Business Shock Recovery Requires Re-thinking
I’ve seen increasing discussion over the past week-plus about the effects of COVID-19 as a “shock” to business, rather than an interruption of the type around which most firms build disaster response and recovery (DRR) plans.
I think that “shock” is a perfect term. And I think that business management software (e.g., ERP) and managed cloud services are the best-positioned tools to help enterprises manage their way(s) out of this, and prepare for the next shocks.
I’m using the term shock in two ways. One is the sheer size, scope, and speed of global impact on business. This is just too big for many firms to deal with. And its impact mirrors the second definition: the medical condition of shock, wherein the body’s blood pressure plummets, the body cannot get enough oxygenated blood to sustain itself, and so it begins shutting down, organ by organ. Urgent and immediate response is needed for the entire body on a scale that requires professionals trained in how systems work, and how they interact.
In my experience, DRR plans tend to assume at least some orderly progressions that take time, specific resources, and quasi-normal conditions somewhere in order to work. They also assume resources that a shock-level disruption prevents. Because they assume resources and communication, traditional DRR plans typically address how to switch things, replace things, and restart things once things are switched and replaced. They focus on a broken link (or two) in the supply chain, versus a collapse of chains.
Shock does not allow for measured, steady responses that assume a managed environment and availability of anything other than the a few of the most basic resources. The body will die.
Shock Resilience = Different Thinking
We know future shocks will come. Frankly, the more interconnected everything in business (and the home) becomes, the greater the possibility of system-wide collapses. And they will recur in different markets at different times – and overlap with one another.
What types of thinking will enable shock response and recovery, and mitigation of shocks to come? Primarily, take into account potential collapse of entire business networks/supply chains. As part of this:
- Consider a wider scope of cascading events outside the company. DRR plans naturally focus on a singular event or the cascade from a singular event. What type of event could collapse an entire supply chain? …and then, an entire market? And when that happens, how will you manage and apply capital and cashflow to enable continuity?
- Look at contagion factors. How will you recognize symptoms of impending shock? How can the symptoms of collapsing trading partners be mitigated for your enterprise?
- Think in indeterminate timeframes. Instead of planning for a certain amount of days, weeks, and so on, consider how, or if, the company can respond and operate without a reference timeframe. And consider how to impart that perspective to employees, trading partners, channels, et al.
- Look beyond the function, the department, the enterprise. Every DRR plan I’ve known focuses on issues specific to the organization for which the plan was drafted. Every organization – including the company itself – needs to be protected and managed as part of something larger.
- Consider compartmentalization and verticality. Where is your business interconnected? How can those connections be severed? And what is the depth of your verticality?
- Look deeper. Shock response and mitigation will need to account for every user in every organization, whether or not they continue to work. A single team or group may be key to response or recovery in some cases.
- Think also about cross-training for everyone. It works for the U.S. Marine Corps; they keep spending down while improving maneuverability and impact.
- Look to the horizons. Can you see far enough up and down the supply chain? What qualifies as useful business data for this, and can you utilize that data to manage discontinuity to the nth degree?
It is quite possible that we humans, and our business systems, will become accustomed to what we currently feel as shock(s). Our ability to anticipate and mitigate such events could improve enough to the point where today’s shocks become tomorrow’s disruptions.
To get to that point, though, we need to accumulate more and better data, and be much better able to use that data. Part 2 will dig into why and how ERP platforms and providers, with managed services providers, may be key to effective shock response and prevention.
Thanks to Analyst Syndicate colleague Jim Duggan for his input.