Systems for everything, except what really counts

How resilient are we, really? It’s a question that just about every firm should be asking itself, but not many actually do. That’s hardly surprising, given that so few firms have the tools in place to measure what resilience they might have. Resilience (or a lack of it) doesn’t show up on a balance sheet (unless it’s already far too late to do anything about it). The obsession with the bottom line at once concentrates minds elsewhere and also obscures the signals that might be telling management that things need to change.

What makes this absence of resilience measurement most puzzling, perhaps, is that most firms have systems in place for just about everything else. Recruitment, legal matters, sales, accounting, day-to-day operations, even a simple calendar to ensure that everyone in a firm knows on which days team members’ birthdays fall. Firms think that they are bulletproof, that they have systematised the most minute details. And yet so many have no early warning system in place that can set off alarm bells when things might be about to go wrong.

With so much change taking place in the business environment, regardless of the sector, reinvention professionals find this absence of signals troubling. It’s a lot like a car’s built-in warnings. Lights will flash if oil pressure is low, but what exists to notify the driver that they might be heading in entirely the wrong direction, or that a better route exists. It’s this kind of warning system that firms need, and it’s why the reinvention sector exists. We don’t tell firms what to do, we show them how to build warning systems that recognise when that change of direction is needed.

That's easier said than done, of course. The trouble with resilience is that it hides in the places that even the most sophisticated of spreadsheets can't reach. How much of the business rests on a single client, or a single supplier, or one person who happens to hold the whole thing together in their head?

How many of the assumptions the firm was built on still hold, and would anyone notice if one of them has simply stopped being true, or relevant?

These are questions which don’t have easy answers and which are, as a consequence, rarely asked, even by the most well-meaning of executives.

Back in 2023, PwC found that around 70 per cent of business leaders were confident they could recover from a serious disruption, while the same research showed most lacked the foundations to actually do so. And while some nine in ten called resilience a top strategic priority, far fewer could name a single thing they measured to actually keep track of it. Confidence, it turns out, isn't a metric so much as a mood, and moods have a habit of curdling at the worst possible moment.

Kodak is the classic example everyone reaches for (and, let’s be honest, for good reason). Its accounts looked perfectly healthy while the market it had dominated for so long changed entirely around it (the firm had even invented, then shelved, the digital camera that would go on to bury it). The warning signs were all there, but nobody had come up with a system to read and interpret them. By the time its balance sheet made the problem obvious, hacks and analysts were already writing Kodak’s obituary.

Part of the problem is that way too many firms mistake robustness for resilience. These are not one and the same thing. Robustness braces firms for the kind of shocks that might be expected, such as a recession that has been budgeted for or a cyber-attack for which back-up data systems might have been prepared for. Resilience is what’s needed for a different kind of shock, the kind of shock that nobody can see coming.

Creating systems and signals that can identify these shocks does not require predicting the future (which is just as well, because nobody can). But a decent warning system can tell a firm, in good time, when a road map no longer points in the right direction, and does so while there's still room to change course. That is the whole of the job. It is also harder than it sounds, because the firms that most need to hear the alarm are, almost by definition, the ones most certain it will never ring.