Adaptive Resilience – Surviving COVID-19
The test of a system in a time of crisis is its capacity to survive in the face of extreme disturbance or disordered collapse. A system must maintain vital functions throughout the crisis. In human organizations, it is up to leadership, both assigned and assumed, to identify and prioritize what that means.
The extent to which our global economy at a macro level, and businesses at the micro level, are able to withstand the test of a pandemic is a question of resilience – the ability of the system to be able to respond and adapt to changing circumstances as they occur and ultimately recover so that sustainability can be achieved in the long-run. A key challenge is making sense of what is going on and providing perspective so that business leaders can successfully navigate a path to recovery.
The study of ecology serves as a useful metaphor to understand how natural systems move between phases of stability and disruption. Much as bushland goes through cycles of stabilization, destruction, growth and renewal (think our recent bushfires), so too does business. C. S. Holling draws on his field of study by using four phases – conservation, release, reorganization and exploitation – to describe the characteristics of a business life cycle (the Holling Cycle).
The Holling Cycle is based on the premise that the ability for a business to continue to grow requires periods of disruption and renewal, making all phases both necessary and unavoidable. In normal conditions these periods can occur frequently (once every year or so) or infrequently (every few decades) depending on the nature of the business and the industry it is in. A further study into the adaptive nature of natural systems (Fath et al, 2015) highlights the extent of resilience of a system is in its capacity to successfully navigate all stages of the cycle, and that the capability and resources needed to survive and thrive through each phase are those cultivated in earlier stages of the cycle. The cycle doesn’t end until the business ceases to exist.
In applying the model to the circumstances we find ourselves in through COVID-19, we can start to get a sense of both where we are in the cycle at a macro level; and what is required of individual businesses as we move through the current stage to recovery. It is in this that we can gain insight into those leadership attributes and business models that are most likely to withstand the current test of resilience, and what is needed in order to reorient and grow in the future.
Most businesses spend most of their time in a state of equilibrium, or Conservation. For many, this will have been the state immediately prior to COVID-19 restrictions. A business in the conservation phase is mature and exists in an environment where there are relatively low levels of uncertainty, aligning investments and processes to services in an increasingly efficient manner. It is characterised by tried and tested processes and routines.
Often there is deep organizational commitment to supply particular services to particular markets, leading to a reduction in resilience. The threat here is that the system has become so refined that there is limited room for innovation or the ability to self-organise in ways responsive to the conditions. There is often little in the way of excess resources that can be redeployed for new growth. Rather than being able to adapt, the system becomes rigid and brittle, making it increasingly vulnerable to disturbance.
The more refined the business, the more interdependent and the more at risk. Highly interdependent systems mean that a disruption in one area is likely to bring the whole system down, making it very difficult for the business to withstand the shock of the current pandemic. A concentration of influence (hierarchy) and low levels of diversity can compound the challenge for these organisations to adapt.
Leading through COVID
If your business is coming from a relatively steady state, and you are not an essential service, it is likely that you will need to re-organise to be able to adjust to changed conditions, even if only for the foreseeable future. If you are struggling to mobilise your organizational capability and resources, the chances are that your systems and ways have working have become so institutionalized that there is little capacity in the system to facilitate new habits and routines.
While you remain in business, it will be important to access above average levels of diversity in both function and relationships to enable the ability to adjust; along with capital reserves that serve as a buffer while the organization adapts.
Your people will have corporate knowledge of different models and systems from previous roles that work well in different conditions. All businesses can draw on the diverse capability held within their organization to survive provided leaders can facilitate the right environment to identify and unearth the required know-how quickly and effectively.
Interestingly, those businesses that have been competitively challenged in the lead up to the crisis may be more ‘match fit’ than those that have not. While capital reserves may be constrained in these organisations, they will have already built a level of resilience that will serve them well through the crisis, provided they can access sufficient stored resources to compete in the next phase.
In business-as-usual conditions, at some point, the business will necessarily experience a collapse or ‘release’ accompanied by rapid value reduction. This is unavoidable.
The Release Phase is clearly our current state. Usually a release is triggered for a business by a change in market conditions – a new product or competitor, a hostile take-over, a failure of leadership. What is unusual in our circumstance is that businesses worldwide are experiencing the effects of a collapse almost simultaneously and within in a very concentrated period, meaning that the economic system as a whole is at risk. At both the macro and micro level we can see that the previous interdependencies required to service the market effectively and efficiently have broken down and become liabilities not assets. The key concern here is survival – the ability to get through under extreme disturbance. The goal is to maintain sufficient reserves to be a player in the next phase.
Success through the crisis relies on the ability to improvise to maintain vital functions. Networks and relationships are key. Emergent leadership occurs, provided the leaders of the business are able to facilitate the necessary environment for this to occur. The ability to move away from prescribed roles and to tap into the reserves of talent that are required to learn and adapt is also vitally important during this phase.
