The terms resilience and agility are very popular in the business world right now. And for good reason! With the pace at which technology is evolving, there is increasing pressure on companies to act quickly. To complicate matters further, the products and services that ensured your past success are not necessarily guarantees of your future success – the examples of Kodak and Xerox demonstrate this well.
It is often assumed that the more agile a company is, the more resilient it will be. But is that really the case?
Strategic resilience is the ability of an organization to respond in anticipation of or in response to a significant change in the external environment.1
The Two Types of Strategic Resilience
In fact, it is not necessary to be the most agile company to achieve long-term success. There are indeed two types of strategic resilience:
- The ability to move quickly, also known as agility
- The ability to absorb shocks
Let’s take the example of Pratt & Whitney Canada, a company that has been designing, manufacturing, and maintaining aircraft engines for nearly a hundred years. The company has several plants, thousands of employees worldwide, and operates in a highly regulated environment. The compliance requirements of the aerospace sector limit its ability to change quickly. However, it has demonstrated extraordinary resilience in response to unpredictable events such as the 9/11 attacks or the recent pandemic. How did it achieve this? Through strong relationships with its partners, suppliers, and customers, a diversified product portfolio, and financial health. Large companies can therefore be very resilient even if they are less agile because they have the ability to absorb shocks. Pratt & Whitney’s many years of operation are proof of this. The secret is to identify your strengths as a company in order to establish the right resilience strategy.
What If We Learned from the Past?
One of the challenges is that resilience is a latent skill, meaning it’s hard to prove you have it unless you face a significant change in your external environment. It is therefore interesting to learn from companies in your sector that have stood the test of time. As the famous saying goes, “history does not repeat itself, but it rhymes.”
Inspired by this philosophy, a group at Shell set out to learn the secret of corporate longevity by studying about thirty organizations over a hundred years old.2 One finding was that in the northern hemisphere, the average lifespan of companies was well below 20 years. This result highlights the opportunities for resilience and the risks that companies face today.
The 4 Characteristics of a Resilient Company
So what was the secret of those companies that managed to perform over all these years? Researchers found that companies over a hundred years old had these 4 characteristics in common:
1. Conservative Financing
The companies studied had enough funds available to seize opportunities quickly without resorting to additional financing, giving them a competitive edge. The availability of liquidity also allowed them to weather economic downturns by investing for the future. An example of this characteristic is Unilever. The consumer goods giant took advantage of the 2009 economic crisis to increase its investments in innovation and marketing, while its competitors were cutting their expenses. It was thus able to capitalize on the crisis to strengthen its market position.
2. Awareness of Their Environment
They were also attuned to changes in their environment and took quick action to respond. In other words, they were good at learning and adapting. And just as importantly, they were attentive to their stakeholders, such as their employees, customers, and suppliers. Take the example of Shell. The company became aware of climate change and its impact on their organization. They took action by making portfolio changes such as acquisitions and investments in new low-carbon projects. They also divested some facilities and set a goal to become a net-zero emissions energy company by 2050.
“Understanding what climate change means for Shell is one of the biggest strategic questions business leaders face” – Shell.com
3. Awareness of Their Identity
A sense of belonging to a community is essential for long-term survival. Managers of living companies were primarily chosen internally, and all aimed to improve the long-term health of the company. Let’s take the example of Pratt & Whitney again. It’s not uncommon to see employees with more than 25 or even 30 years of experience within the company. Some even stay long enough to work with their children! The sense of belonging is so strong that people sometimes talk about having “the eagle tattooed on their heart,” the eagle being the manufacturer’s emblem.
4. Openness to New Ideas
Openness involves a willingness to explore new approaches, challenge established conventions, and be receptive to changes and developments in various fields. Centenarian companies encourage experimentation and recognize that future opportunities may lie in completely new areas. An example is WR Grace, a company founded in Peru in 1854 for the export of guano (a fertilizer made from bird droppings), which later evolved into air transport by partnering with Pan Am, and eventually became a chemical company and the leading provider of kidney dialysis services in the United States. When a company evolves from fertilizer distribution to a key player in the US healthcare system, its openness to analyzing opportunities cannot be denied! We can also think of Amazon, which started out selling books remotely to become a technology giant that is now the largest delivery company in the United States, surpassing both UPS and FedEx.
And You, Will You Be Centenarian?
Each of the 27 long-lived companies completely changed their business portfolio at least once. This leads us to the following conclusion: centenarian companies value their employees more than their assets.
And do you notice something interesting? While agility plays a role in the success of companies, it is not the most important factor. Cultural factors such as identity, the ability to innovate and learn, and external orientation are key. That’s why they are an integral part of our Organizational Diagnostic 5.0.
Next Steps
Do you want to increase your resilience but don’t know where to start? The organizational diagnostic is an excellent starting point. It is a comprehensive assessment of your organization on human, operational, and technological levels. In addition to assessing your organization’s maturity level, it is accompanied by strategic and tactical recommendations that will help you align your team with the right priorities. We can help. Contact us to learn more.
Generative AI was not used in the ideation, writing, or revision of this article.
