Updated: May 21, 2020
"If one virus can wipe out the entire economy in a matter of weeks and shut down societies, then that is proof that our societies are not very resilient" (Greta Thunberg)
In the unfolding Covid-19 crisis we are hearing much about the need for resilience in our businesses, organisations and wider society. But what does that actually mean?
In nature, resilience is a necessary condition of successful ecosystems. It underpins healthy, sustainable growth, and builds the robustness to survive unexpected shocks. But this resilience is rooted in biodiversity and redundancy, positive inefficiencies seemingly at odds with our short-termist, market-driven financial system, where inefficiency is a cost to be removed.
As we collectively regroup, look to the future and ask if there's a better way, we need to learn the lessons of the natural world. It could be that those very qualities our economic theories and financial markets see as an unnecessary drain on profitability are essential if we are to survive and thrive in the ‘new normal’ where uncertainty and unpredictability are ever more common.
The science of resilience was born out of the intersection of ecology and chaos theory in the early 70s, and the study of complex adaptive systems in nature. Now more widely applied to any complex system, it defines resilience as...
“the capacity...to absorb disturbance and reorganize so as to retain essentially the same function, structure, and…identity”
Such resilience does not mean standing still: ecosystems evolve in the face of change. But what resilience provides is protection against damaging, irrevocable decline. And it's something sorely missing in the world we now live in.
We like to think our world is simple. Linear. Predictable. Easy to model. Easy to manage. And such predictability is the basis of everything from classic economic theory to modern industrial practice. Unfortunately, no matter how ‘true’ this might seem, it is nothing but a comforting myth as the daily news cycle in the time of corona demonstrates.
The complex adaptive systems that make up our world (natural, social and financial) are not this straightforward. Or predictable. Or manageable. Instead they exist in equilibrium between often fundamentally different states; a finely balanced knife-edge where state-shifts can be as instant as they are unexpected. Usually triggered by apparently inconsequential factors we hadn’t ever considered or unavoidably significant events we couldn’t see coming.
Imagine a lake. It exists in a 'positive' stable state: clear, fresh and full of life. A state people assume will continue 'forever' (it seems predictable after all). Then a binary shift happens. Overnight and for no apparent reason. Now there’s a stagnant, algae-swamped mire…a 'negative' stable state that seems as intractable as the previous positive one. Which is no hypothetical example – this is something that happens all too often.
When you look below the surface the causes become clear…retrospectively at least. More often than not, such shifts are due to a slow, imperceptible build up of nitrogen-based fertiliser, washed from surrounding fields, changing the lake’s ecosystem until a tipping point is reached from which there's no turning back. For a complex ecosystem to remain in ‘positive’ equilibrium, it needs resilience to protect against both this unseen erosion of structural integrity and the bludgeon of unexpected events.
So what makes systems resilient in this way? The Stockholm Resilience Centre (part of Stockholm University) has identified seven principles...
The first of these, and consistently identified as the key to resilient ecosystems, is diversity and the functional redundancy it provides...
"Systems with many different components are generally more resilient than systems with few components. Functional redundancy, or the presence of multiple components that can perform the same function, can provide ‘insurance’ within a system by allowing some components to compensate for the loss or failure of others. In short, redundancy is embodied in the saying 'don’t put all your eggs in one basket'. Redundancy is even more valuable if the components providing it also react differently to change and disturbance. This is what we call response diversity: differences in the size or scale of the components performing a particular function give them different strengths and weaknesses, so that a particular disturbance is unlikely to present the same risk to all components at once"
Which presents us with a conundrum. Because the biodiversity so important in nature is essentially inefficient. And as all good business text books will tell you, inefficiency is bad. It compromises 'effectiveness' (as defined by the profitability of the organisation). After all, how many different butterflies and bees can you possibly need?
But it is these ‘unnecessary’ inefficiencies and redundancies in an ecosystem which allow them to survive shocks, absorb disturbance and resist shifts to a negative equilibrium state. To actually remain effective. Something we are realising to our cost currently as we state-shift from an equilibrium of business-as-usual free movement to the new normal of lockdown. In confusing efficiency for effectiveness we have undermined resilience at a societal and organisational level, with all the negative consequences this brings.
