pinpoint precisely where the most effective investments should be made.
Digital twins can even show how particular capital expenditures can produce future revenue. A global materials company, for example, used such modeling to create a machine-first approach to the automation of its shop floor. During the COVID-19 pandemic, the company was able to ramp up capacity, generating 19 million pounds of material needed for personal protective equipment to meet the sudden demand.
Build it or buy it
Does becoming more resilient mean companies have to bring more services and systems in-house to control risk?
Not necessarily. Today’s cloud service offerings are more robust, more bulletproof, and more flexible than ever before. While in some cases, moving to the cloud may increase cost; overall, it makes services more adaptable and scalable. It also is an essential pathway to using digital twins to create virtual, predictive plans that adapt as levers change.
Resiliency planning applies to people, too
Employee changes, driven by more distributed workforces, are also having a resounding effect on risk matrices and scenario planning. This is presenting new threats for IT. And, it is creating management challenges that require reinforcing the idea of organizational purpose. So, resiliency planning should not only yield insights on new technologies and infrastructure needed to shore up gaps, but also, it should call for investments in the employees and talent we rely on every day.
Dave Jordan is Vice President & Global Head, Consulting & Services Integration at Tata Consultancy Services (TCS). In this role, Dave leads a team focused on the strategic journey of leading enterprises as they transform and grow their businesses. Through his leadership, the team strategically consults clients navigating disruptive technologies and enables enterprises on their path to Business 4.0 success.