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The Quest for Resilience
In a turbulent age, the only dependable advantage is a superior capacity for reinventing your business model before circumstances force you to. Four tough challenges stand in the way.
In less turbulent times, executives had the luxury of assuming that business models were more or less immortal. Companies always had to work to get better, but they seldom had to get nordstrom case study harvard at their core, not in their essence, nordstrom case study harvard. Today, getting different is the imperative. Continued success no longer hinges on momentum.
Rather, it rides on resilience—on the ability to dynamically reinvent business models and strategies as circumstances change.
Strategic resilience is not about responding to a onetime crisis or rebounding from a setback. To achieve strategic resilience, companies will have to overcome the cognitive challenge of eliminating denial, nordstrom case study harvard, nostalgia, and arrogance; the strategic challenge of learning how to create a wealth of small tactical experiments; the political challenge of reallocating financial and human resources to where they can earn the best returns; and the ideological challenge of learning that strategic renewal is as important as optimization.
Corporate success has never been so fragile. With the world growing increasingly turbulent, perennially successful companies are failing. Corporate earnings are whipsawing.
Performance slumps are proliferating. Firms can no longer count on the flywheel of momentum and incumbency to sustain performance, nordstrom case study harvard. Instead, they need strategic resilience : the ability to dynamically reinvent business models and strategies as circumstances change, to continuously anticipate and adjust to changes that threaten their core earning power—and to change before the need becomes desperately obvious.
Conquer denial. Though warning signs of dramatically changing circumstances abound, many of us refuse to acknowledge them because the implications are unpalatable. Value variety. Variety is insurance against the unexpected. Thousands of ideas will produce dozens of promising ones that may yield a few huge successes.
Test promising ideas through prototypes, computer simulations, nordstrom case study harvard, and customer interviews. Most experiments will fail, nordstrom case study harvard. A stream of new products—from Gladiator Garage Works modular storage units to the Gator Pak an all-in-one food and entertainment center for tailgate parties.
Liberate resources. To avoid overfunding moribund strategies, get cash to people who can bring new ideas to fruition, nordstrom case study harvard. Create an investment market inside your firm by giving everyone who controls a budget the ability to provide seed funding nordstrom case study harvard ideas aimed at nordstrom case study harvard the core business. Embrace paradox. Dedicate as much energy to systematic exploration of new strategic options as you do to the relentless pursuit of efficiency.
Reward people for strategic variety, wide-scale experimentation, and rapid resource deployment. Your reward?
An organization that responds to change continuously—without destructive turmoil. Call it the resilience gap. The world is becoming turbulent faster than organizations are becoming resilient. The evidence is all around us. Big companies are failing more frequently. Of the 20 largest U. bankruptcies in the past two decades, ten occurred in the last two years.
Corporate earnings are more erratic. Even perennially successful companies are finding it more difficult to deliver consistently superior returns. But over the last ten years, just six of these nordstrom case study harvard managed to outperform the Dow Jones Industrial Average. The other twelve—a group that includes companies like Disney, Motorola, Ford, Nordstrom, Sony, and Hewlett-Packard—have apparently gone from great to merely OK.
Any way you cut it, success has never been so fragile. In less turbulent times, established companies could rely on the flywheel of momentum to sustain their success. Others, like General Motors and Coca-Cola, enjoyed a relatively stable product paradigm—for more than a century, nordstrom case study harvard, cars have had four wheels and a nordstrom case study harvard engine and consumers have sipped caffeine-laced soft drinks.
And in capital-intensive industries like petroleum and aerospace, high entry barriers protected incumbents. The fact that success has become less persistent strongly suggests that momentum is not the force it once was. To be sure, there is still enormous value in having a coterie of loyal customers, a well-known brand, deep industry know-how, preferential access to distribution channels, proprietary physical nordstrom case study harvard, and a robust patent portfolio.
But that value has steadily dissipated as the enemies of momentum have multiplied. Technological discontinuities, regulatory upheavals, geopolitical shocks, industry deverticalization and disintermediation, abrupt shifts in consumer tastes, and hordes of nontraditional competitors—these are just a few of the forces undermining the advantages of incumbency. In the past, executives had the luxury of assuming that business models were more or less immortal.
Nordstrom case study harvard always had to work to get better, of course, but they seldom had to get different—not at their core, not in their essence. For all these companies, and for yours, continued success no longer hinges on momentum. What are the odds that change, in all its guises, nordstrom case study harvard bring your company considerably more upside than downside? Confidence in the future of your business—or of any business—depends on the extent to which it has mastered three essential forms of innovation.