Navigating through the crisis requires leaders to
- quarantine system failure by identifying high-risk areas early and mitigating the spread of collapse through organizational structure
- identify and maintain functions that provide minimum levels of utility such that survival can be assured
- facilitate cohesive leadership to navigate circumstances as they evolve
- communicate consistently and rapidly with regard to the organisation’s response
- facilitate the ability to improvise in order to respond to immediate needs
Quick yet robust decision-making is facilitated by close working teams with short feedback loops. The key cultural condition during a period of collapse is the seamless cooperation of leaders. Businesses can ill-afford to lose time as a result of power struggles. The challenges faced by the organisation should be shared with transparency. Information flows must be open, allowing for the rapid communication of issues to be fast-tracked to decision-makers for immediate action.
As this phase progresses, it is imperative for leaders to nurture and acquire the capability to improvise and to be creative. Charismatic leaders with the ability to be able to tell a strong story about the future of the company and alternate routes to achieve it will help to build an environment of hope, positivity and the will to succeed. Strong bonds within and among individual teams and the ability to ‘let go’ of previous structures and norms is also important, with an understanding that this is necessary for future growth and renewal. At this stage it is essential to identify who the core employees are and what assets are required for survival. Leaders must be open to alternate views and accept that these are exceptional circumstances, requiring new roles and new players beyond traditional hierarchies.
Leading through COVID
If you are still in business, now is the time to adapt and learn. If you have even the smallest chance to pivot, pivot. Hunt out new capability in your business in the form of improvisation skills and emergent leadership. Release these people from prescribed roles and task them with solving problems that enable the maintenance of those functions considered core and provide new routes to capital essential to your survival. Even if it is just one component of your business operations. The learning you will gain about yourself, your people and the capacity of your business to adapt will be the thing that will sustain you through the cycle of re-organisation and recovery.
Whether in weeks or months, as we move from survival to recovery we can expect to see existing assets and systems abandoned or sold, freeing up capital for re-investment. A number of new business models will be required to be tested through this phase. There will inevitably be a review of the capability required to lead through the challenges of this phase, which continue to feature high levels of innovation, uncertainty and instability.
This is all about successfully stewarding the business through collapse to the Reorganisation Phase, characterized by a rapid reconfiguration of the business environment. The name of the game here is test and learn – being able to facilitate lots of small activities in order to adapt. Success relies on the capacity for the organization to innovate through new business models. It relies on the ability to re-orient based on systemic memory in order to pursue pathways that provide access to capital in different ways. Fast, iterative proto-types and short feedback loops take primacy over perfection. Co-creation with customers and clients to meet specific needs through open innovation will become a model feature, requiring passionate individuals with room for experimentation and play.
The threat in this phase is a lack of sufficient systemic memory to be able to re-orient. Memory within a system is maintained where there is high modularity, preventing the risk of full system failure inherent in highly interdependent business models.
Leading through COVID
Consider that as the market recovers, the business must be configured in a way that is simple enough to scale quickly, with enough corporate recall and modularity to ensure self-sustainability. Observe patterns of consumer behaviour and have the courage to adopt new business models and ways of working that better respond to actual need now, so that the business has optionality when it is time to re-organise. Use this opportunity to re-deploy the skills and capabilities that give your business strategic competitive advantage and that will enable the ability to fast-track growth in a re-balanced market.
The final phase is the Exploitation Phase, or growth. The many small activities that characterize re-organisation are reduced to a few dominant models that prove most effective in building value. Diversity of experience in different business types increases the ability to identify opportunities and exploit them. Success in the growth phase is reliant on the capacity to grow, requiring the alignment of resources to a clear strategy. The threat is that the system cannot access enough resources to reach a state where it can self-generate without relying on external sources of capital. This phase is typically marked by abundant resources and entrepreneurial leadership, with innovation occurring out of abundancy rather than constraint, as in the Conservation Phase, given the extent of resources available for experimentation.
Having a clear strategy and commitment to a particular course of action with aligned investment is essential in this phase, often leading to the need to re-build organisational culture and ways of working.
Solutions should be simple with the capacity to scale and an ability to acquire customers through products and services that are perceived as high value. Acquiring capital to invest and to attract the right people, supported by the right partners and networks is important.
Leading through COVID
No matter how remote it may seem, there are opportunities to grow your business now and in the future. What is certain is that the models and ways of working in the past will not be those of our future. Those organisations that can seize this moment to experiment and adapt through different business models, thinking and action with a growth mindset will win out in the long-run. Understand the core capability of your business, where there are gaps, and work to fill those gaps while the market is in decline. Keep a firm eye on the growth potential of your organization as new market conditions emerge.
Now is the time to reinvent how your organization grows. www.growthops.com.au
By IECL Group Director – Gabrielle Schroder MBA FAICD
Holling, C. S. 1973. Resilience and stability of ecological systems. Annual Review of Ecology and Systematics 4:1-23. http://dx.doi.org/10.1146/10.1146/annurev.es.04.110173.000245
Holling, C. S. 1986. The resilience of terrestrial ecosystems: local surprise and global change. Pages 292-317 in W. C. Clarkand and R. E. Munn, editors. Sustainable development of the biosphere: interactions between the world economy and the global environment. Cambridge University Press, Cambridge, UK.
 Fath, B. D., C. A. Dean, and H. Katzmair. 2015. Navigating the adaptive cycle: an approach to managing the resilience of social systems. Ecology and Society 20(2): 24. http://dx.doi.org/10.5751/ES-07467-200224