The Internet has brought businesses a wide range of benefits, but it’s also imposed costs. One of the most obvious is the customer expectation set by the on-demand economy. We can download the new bestseller to our Kindle at 2:00 a.m. or get an avocado delivered within minutes to crush onto our toast if we get the munchies at midnight. Instant gratification delivered through constantly available services has become the norm rather something noteworthy. And woe betide the company who can’t service this voracious customer need because an alternative is just a click away. It’s a challenge facing B2B companies as much as B2C. Unfortunately, at the same time as our customers’ expectations of service availability increase, the world in which we operate is becoming more volatile, more unpredictable, more prone to the very kinds of disruptions we’re trying to avoid.
It's not just a problem for on-line retailers. Customer impatience has spread to all aspects of business. I’m sure I’m not the only one who’s wondered why I can stream a movie on Netflix at any time, day or night, yet the airline call center has kept me on hold for twenty minutes because of “unusually high call volumes” after their website crashed mid-transaction.
The costs of service outages aren’t just measured in lost revenue but also in terms of reputational damage for suppliers and potential harm for consumers (think about banking systems that crash and prevent salaries, mortgages and invoices being paid). In financial markets, governments and regulators have introduced rules which encourage organizations to make themselves and their supply chains resilient, thereby reducing the risks to market integrity and preventing harm to consumers. Unfortunately, based on previous regulatory experiences, these well-intentioned efforts could exacerbate the problem rather than reduce it.
Compliance is a double-edged sword, best summarized by anthropologist Marilyn Strathern, paraphrasing Goodhart Law - “When a measure is used as a target, it ceases to be a good measure”. Economist Jón Daníelsson was even more blunt - “A risk model breaks down when used for regulatory purposes”. When people know they’re being measured, they fixate on passing the exam. The target becomes the goal, rather than the outcome it was intended to create. Compliance too often turns into an exercise in ticking boxes, rather than a stimulus that changes mindsets and creates good behaviors. Managing risk is delegated (or relegated) to a risk management team, rather than being something every employee considers as they perform their work.
To work effectively, operational resilience needs to be habitual, an integral part of your company’s DNA. Resilient organizations are resilient by design. It took conscious effort – and commitment - to make them that way.
Before you do anything else, you need to understand the problem. As Simon Tweddle from Risk Shapes put it in a recent BusinessOptix podcast, “You've really got to understand the details of how your business delivers the service to your customers - and that's not something many firms can articulate easily.”
Step one is to think like your customers. Look at your services from the outside in, not inside out as most organizations do. Step two is to think about services rather than systems. Most services are delivered using several interlinked systems, a series of manual interventions, and a varying degree of outsourcing. To be truly resilient, each link in that chain must be as strong as every other (See Operational Resilience: Living in a House of Cards for more information).
On the same podcast, Simon’s colleague Karen Latham described the challenge thus, “We’ve got to start looking at operational resilience, not from the view of what we do if the system goes down, but what’s the impact on our customers if there's disruption to an end-to-end service we provide? What outcomes are they depending on our services for and what’s the harm to them if that service isn’t available. It's a mindset and culture change firms must go through to do this successfully.”
As well as having a holistic, customer-centric view of your end-to-end services, you also need to make resilience a priority - as important as maximizing revenue and minimizing costs. If that seems challenging, then consider this quote from a Deloitte article about resilience – “Research indicates that on average, investing US$1 in resilience early helps avoid on average US$5 in future losses.” Not only is there “the avoidance of tangible and intangible damage during adversity” but there are also the benefits of “greater service reliability, higher levels of financial stability, enhanced ability to take risks, and better connectedness with all stakeholders”.
So how do you teach an organization new habits? A discussion about the strategies and techniques for achieving sustainable behavioral change in a workforce would take up more time than we have here, but James Clear, the author of Atomic Habits, has a good four-step overview of how we form habits in their personal lives. He believes, by consciously tapping into a mental process we all unconsciously but constantly run, we can create good new habits and remove bad old ones. The four steps are:
Don’t make the cue “Tick the compliance boxes”, instead make it “Create and maintain services that deliver value to our customers without interruption”. Ensure your leadership team models the new way of working and that they walk the talk – don’t give confusing mixed messages. Make it easy for your people to adopt the new behaviors and reward them when they do.
Changing the mindset of an entire organization isn’t easy. Unfortunately, the future for companies with poor operational resilience is unlikely to be either bright or long. Faced with repeated service disruptions consumers will vote with their feet and move to more resilient competitors. The good news is that achieving operational resilience is a well-understood challenge and there are people and tools to help you.
Running a marathon seems impossible before you try but it starts with lacing up your shoes and running around the block. And then going a little further and faster tomorrow. And the next day. And the next day…
To hear more from Simon and Karen at Risk Shapes, click here to go to the first 3 Operational Resilience podcasts in our ongoing series. Be sure to follow us on LinkedIn for more Operational Resilience podcasts which will be focused on next steps and lessons learned (so far).
