What Makes a Company Resilient?
Back in 2007, I started thinking about resilience. I'd just published a book about highly successful entrepreneurs and had been struck by the fact that, sooner or later, each one told me their 9/11 story. I hadn't asked for this—but any time the topic of values came up, this story showed how the company's values had stood up to the huge test that was 9/11. Resilience, I saw, wasn't about avoiding crises; it was all about how you met the challenge they represented.
So I went back and looked at the period between the tech bust in 2001 and the year 2004 when the U.S. emerged from recession. I was looking for outliers: the companies that, despite market volatility, terrorism, avian flu, SARS, war, and recession, had emerged stronger than ever. What, I wondered, could we learn from them? I thought the topic had the making of a great book.
So what did I learn?
1. There is nowhere to hide. Small businesses did exceptionally well when they were exceptionally honest with their employees. They did not try to 'tough it out' and they didn't even pretend to understand events they couldn't control. Exceptional leaders spelled out what was needed for survival and what the tradeoffs would have to be if targets weren't met.
2. The strength of a business is a function of its relationships. You can't do well if your suppliers go under. Successful companies reached out to key business partners, sometimes helping with longer term contracts or bigger orders than absolutely necessary. Looking after others was one way they looked after themselves.
3. External chaos demands internal brilliance. Confronted by global surprises month after month, outstanding CEOs took the opportunity to re-examine and alter fundamental numbers inside their business models. While the world around them seemed to fall apart, they changed their culture, their processes, and their reward structure to build loyalty and engagement. Instead of caring for people less, they lavished employees with professional development and training so that the entire company got smarter.
4. Ignore the noise. During this time, every quarter for three years, market analysts told Steve Jobs that Apple was doomed. The stock price fell, market share fell, the retail strategy was obviously idiotic and the iPod was too expensive. You have to read this commentary day after day to appreciate just how confident the market was that Apple was heading in the wrong direction. I'm less impressed by their strategy than by the discipline required to ignore people who think they understand your business.
5. Entrepreneurs thrive in recessions. Method Home Care was also launched just as the world appeared to be falling apart. What was in their favor? Talent was available. Manufacturers would give them a chance because order books weren't full. And consumers were eager for new products that bigger companies weren't creating. Method didn't have a lot of cash but it did have courage.
6. If you have cash, recessions are a great time to go shopping. Timken, a bearings and alloy steel manufacturer, used a buyers' market to acquire companies larger than themselves and to create business partnerships of a kind that boom times would never have allowed. They didn't lose their nerve but instead, as the CEO said, "planted in a glut."
7. Empathy counts. The companies that thrived during and after this period realized that they weren't alone in being stressed and afraid; they knew their customers were too. So they made cuts that were invisible and boosted the extras that made customers feel great. This might have looked extravagant; in fact, it was calculated to put customers first. Loyalty soared—and endured.
There was more, a lot more, much of which I've embedded in my own business and in my life. But in 2007, no one was interested in resilience—because they couldn't imagine that bad times would ever return. So the book never got commissioned and I never wrote it. Which taught me a few lessons too.
Margaret Heffernan is an entrepreneur and author. She has been chief executive of InfoMation Corporation, ZineZone Corporation, and iCAST Corporation. In 2014, she published her fourth book, A Bigger Prize: How We Can Do Better Than the Competition.