Whether newcomer or old timer, a company needs an unconventional strategy to produce unconventional financial returns. Industry revolution is creative destruction. It is innovation with respect to industry rules. Newcomers have one important advantage over incumbents—a clean slate. To reinvent its industry, an incumbent must first reinvent itself. Strategic renewal is creative reconstruction.
It usually takes a performance crisis to prompt the work of renewal, nordstrom case study harvard. Rather than go from success to success, most companies go from success to failure and then, nordstrom case study harvard, after a long, hard climb, back to success. Resilience refers to a capacity for continuous reconstruction. It requires innovation with respect to those organizational values, processes, and behaviors that systematically favor perpetuation over innovation.
Strategic resilience is not about responding to a onetime crisis. Successful companies, particularly nordstrom case study harvard that have enjoyed a relatively benign environment, find it extraordinarily difficult to reinvent their business models. When confronted by paradigm-busting turbulence, they often experience a deep and prolonged reversal of fortune.
Consider IBM. Such a protracted earnings slump typically provokes a leadership change, and in many cases the new CEO—be it Gerstner at IBM or Ghosn at Nissan or Bravo at Burberry—produces a successful, if wrenching, turnaround.
A turnaround is transformation tragically delayed. Imagine a ratio where the numerator measures the magnitude and frequency of strategic transformation and the denominator reflects the time, expense, and emotional energy required to effect that transformation.
Any company that hopes to stay relevant in a topsy-turvy world has no choice but to grow the numerator. The real trick is to steadily reduce the denominator at the same time. Instead, it must begin with an aspiration: zero trauma. The goal is a strategy that is forever morphing, forever conforming itself to emerging opportunities and incipient trends.
The goal is an organization that is nordstrom case study harvard making its future rather than defending its past. The goal is a company where revolutionary change happens in lightning-quick, evolutionary steps—with no calamitous surprises, no convulsive reorganizations, no colossal write-offs, and no indiscriminate, across-the-board layoffs. In a truly resilient organization, there is plenty of excitement, but there is no trauma.
Sound impossible? But today we live in a world where Six Sigma, 3. Defects cost money, but so do outdated strategies, missed opportunities, and belated restructuring programs. But no law says they must remain so. It is precisely because resilience is such a valuable goal that we must commit ourselves to making it an attainable one. In this view, competition acts as a spur to perpetual revitalization.
A company that fails to adjust to its changing environment soon loses its relevance, its customers, and, ultimately, the support of its stakeholders. This view of the resilience problem has the virtue of being conceptually simple. It is also simpleminded. While competition, new entrants, takeovers, and bankruptcies are effective as purgatives for managerial incompetence, these forces cannot be relied on to address the resilience problem efficiently and completely.
There are several reasons why. Second, competition, acquisitions, and bankruptcies are relatively crude mechanisms for reallocating resources from poorly managed companies to well-managed ones. When a firm fails, much of its accumulated intellectual capital disintegrates as teams disperse. It often takes months or years for labor markets to redeploy displaced human assets. Takeovers are a more efficient reallocation mechanism, yet they, too, are a poor substitute for organizational resilience.
Executives in underperforming companies, eager to protect their privileges and prerogatives, will typically resist the idea of a takeover until all other survival options have been exhausted. Even then, they are likely to significantly underestimate the extent of institutional decay—a misjudgment that is often shared by the acquiring company.
And what about competition, the endless warfare between large and small, nordstrom case study harvard, old and young? Some believe that as long as a society is capable of creating new organizations, it nordstrom case study harvard afford to be unconcerned about the resilience of old institutions.
In this ecological view of resilience, nordstrom case study harvard population of start-ups constitutes a portfolio of experiments, most of which will fail but a few of which will turn into successful businesses.
In this view, institutions are essentially disposable.
HBR Case Study: Competing Against Bling
, time: 4:30Stress-Test Your Strategy: The 7 Questions to Ask
In a turbulent age, the only dependable advantage is a superior capacity for reinventing your business model before circumstances force you to. Achieving such strategic resilience isn’t easy Summary. Drawing on some 25 years of research, Harvard Business School professor Robert Simons identifies seven questions all executives should ask in order to ensure their strategies’ success We offer assignments help in any of the following formatting styles APA, MLA, Chicago, or Harvard in over 80 disciplines and all levels of study. We help with high school, college and university assignments at a fair price submitting high-quality papers
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