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Evolve and protect your business from future shocks

(Image credit: Image Credit: Dotshock / Shutterstock)

Covid-19 has been the biggest catalyst for digital transformation in the last five years: “In some cases, take-up of tech has advanced 10 years in two months,” says Eric Schmidt, former CEO of Google. Organizations must now understand which changes have created value and learn to sustain the positive ones permanently. Antifragile organizations like Amazon and Haier, with digitally enabled, loosely coupled and distributed workforces and infrastructures, have proved it’s possible to flex, adapt and emerge stronger from crises such as Covid-19. Future shocks, including climate change events, will become more regular and bigger, and the current pandemic is a valuable dress rehearsal. Organizations must now understand which changes have created value and learn how to sustain the positive ones.

Weaknesses in supply chains and brittle operating practices have been made public. “Antifragility,” rather than agility, is the new watch word in business resilience and what businesses should aim for.  Depending on how well resistant a business is against future shocks, it can sit in one of four categories: Fragile, Brittle, Resilient or Antifragile?

  • Fragile: In a fragile business, there is an impact on organizational performance/workforce protection immediately after a shock occurs. Organizational failure occurs almost immediately after a shock.
  • Brittle: When an organization is brittle, the business operates as normal for a short term, but soon sees the impacts on business performance and workforce protection. Organizational failure occurs shortly after a shock.
  • Resilient: Although a significant dip in organizational performance occurs after shock, the resilient business is able to make changes to its service model, core operations and IT systems to enable the organization to return to near normal performance.
  • Antifragile: Like resilient, the antifragile organization has to adjust after a shock but then sees a growth to the business/positive response to the changed measure. Antifragile organizations not only respond to shocks but seek and embrace them.

Example: How a retailer at each antifragility stage might appear during a crisis

  • Fragile/Brittle – Loss of control of Data Polices, random use of unsecure tools and systems. Employees unable to perform basic tasks, find information or complete on business transactions.  Store is basically closed, with limited services and products available to purchase.
  • Resilient – Basic functions and routine tasks can be completed, some adaption to services provided. We can still sell goods through click and collect or via delivery, but our in-house design studio will be available in few weeks and we move our design consultants’ home and setup their systems.
  • Antifragile – Business as usual all products and services are available; in fact we have grown our design business as our consultants are fully mobile with access to all our cloud-based design systems. 

To achieve antifragility, organizations should adopt the following framework:

  • Manage the shock
    Many organizations are already managing the current shock and stabilizing – they have taken care of their staff, switched to remote working, and upgraded and secured their IT infrastructure. They are now starting to think ahead, about adapting to the aftershocks and longer-term transformation.  They recognize that they need to make data-driven, informed decisions to take the business forward.
  • Adapt to the new normal and aftershocks
    We know that the current pandemic will have aftershocks, so we need to adapt our organizations to be flexible.  In past crises, organizations that slashed and burned performed worse in the medium- and long-term than those that trimmed and invested smartly. Organizations that cut down their options while stabilizing could perish; those that increase them will adapt and transform best. Investors, foreseeing the aftershocks, are already devising ways to incorporate options more systematically into their valuations.

    But those aftershocks also bring us many (and rare) civic and market opportunities. While managing the shock, smart organizations can create options that generate civic progress and competitive advantage. There are already extraordinary (and perhaps double-edged) civic and commercial trends and opportunities emerging from pandemic responses and our forced experimentations and accelerations
  • Transform to an antifragile organization
    You've survived the aftershocks: sectors will be merging, and government departments will be working and learning at a scale unimaginable a year ago. Your job is to reposition your organization in the new landscape, and change both business and operating models.

    The overriding question you’ll need to ask yourself is: “Have we got the clockwork to evolve? FASTER?” To do this, you’ll need in place or to acquire:
  • Smart, highly automated, self-managing platforms - often put at the service of national or local government
  • Big, fast data flywheels driving your operational systems – potentially driven by citizens
  • People who feel safe enough to imagine, because imagination beats AI – imagination is about anomalies, accidents and analogies, not averages

It is important to note that although the three stages are represented sequentially, the success of this model will require businesses to be agile, breaking programs down into manageable pieces.  Failing fast is a must, and feedback loops to allow continuous improvement are critical.

Creating an anti-fragile IT infrastructure

Digital giants such as Netflix, Google and Ocado have anti-fragile capabilities, with an ability scale up and down to maintain services and availability for customers during crises.  The reason the digital giants are able to do this is because they build their services in a common way, breaking them down into small scalable micro-services, which can be controlled through automated processes. For them, dialing up or down is as simple as adjusting a variable in an automation script.

But dialing quality up and down and scaling services – in either direction – to meet fluctuating demands during and after shocks is no simple matter for the traditional enterprise. Many who tried discovered that their infrastructures were brittle: information was stored in monolithic systems with mission-critical data often locked behind firewalls and inaccessible to remote workers. Equally, networks configured around rigid work patterns became easily overloaded, slowing performance unacceptably.

Sending employees home to work because of the pandemic exposed these weaknesses in infrastructure, which aren’t exhibited in ‘normal times’ when the majority people have worked within the confines of an office: within the boundaries of a firewall, everyone is trusted, and network performance assured. As companies start to invest in anti-fragile infrastructure and decompose systems into microservices, they’ll also need to rethink network access and how to embed trust, potentially embracing a zero-trust posture.

Future shocks will come

We will feel aftershocks as the impact of this pandemic ripples across every region and industry. It may also be the case that we create our own aftershocks through the transformation of our organizations.  Be careful and have your seismic sensors in place, capturing the data from your test points and responding appropriately.

Once this pandemic is over, forward thinking businesses will look back and consider what worked and what didn’t, in order to prepare for future disruptions around the corner. Aside from rethinking boardroom priorities and the value of efficiency over capacity and quality over availability, some of the emergency measures brought in may benefit the business in the future.

Bill Murray, Senior Researcher and Advisor, Leading Edge Forum