Feb 12

Resilience to face the future


Its origin comes from metallurgy. In engineering sciences, resilience is the ability of a material to withstand impulsive stresses and forces that are applied to it. The social sciences, in turn, have adopted the term resilience to describe the ability to face events positively, in particular the most traumatic ones, and to be able to rearrange your own life as a consequence of emerging difficulties. Resilience is therefore the right word for all of us.

Generations, from the post-war period till today, had never suffered and experienced such an economical and structural change like this, which is strongly challenging countries’ economies, businesses’ competitiveness and individual citizens’ lives. We are technically, and perhaps also psychologically, unprepared: past crises that periodically occurred in recent decades, lasted shortly and they depressed GDP at most of 2%. During each crisis, consumption suffered a setback but, as soon as the sentiment came back quiet and positive, it tended to regain previous levels. After the storm, the sky lit up and everything came back, more or less, as before. Today everything seems totally different compared to yesterday and we have to face the future with resilience. Resilient people are inclined to redesign themselves, to face the challenge, although difficult and almost cruel, predisposing themselves to change.

But what kind of changes and what can we do? Inspiration is further enhanced by the results of an interesting survey, concerning a large sample of firms. The research examined and compared their performance in the three years before and after the last three crises ( 80s, 90s and at the end of 2000). 17% of the analyzed companies did not survive the recession. They were acquired or, more dramatically, failed. Comparing this situation to a national system, this would mean going "default" and moving towards an inexorable and dramatic decline. This cannot and should not be our case.

Survived firms, in the vast majority (74%), failed to return to pre-crisis sales’ and profits’ levels. On the contrary, only a small number of firms (9% to be exact) managed to flourish again, achieving even better results than the slowdown. As a country's system, this model should be our ambition.

These "winning" companies, despite what many people might think, are not the ones that, more or better than others, were only able to reduce costs. Surprisingly, firms that  focused only on cost cutting, reduced to 21% their probability to realign to their rivals in the post-crisis period and to 26% the chance of being able to become a leading company. Then, what kind of companies managed to overcome the downturn that overwhelmed them? What kind of strategies did they adopt? Can these strategies be applied also to a country?

Companies that were able to manage the crisis are those that have combined costs reduction, in order to survive in the present, with the promotion of investments to grow in the future.

The solution may seem intuitive, but the combination of offensive and defensive strategies permitted,  with the highest probability (37%), not only to overcome difficult moments but also to remain competitive after the recession period.

Businesses and national systems, like people, tend to relieve pain and to improve wellness. However, these entities differ in how they achieve these results: some are more oriented to face challenges, others simply to prevent damages. Actually, even if it could appear as an unsolvable paradox, countries, like companies, must be able to combine a sharp cost reduction with the development of strategies for growing and innovating. Therefore they have to integrate a defensive approach with a more offensive one.

However, in successful companies, cost reduction was not linear or longitudinal but highly selective: they cut all unnecessary costs and they invested to improve operational efficiency. Only 23% of these companies reduced just the intellectual capital. Companies that reduce only staff, reduce to 11% the likelihood of recovery in the post-crisis phase. Staff’s morale and empowerment was higher in companies trying to improve operational efficiency compared to those who pursued the “cut for the cut”: this because staff is not only afraid about its professional projects, but it also feels the company's efforts to survive, so it participates with enthusiasm to change.

Moreover, these companies appeared strategically ambidextrous because they oriented to the development of new businesses, new opportunities and to the regeneration of value propositions for their customers, investing, more and better than rivals, in R&D and marketing. These companies respond to the challenge of the crisis, by regenerating their whole business model, redesigning how they manage all their activities.

By analogy, this orientation is the one that should also be pursued peremptorily to redesign a national system. To do so, a lot of resilience is necessary. For a country, resilience is the ability to really change. Discontinuity and change express uncertainty. Change is a word, surely not popular because it is fraught with doubts, it expresses the interruption of known things and the move away from familiar situations and contexts. The same kind of dejection is caused by the idea of discontinuity. For these reasons, countries, like businesses, are sometimes reluctant to change. It is necessary to destroy certain agreements with courage to change. Conventions are the things that we accept because they belong to our habits, customs and our familiar behaviors. Habits involve comfort, which in turn prevents change. The first step to prepare every firm, but also a country’s system, to a more radical step and to create a new vision for our future planning is the identification of convictions and orthodoxies. To start this journey, we need resilient people, able to face setbacks, by rearranging their lives and giving new impetus to their existences. This behavior can be exactly traced in the etymological meaning of the word resilience: it comes from the Latin resalio, which describes the act of getting back on a boat, capsized by the force of the waves, without surrender, despite the difficulties we will have to face.