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The Business Resiliency Riddle
In a recent trip to Kolkata (India), I visited one of the local corner shops. The nearly 50 year old shop is now run by the son whose father opened it years ago. The shop seems to have stuck in a time warp- standing amidst the simmering, glittering new developments all around. When asked about how the business is faring, the old man said, “We have seen many lights come and go but you can see we are still continuing the same way. Products in the market have changed, perceptions about us have changed, our customers have changed. Some youngsters who always shopped candies on their way back from school might have opted away from us for some fashionable stores but still if they cannot find something in those stores they come back to us because they rely and remember us…”.
In times when corporates breaking consumer trust is a repeated phenomenon and debt laden companies getting into insolvencies is a common scenario, the old man’s view on business and its resiliency is intriguing.
By definition, resiliency in the business context is the ability of an organisation to quickly adapt to disruptions, changing business environment, demographic changes etc. while maintaining continuous business operations and safeguarding people, assets and overall brand equity. It interprets to healthy longevity of the businesses. Broadly, business resiliency is impacted by two key factors-
1) ‘Regular Maintenance’ - this helps the organisation to run on a day-to-day basis and acquire strength for any contingencies that may crop up in the future.
2) ‘Withstanding Contingencies’ – this is an organisation’s ability to withstand any unforeseen challenges that may hinder the business operations and to remain invincible.
Now, do these factors lead to chasing targets, endless pursuit of sales/profit and the subsequent vicious cycle? Does it add to the business resiliency riddle?
A 2004 study indicated the average life span of companies to be 12-15 years (Hewitt, 2004) – a life that is too short. Further to this, a recent study analysed the Fortune 500 firms of 1955 vs 2016. Ironically, there are only 60 companies (12%) that appear in both lists. Remaining companies from 1955 list have either gone bankrupt, have undergone merger/acquisition or have fallen from the list and are unrecognisable today (Perry, 2016).
On the other hand, another study by Tokyo Shoko Research Ltd (in Breitbart, 2009) presents a contrasting picture. Among nearly 2 million (1,975,620) firms in Japan 21,066 firms were founded more than a century ago and 8 firms founded more than 1,000 years ago, with Osaka-based construction company Kongo Gumi topping the list with 1,431 years of history (until its liquidation in January 2006). Regarding the reason for resiliency and longevity of Japanese firms, it has been argued that they focused on their core businesses by accumulating and developing unique skills and know-how, management based on the trust of stakeholders and conservative management (Ibid).
The essence of business resiliency is perhaps well explained by the quote by noted academics Paul L. Wachtel, “We are faced with having to learn again about interdependency and the need for rootedness after several centuries of having systematically—and proudly— dismantled our roots, ties, and traditions. We had grown so tall we thought we could afford to cut the roots that held us down, only to discover that the tallest trees need the most elaborate roots of all.”