In 2009, the first Annual Drucker Forum was held to mark the centenary of Peter Drucker, the “father of modern management.” Coincidentally, that same year, the world faced the most severe worldwide economic crisis and recession in 80 years. Since then, we have witnessed an accelerated pace of change and experienced many unexpected challenges. The past few years have been especially difficult as we dealt with COVID-19, geopolitical disruptions affecting the global economy, very discernible effects of climate change, the polarization of societies, and the rise of artificial intelligence.
Drucker once said, “A person can perform only from strength.” Most organizations know their strengths, having nurtured and strengthened them through sound corporate strategy work and execution. But will these strengths protect us in times of disruptions, when the rules of the game can change very fast and drastically? Will they enable us to weather the storm, navigate through the needed readjustments, and leave us stronger than before, even if not fully unscathed?
The Experience of Resilience
My personal interest in resilience was sparked by the 2008 global financial crisis and the ensuing great recession. At the time, the organization I worked for relied heavily on clients’ so-called “discretionary budgets”, and everyone expected us to be among the first casualties. Instead, we fared well, our growth only temporarily affected by a few points before rebounding strongly and outperforming the market in the subsequent years. Financial analysts were somewhat flabbergasted and kept asking us why and how we did it. The truth is, we did not really know why! As a leadership team, we often laughed about it.
In trying to find the root causes of this unexpected resilience, I looked back at my career and reflected on my past experiences. I remembered the first time I was asked to run a company. It was a European publishing company massively disrupted by the digitalization and globalization of its segment. The main shareholder had told me that the business model was collapsing, and that at this point, they preferred to pick someone as CEO who knew very little about anything, hoping they would figure out what to do. I was barely 30 years old and thought I had nothing to lose. Indeed, I had to “figure it out”. We stayed true to the original mission of the company, kept and even reinforced the premium positioning, but changed everything else in a massive and largely improvised digital transformation. As it turned out, we succeeded much faster than expected, giving another decade of growth to the company.
Still trying to find the root causes of corporate resilience, I also read a few useful books, among which “Resilience” by Andrew Zolli and “Anti-Fragile” by Nassim Taleb influenced me the most. Then, 10 years after the great recession, Covid happened, and once again, we had to figure it out. Facing this “black swan” event that turned into a fascinating real-life social experiment on a global scale, the business I was running then, this time in the US, not only did rather well during the months of lockdown but also gained market share, emerged strong, and significantly outperformed the market in the subsequent years. But the aha moment I had during this period, what truly struck me, was that this time I could clearly see what had made us so resilient. And the disturbing fact was that what had made us so resilient, were the things that we had, in fact, tried to tame for years as a leadership team: the propensity of everyone, in this very entrepreneurial company, to do more or less whatever they enjoyed doing, over abiding by the corporate strategy; the complexity of our offer; and the relative fragmentation of our organization.
That is when an almost existential question started to emerge in my mind: Does the commonly accepted way of developing and executing a strategy, although making us more successful, also make us more fragile?
The Tension between Corporate Strategy and Corporate Resilience
If you think about it, corporate strategy is about making choices: where to play, and where not to play; how to win, based on expressing a relevant and differentiated value proposition; how to build capabilities to execute flawlessly; and how to reallocate resources effectively. It often comes together with an execution plan that emphasizes the need to consolidate structures, streamline the supply chain, reduce the number of product lines, eliminate cost redundancies, and sometimes even reduce the number of clients to focus on the largest and most loyal ones. And, although this is rarely the favorite topic for CEOs, risks are thoroughly assessed, sometimes driven by regulatory requirements.
The keywords are: pick your lane and scale.
As the strategy is deployed, a lot of effort is also put into “alignment.” The goal is to have the entire organization support the strategy and avoid spending time and resources on anything else.
Let’s recognize it: A well-designed and properly executed strategy usually works, at least as long as the environment is relatively well-known.
But here’s the problem: When we observe the most resilient systems around us, they do not seem to abide by all these commonly accepted good practices of strategy.
Think about ecosystems, including biosystems. Or, to refer to human creations, think about groups that are very difficult to eradicate despite the deployment of considerable resources, such as criminal or terrorist organizations. These most resilient systems seem to share a few things in common. They are complex, sometimes incredibly so, and diverse. Their components are interdependent but are distributed and balance each other. They do not seem to follow a conscious plan. Rather, they constantly adapt.
