Building a Resilient Global Enterprise Inspired by Biology
“Biology can provide some inspiration. Biological systems, which have evolved the property of resilience on multiple timescales, offer valuable lessons on how to manage under extreme uncertainty. In our work with mathematical ecologist and National Medal of Science recipient Simon Levin of Princeton University, we have observed that resilient biological and social systems display six characteristics, all of which are directly applicable to business.
Redundancy. Duplication of elements (factories, stocks) may be inefficient but can provide a buffer against the unexpected. Functional redundancy offers a smarter route to the same end: if elements (plants) can be repurposed rapidly, then the costs of duplication are partially offset.
Heterogeneity. Different types of elements (contract types, factory types and locations) make it possible to react to unexpected change and avoid correlated responses across a system, which can lead to total system failure. Diversity is also the substrate for evolutionary learning and adaptation to new situations, which increases strategic optionality.
Modularity. Separate modules (subsidiaries, plants), loosely linked, can act like circuit breakers to help prevent the collapse of a system. With modularity, as with firebreaks in a forest, one portion can sustain damage while the integrity of the others is preserved. All else being equal, a highly uncertain situation favors a network of loosely linked parts rather than a centralized and tightly integrated system.
Adaptation. Rapid adjustment to new circumstances protects a system against the negative effects of change. In the case of simple change, planned responses (such as contingency plans) can mitigate disruption if the system is sufficiently flexible and agile. For complex change, when the right response may not be analytically knowable, an adaptive approach comprising experimentation, selection, and amplification of successful outcomes can be effective. Global businesses’ supply chains therefore need to evolve to match changing circumstances, rather than being rigidly designed a priori.
Prudence. While the future may not be foreseeable, downside scenarios can often be plausibly envisioned. The worst-case scenarios for taxes and trading regimes can be posited and used to stress test supply chain designs for economic viability. Current levels of uncertainty justify the investment in simulation models to permit such stress tests as well as the investment of management attention in scenarios and contingency plans.
Embeddedness. Most systems are embedded in larger systems. A company is usually part of a multi-company system that converts inputs into products for end customers. And those larger systems are embedded in economies and political systems. Reciprocity and mutual benefit between levels are essential for stability and continuity. The impact on partner supply chains and on employment and skill building in local economies is therefore an important long-term consideration. The articulation of social purpose and contribution is also essential at a time when corporate capitalism is under scrutiny. Several US manufacturers are experiencing directly the importance of these broader issues as they run into strong political pressure to restore domestic manufacturing jobs allegedly lost to offshoring and technology.