When times are good this isn’t a problem. The lake remains crystal clear. Efficiency is the icing on the cake, adding some profit increments on top. Then shit happens. And with no redundancy to act as buffer, efficiency becomes the enemy, the straw on the proverbial camel. The system breaks. The algae blooms.
As we sit here in the current crisis, many of the problems we face are the consequence of our efficiency fixations. Maybe not the existence of Covid-19 per se, but definitely our ability to cope with its fallout. Why have more ventilators than you need? Why have the most expensive protective gear? Why pay key workers enough that they feel valued? Because one day, when it really matters, that’ll be what makes a difference.
Or to take a positive example: how are Morrisons able to give £10m worth of much needed produce to food banks? Because, as the only UK supermarket to have its own manufacturing facilities, they are the country's largest fresh food producer. An ‘inefficiency’ (why not outsource and reduce your cost base?) that has allowed them to ramp up production by an extra hour every day to make, prepare and pack the essentials food banks need. A resilient grocery ecosystem that stretches beyond the boundaries of the business to benefit the wider communities that it operates in.
So what should we learn from this in our unpredictable, unstable times? After all, a broken global economy that went from an apparent eternal boom to a worryingly uncontrollable bust in 2008, or the unexpectedness and speed of the Covid-19 disruption, show all the hallmarks of a complex system that isn't resilient enough to stay in positive equilibrium.
Imagine society or businesses as a set of Jenga blocks. And that each block has a cost attached to it. With all 54 blocks in the tower, you have a positive ‘steady state’. Resilient too, as the inefficiency of redundant blocks make for a robust structure. Some of that redundancy is clearly unnecessary (a business can be too ‘obese’, too slow). The system would still be resilient with fewer blocks. But how much inefficiency to remove? Theory says as much as is possible: take out half the blocks (maybe more). Your tower stays the same height, but you’ve halved the cost and increased profits accordingly.
But the more blocks you remove the more you reduce system resilience. You are now vulnerable to a state-shift and system failure. Whether inherent weaknesses (you built on an imperceptible slope) or black swans (the vibration of a slamming door), you are a hair’s breadth away from a new steady state equilibrium: a pile of bricks on the table.
Now think of the parallels in ‘real world’ businesses (or society generally): removing ‘excessive’ (and costly) quality from your product, pursuing monoculture production or single source supply, under-valuing front-line staff, switching your call centre to India or relying on chatbots, cutting your marketing budget, preferencing ‘sales activation’ over ‘brand building’. Individually, these may be good business decisions that address inefficiencies and improve profitability. But each is the equivalent of removing blocks from your tower, reducing resilience and hastening potential system collapse as a consequence if you push efficiency too far.
Brand measures may hold steady. Usage data my look healthy. And there could be no discernible impact on sales (yet). So all seems well. But if resilience theory is correct, this means nothing. You could still wake tomorrow to find everything is in free fall. For no apparent reason . Now scale that up. Nationally, globally, with all the systems and structures that hold our societies together, and you have the situation we find ourselves in currently.
And the moral?
'Inefficiency' has long been public enemy no.1 in modern capitalist economies, the bottom line and financial markets dictating that we must reduce, outsource or cost-engineer ‘biodiversity’. Sometimes this is the right thing to do – being quick and flexible is clearly a good idea. But, as the lessons from nature show, we also need to accept that a blinkered, dogmatic pursuit of cost cutting efficiency-at-all-costs is not always the optimum approach for long term success.
Or the best way to weather the unexpected black swans of disaster that seem to be flying our way with ever greater, but no more predictable regularity. Because as the world gets increasingly complex, we need the positive inefficiencies of diversity, abundancy and redundancy that provide resilience to shock and disruption.
This will manifest in different ways for every brand, business, organisation and society at large. But how we build these positive, resilient ecosystems for the benefit of all, and at every level, is a conversation that we need to have.
Postscript: something that occurs to me after finishing this. Climate change is the next disruptor we will need to deal with. And its impact will be greater than Covid-19. So a recognition of the need for business resilience, and to protect your brand ecosystem would, I hope, have implications for how our businesses behave in the wider world; a mind-set change that leads us to recognise the need for similar positive resilience in the natural environments they operate in. Which can only be a good thing. So finish, the second half of the quote from Greta Thunberg that we opened with..."
...(Covid-19) also shows that once we are in an emergency we can act and we can change behaviour quickly"