Then comes the real question for CEOs who are focused on the long-term of the organization they lead, who are obsessed with maximizing its chances to thrive long after their own tenure: Are there practical ways to combine the strategy imperative and the need to make their company resilient, so it can actually gain in the future from disruptions whose precise nature cannot be predicted, which might upset an otherwise very successful strategy?
Exploring the Search for Excellence in Both Strategy and Resilience
Combining a sound corporate strategy and the intentional development of an organization’s resilience, is more an art than a science. Maybe scholars will help make it one. Meanwhile, I can only share some ideas to explore, based on thoughts I borrowed with pride from others, on discussions with peers, and on my personal experience, both successes and failures, of decades as a “practitioner-CEO”.
Before anything else, we need to recognize that developing resilience is not just about making corporate strategy more sophisticated. It is also about multiple other things you can do as a CEO, such as:
• Fostering the right culture, by getting the organization used to change and increasing its psychological readiness for disruption, by being data-driven – that is, building data capabilities, but also the ability of the organization to accept what the data says, by nurturing feelings of belonging and mutual trust, including with suppliers and clients, or by ensuring diversity to maximize the chances that creative solutions emerge when the time comes.
• Designing the right structure, with the ideal goal to make it both distributed, so the various groups can operate with a lot of autonomy when facing unexpected situations, and clustered, so they have some scale efficiency and diversity.
• Developing the right kind of leaders, who are focused on the long-term, who have the ability to be great connectors between relatively independent elements, who are focused on outcomes rather than on outputs, who are themselves resilient individuals through their attention to mindfulness and selflessness, who are curious, culturally adaptable and constantly learning.
But when it comes to the corporate strategy itself, there are also specific steps a CEO can take.
Firstly, when designing a strategy, I believe it is better to resist the temptation of over-simplifying. What we may gain short term, will in turn increase our fragility. Leaving some room for maneuvering will be essential when the rules of the game suddenly change.
Second, when making bets, the asymmetry between risk and rewards must be thoroughly reflected upon. The organization often pushes for big bets that have big upsides. But what if the downside is massive? As the CEO, our role is to avoid these bets where we bank the future of the company we lead and are responsible for, if there is a reasonable chance that a failure will be lethal. On the contrary, multiplying small bets that have significant upside but are all recoverable from in case of failure, not only creates options that may prove very useful when unforeseen events occur, but also develop, in case of failure, “muscle memory” to the organization. It makes it more resilient no matter what.
Thirdly, it is essential that the resource allocation make room for innovation and be very intentional about it. I personally like to apply, at least directionally, the 70/20/10 principle: 70% of resources allocated to running existing products and services. 20% to developing and taking to market innovation that stays in the “known” domain for the organization. And 10% to invest in the “unknown”. It is very difficult to do this. In all companies I have run in my career, the starting point was much more in the 90/8/2 range. But maybe the journey is more important than the destination. Being intentional about innovation is a critical move to develop resilience. The unknown may not deliver much for long periods of time. And you may not understand how it will. But maybe it will save your organization when the unpredictable will occur.
Finally, in the world of project management, which is, after all, what we focus on at the Project Management Institute, the last decades have seen the constant rise and increased pervasiveness of Agile methodologies. They have progressively blended with predictive approaches to form the hybrid approaches that PMI most often favors, and to the broader emphasis on corporate agility. I believe the principles of corporate agility should apply to corporate strategy to preserve corporate resilience, while at the same time ensuring a rigorous and methodological approach to corporate strategy: Operate with incrementality or iteration, get a constant feedback loop, favor servant leadership.
And even more importantly, combine fluidity when it comes to structures and plans, and rigidity when it comes to purpose and values. When the light suddenly switches off because of a fundamental disruption or a black swan event, this North Star, made of why your organization exists and how your teams should behave in any circumstances, will still be there. Your teams won’t require a plan nor even a precise direction to find their way back, while other organizations will collapse under the disruption. And you will emerge stronger than your competitors when the light switches back on.
Building resilience is not about dumping corporate strategy because ‘nothing is predictable.’ And nothing will ever guarantee that your organization will survive anything that may happen. It is about increasing the odds that you will survive if it happens. And being confident that when it happens, you will do better than your competition, which should even make you hope that disruption happens.
And in any case, building resilience in your strategy, culture, structure and leadership principles will ensure that whatever form it will take, the very purpose of the organization you lead, and what it deeply believes in, will carry on and thrive.
About the Author:
Pierre Le Manh is President and CEO of Project Management Institute (PMI)