Disruptions ranging from supply chain obstacles to product innovations have the potential to wipe companies off the map. At the very least, environmental forces that interrupt “business as usual” can reduce or cut off revenue streams. Think of industries where tech advances made operational models, such as brick-and-mortar video rental locations, nearly obsolete. The shifts to video streaming and digital photography and music are just a few examples of such disruptions.
Other threats, including pandemics, wars, and rising prices, demonstrate the necessity of developing business resiliency. Along with fostering resiliency is the need to swiftly adapt to changing market dynamics. While planning for some types of disruptions is nearly impossible, risk management strategies and agility frameworks are a must. This article explores some ways to manage threats from potential business disruptions.
Identify Internal Vulnerabilities
While disruptions often come from outside an organization, internal processes, technologies, and cultures can exacerbate the effects of threats. Internal vulnerabilities, such as overreliance on a few suppliers, might worsen supply chain delays. Similarly, continuing to depend on core business units without paying attention to developing market trends could spell disaster.
Companies are not limited to disruptions involving processes with external vendors or customers. A business’s data pipeline can easily become an internal source of interruption to normal operations. Data anomalies and bottlenecks are liabilities that can lead to downtime and outages.
AI-based technologies can help monitor and correct these issues before they become disruptive. Although some degree of human oversight is still necessary, leveraging automation’s capabilities removes many blind spots. Identifying potential failure points and weaknesses in procedures, applications, and mindsets reveals where a business can improve the pipeline and uncover opportunities to optimize performance. Examining vulnerabilities also uncovers opportunities to introduce increased flexibility.
Focus on the “Why”
What drives customers to buy specific products and services? The Jobs-to-be-Done framework indicates it’s not the product or service itself. Instead, the product or service helps clients accomplish a task like eliminating hunger pains. Task accomplishment is the “why” behind customers’ purchase behaviors and the reason companies are in business.
However, consumers’ motivations contain more than functional aspects. While people’s task may be to eliminate a growling stomach, they’ll choose different foods to do this. Customers’ attitudes and self-perceptions might prompt them to stick to organic oatmeal or a smoothie. Socioeconomic background and culture could make some people choose grits. Temporary circumstances like long commutes will drive others toward fast-food drive-thrus.
When business leaders concentrate on why customers make purchases, they can create cultures of innovation. Companies will be in a better position to prevent disruptions from new products and services that fulfill consumers’ needs in novel ways. When businesses focus on serving the why, they’re less likely to become overly dependent on product and service lines that may become irrelevant. Had video rental chains focused on why customers came in, they might not have been edged out by streaming services.
Bring Departments Together
Data silos within companies make it more challenging to predict and respond to disruptions. When departments don’t have access to the same information or exchange ideas, businesses become segmented. It’s almost like having several separate companies within a larger firm. The executive team might tell marketing to promote a new initiative. But if back-end departments like billing and customer service aren’t aware, the company won’t be ready for the launch.
Similarly, sales might be seeing emerging signs of customer dissatisfaction and unmet needs. If that information doesn’t flow to the C-suite and marketing, the organization may not make necessary changes quickly enough. Leaders will continue to implement the same decisions until it’s obvious something is wrong. By then, it may be too late to recover, and leadership might still base strategies on incomplete data.
Combining voices and perspectives from all functional areas breaks down and prevents data silos. It also stimulates creativity, builds trust, and increases adaptability. Bringing departments together can take the form of all-hands-on-deck meetings and software solutions that centralize information. But it’s also about building a collaborative culture that doesn’t penalize employees for speaking up. Acting on good ideas, rather than ignoring them, encourages staff contributions.
Prepare for Worst-Case Scenarios
Hypothetically, a wireless services company could encounter a worst-case scenario during simultaneous supply chain disruptions and government regulation changes. Without an adequate supply of smartphones, for example, the business loses cellular service and equipment sales. New laws that require the switching out of cell tower equipment lead to disruptions in the company’s internet service.
Customers with fixed wireless internet and cellular service could become upset and confused during temporary outages. Even though their phone service isn’t interrupted, clients may switch internet and cell service to competitors. Some employees might also become discouraged and start jumping ship. Meanwhile, the remaining staff will struggle to respond to multiple crises.
McKinsey & Company reports that an extended production-only shock can eliminate between 30% and 50% of one year’s gross earnings. Anticipating possible disruptions and developing buffers beforehand helps companies respond effectively to worst-case scenarios.
In the hypothetical situation with the wireless services company, paying attention to early signals might have led to better planning. News of chip shortages and manufacturers’ production bottlenecks could have prompted a pivot in customer acquisition and retention strategies. Phone promotions might have shifted to in-stock models, while customer outreach explained ongoing supply challenges. The company could also have emphasized the value of upgrading and using cellular service plans during internet disruptions. Such foresight and long-range thinking could have prevented reactions that threaten the company’s sustainability.
Predicting market disturbances and threats to business models isn’t an exact science. Sometimes leaders can prevent disruptions through intuitive interpretations of signals and data. Other times, taking measures to lessen negative impacts is the better strategy. Mitigating internal vulnerabilities, building resiliency and redundancies, and planning for crises can help companies head off — or at least weather — disruptions more effectively.
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