How to build a resilient organisation 

Macro factors such as public health, war, and new technology continue to create unprecedented shocks for organisations. As a result, resilience has become fundamental for modern businesses.

Resilience has many dimensions. Most simply, it is the ability to bounce back after unexpected disruption and to endure in the face of uncertainty.

Many domains are important for resilience. These include finance, operations, technology, reputation, and strategy. Each has its own requirements and imperatives.

A failure in any of these dimensions can compromise the resilience of the whole enterprise.

Risk management is essential. In operations, companies want the negotiating power and economies of scale that come from concentrating purchases with as few suppliers as possible.  

However, a reliable supply chain implies sufficient diversification to avoid disruptions if a particular supplier cannot fulfil their orders. In this instance, resilience requires a delicate balancing act.

Financial risk management includes avoiding overly ambitious corporate actions. This includes acquisitions that pay a large premium over the market value of the firm, acquisitions in an unrelated field, and those where synergies are overestimated.  

It also includes prudent investment of free cash flow and robust governance to review any substantial expenditure or corporate-level action.  

Building a sustainable competitive advantage

While risk management no doubt contributes to resilience, it is by no means the be-all and end-all.

Risk management is more defensive in nature. It focuses on creating internal conditions and governance processes where risk can be minimised.  

Building resilience, on the other hand, implies strategic action to build competitive advantage that will endure shocks and disruptions.  

For example, budget airline Ryanair continues to achieve levels of profitability that are unheard of in the industry.

COVID-19 may have decimated aviation demand for around 18 months, but Ryanair has emerged even stronger. The company is on track to achieve its ambitious growth targets. Even the timescale has only been delayed by around two years from its original, pre-COVID plans.

A comparison of operational costs across the industry reveals that only Ryanair has returned to pre-COVID-19 efficiency levels. Meanwhile, its competitors continue to contend with higher costs created by the actions they took during the crisis.  

Ryanair has built the highest levels of efficiency in the industry, as well as agility. These strategic capabilities are the roots of its resilience.  

In any crisis, its competitors will have to pay a higher price than Ryanair to keep operating. As a result, Ryanair can bounce back faster and endure a lot longer than competitors.

Building resilience through reputation

The Indian healthcare chain Narayana Health is another case in point. During COVID-19 the company was exemplary in its actions.  

It avoided profiteering from the crisis, providing vaccines at cost to millions of people. It also engaged in public awareness and education, and supported public health measures.  

When most large healthcare chains in India reported record profits, Narayana Health reported losses during the same period.

But after the pandemic peaked, its share prices rose from 650 rupees in August 2022 to 1,200 rupees in November 2023. 

This occurred due to the combined effects of Narayana Health’s reputational, operational, and strategic resilience.  

The company’s actions during COVID-19 reinforced its reputation for providing affordable healthcare to the masses in a nation with immense structural deficiencies in healthcare.  

Operationally, its robust supply chain, with immense efficiency that derives from technological integration in the healthcare process as well as scale of delivery, supported the company’s actions during COVID-19. It also enabled the company to bounce back when demand returned. 

How resilient organisations build their capabilities

In terms of strategy, Narayana Health is perhaps the textbook example of ambidexterity - the ability to accomplish competing goals such as low cost and high levels of quality.

Ambidexterity at this strategic level is fundamental to resilience. A shock will test competitors much more than it will test an ambidextrous organisation.  

Resilience is not an appropriate descriptor for organisations that endure because Government regulations erect barriers to entry. Or for firms that are bailed out with taxpayer funds (a commonplace event for financial institutions during recent crises). 

Instead, resilience is a badge of leadership accomplishment. It is reserved for organisations in competitive markets that build strategic capabilities through wise leadership and consistent corporate actions.  

In many ways, creating sustainable competitive advantages by building such capabilities is a parallel road to building resilience.

Further reading:

Four keys to using big data to unlock better strategy

Increase the odds of success in digital transformation

How to frame a strategy to make sure staff back it

What is the secret to Walmart's success

Loizos Heracleous is Professor of Strategy and teaches Strategy and Practice on the Full-Time MBA, Executive MBA, and Global Online MBA.

Learn more about strategy on the four-day Executive Education course Creating Strategic Advantage at WBS London at The Shard.

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