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The Path for Resiliency
Czechoslovakia’s Velvet Revolution transformed Skoda into an investor magnet, but will industries in the agitated Middle East emulate the automaker’s path?
May 1, 2011 3:55 by p.deleon
In 1989 Skoda Auto Works in Bratislava was a sleepy, government-owned enterprise producing cars with a reputation for poor quality that wasn’t that different from Czechoslovakia’s reputation in general. But in November of that year, the Velvet Revolution took place in Prague, and then in Bratislava, and everything changed. Suddenly industries in the country had the ability – and necessity –to compete globally, but they had to clean the rust off of their factories and transform themselves at a rapid pace.
Twenty years later, Skoda has not just survived, but is becoming a global brand. It consistently ranks at the top of the JD Power & Associates consumer survey, and there is a waiting list to purchase their cars in the UK. They have leveraged their ability to operate in challenging environments by successfully opening factories in Sarajevo and the Indian state of Maharashtra.
How did Skoda adapt so effectively? The walls that tumbled down not only allowed them to compete globally, but allowed global competitors into their core market – they could have easily folded under the pressure. What Skoda developed, very quickly, was something called resiliency. That resiliency is the single most important lesson that Skoda, and many others like it, can offer to companies operating today in Egypt, Libya, Tunisia and other locations experiencing seismic change. At its core, resiliency is the ability of a company to cope in the face of adversity and uncertainty, and even find ways to use that adversity to propel itself to greater success, while others shy away. We have found that truly resilient companies share five common factors:
They communicate constantly and obsessively. In times of change, everyone cares about what is happening with the company. Employees, customers and the capital markets want to know that the company is able to deal with the changes it is facing, and silence always communicates the opposite, regardless of where the truth lies. Carefully crafted messages, delivered on a regular basis, are the single biggest confidence builder for all of these stakeholders. Skoda went to the extreme in the early 2000s with a marketing campaign based loosely around the theme of “it looks so good and drives so well – it can’t be a Skoda.” Companies with operations in Egypt, Libya, or Tunisia need to assure stakeholders that they are actively managing their response to events and are available to address questions or concerns – this sends a message of confidence.
They build quick response mechanisms. As many retailers know tastes and popularity of products can change overnight in unpredictable ways, and they must therefore be able to respond to a catastrophic drop in demand – or an unpredictable surge – in efficient ways. This same thinking, at a more profound level, must be applied to the response to geopolitical events like those happening in Egypt, Libya, and Tunisia, and elsewhere in the Middle East. Rather than try to predict such events, companies are better off having a crisis response team in place, along with processes and protocols that assure quick and careful decisions are made to respond to and capture the opportunities, while avoiding disaster.
Libya’s outbreak of violence requires a different response than Egypt’s prolonged protests did; being prepared to quickly take in critical information and respond appropriately can mean a dramatic difference in revenue, continuity of business operations, and life safety.
They secure dependable access to capital. Preparation and communication are critical, but they will not succeed if the company cannot afford to respond. Skoda, for example, attracted a 30 percent investment from Volkswagen within a year after the Velvet Revolution, and Volkswagen has continued to deepen its investment, allowing Skoda to expand rapidly and build a strong global franchise. Resilient companies in Egypt should be seeking access to capital as the political situation calms, so they can be ready to drive demand in a new economy.
They create redundancy in all essential systems. When the Internet went down in Egypt at the beginning of the Tahrir Square demonstrations, any company with servers based wholly within the country saw their IT infrastructure come to a grinding halt at exactly the point when employees could not get to work and communicate directly. The same goes for any company who has critical components of its supply chain being sourced in Libya, and has no “plan B”. Part of the “crisis plan” for every company needs to be making sure that anything that is essential to operations – IT, key supply chain components, access to air travel, access to telephone communications – is assured during disruptions; resilient companies build what the IT world calls “failover” capability.
They spread risk geographically. Because most geopolitical events and natural disasters have defined geographical limits, companies that are able to better weather these risks are the ones that have backup and recovery plans in place that take their geographic constrains into consideration. For example, Microsoft shifted call center operations to a different geography when they could no longer provide service from Egypt due to the riots that started in January. Royal Dutch Shell evacuated expatriates from Libya and activated business continuity plans in mid-February, amid outbreaks of violence. Similarly, after Japan’s 1995 Kobe earthquake, the Daiei department stores sent helicopters, trucks and ferryboats in a massive re-supply operation to keep business flowing despite local supply chain breakages.
In summary, resilient companies – those who survive and become part of the backbone of the new economy in places like Slovakia or Tunisia – do so because they have prepared themselves to act differently during the crisis. When organizations that must function at a higher level in crisis such as CNN or Al-Jazeera go into “breaking news mode,” decisions that usually require multiple memos and approval at weekly management meetings can be made in a matter of minutes. Like these news organizations, every company that may face such disruptions (and who would say that was not a possibility?) should be doing the careful planning now, so that they will be ready for the next crisis.
The unrest in the Middle East and North Africa is only the latest example of why companies should increase their resiliency. While these countries present operating risks, they have tremendous potential as robust Middle Eastern markets. Those companies that choose to consider events like Egypt, Libya, or Tunisia’s revolutions “once in a lifetime” would be well served to consider the cost of resiliency against the cost of surprise.
An old proverb defines “luck” as the moment when preparation meets opportunity. That’s not luck, we would argue –that’s resiliency.
Gary Ransom is Vice President of PRTM for Middle East and Africa. PRTM is a US-based management consultancy firm.
This article first appeared in TRENDS