Respond, recover, thrive with Deloitte’s crisis plan
Adaptability, preparedness, collaboration, responsibility and ethics are considered the five traits of a resilient leader in a report by Deloitte Insights which explores how companies can improve their response to a crisis.
“Resilient organisations rapidly and successfully cycle through three phases - Respond, Recover, Thrive - not just for COVID-19 but for every crisis,” says the new report, The journey of resilient leadership, Building organisational resilience.
"While promising results from vaccine trials - perceived by global CEOs as the highest priority on the path to recovery - encourage us to set our sights on a “better normal” progress has been more looping than linear,” says the author Punit Renjen of Deloitte Insights.
“Regardless of where each of our organisations is on the journey from Respond to Recover to Thrive, virtually every CEO I interact with agrees on one thing: The journey involves an ever-accelerating pace of change.
“Achieving a better normal is not just about having a better map; it’s about having the nimble team, resources, and systems that enable us to thrive before, during, and after change (especially adversity). It’s about having a resilient organisation.”
According to Deloitte’s report, resilience is not a destination; it is a way of being.
“A resilient organisation is not one that is simply able to return to where it left off before the crisis. Rather, the truly resilient organisation is one that has transformed, having built the attitudes, beliefs, agility, and structures into its DNA that enable it to not just recover to where it was, but vault forward - quickly.”
Deloitte also points out it is about having an inspiring leader who possesses the five traits that can connect all aspects of an organisation. “Resilient leaders know that responding to disruption with agility is about more than survival. It’s about uncovering value,” comments Renjen.
“Discontinuities create obstacles, but also open new paths for discoveries and value creation. Market structures, business models, ecosystem relationships, and customer needs are dramatically reshaped, and the winners script the future. The same has been true during the COVID-19 market disruption.”
According to Deloitte the key actions on the road to a resilient organisation are the following:
- Beliefs: Explore and leverage opportunities on the trail of the pandemic
- Attitudes: Lead your team through the mindset shifts to navigate a path to resiliency
- Agility: Embrace collective agility by convening stakeholders to codesign the answers to company-critical challenges
- Structures: Ensure C-suite members are accountable for the seven key elements of a resilient organisation
“The situation pivots from a tenuous interim normal to actively pursuing a better normal. Leaders must therefore chart their organisation’s strategic destination as it emerges into Thrive, said Deloitte.
A Fortune/Deloitte CEO survey signalled key elements of that better normal: 96% of CEOs said that diversity, equity, and inclusion are strategic priorities, and 78% expect a consistent focus on sustainability and carbon reduction.
“The leadership attitude shifts from reinventing ways of doing business in the interim to a pioneering ethos, one in which you focus on inspiring and empowering the team to follow you.
“During the Recover phase, the focus shifted from internal to market-facing. Now, however, we shift to market-making,” says the report. A total of 74% of the CEOs in the survey expect the crisis to create significant new market-making opportunities
Collective agility to thrive
According to the report, today’s leaders can build resiliency by convening the full ecosystem to collaborate and define the journey together – known as collective agility.
“As my colleagues have seen in their work with various client organisations, the accelerated delivery of viable vaccines demonstrates this type of collective agility across a whole system of stakeholders,” says Renjen.
Deloitte found that the vast majority of organisational needs cluster into one of seven categories:
- Resilient strategy -Define the transformation journey and ambition
- Resilient growth - Drive customer focus, product innovation and market/revenue growth
- Resilient operations - Transform and modernise operations
- Resilient technology - Accelerate digital transformation
- Resilient work - Transform the work, workforce and workplace
- Resilient capital - Optimise working capital, capital structure and business portfolio
- Resilient society - Steward environmental and social resources through trust, response, governance and measurement
“Each of these elements needs to be strong independently. Taken together, the seven elements operate within a cohesive, interdependent web that reinforces each of the parts and enhances the adaptability of the organisation,” comment Deloitte.
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.