Organizations grappling with uncertainties

Companies that are able to make their resilience efforts broader, more forward-looking, and bolder are most apt to outperform peers in the years ahead

The recent McKinsey Global Resilience Survey reveals striking insights about how disruptive trends are impacting advanced industries like automotive, aerospace, electronics, and semiconductors. Only 31% of senior executives feel fully prepared to handle future challenges. Let’s examine why and how companies can become more resilient.

Short-Term Pessimism, Long-Term Cautious Optimism

Leaders are pessimistic about near-term prospects due to slowing macro growth, supply chain issues, workforce shortages, geopolitics, and more. For example, Ford had to temporarily shutter plants this year amid semiconductor shortages. However, they see glimmers of hope in rising demand, breakthrough technologies, and shifting customer preferences. Toyota, for instance, sees strong long-term tailwinds as consumers embrace hybrid and autonomous vehicles.

Top Support, But Resilience Efforts Lagging

Around two-thirds of respondents say CEOs lead resilience efforts. Yet only 31% feel fully ready for disruptions. Most feel partially (44%) or underprepared (25%). Strong vision isn’t yet translating into organisational readiness. Samsung, for example, has spoken of bolstering resilience but continues to grapple with semiconductor demand volatility.

Narrow Focus and Overly Defensive Posture

In the near term, over 80% of companies prioritise bolstering financial and operational resilience. However, focusing excessively on crisis defence while neglecting other areas like branding, innovation, and ESG may limit long-term success. Leading resilient companies like Schneider Electric take a balanced approach across all business dimensions.

Going on Offense – The Hallmark of Resilience Leaders

The most resilient companies complement defence with bold offense – rapidlyresponding to crises with radical moves like changing business models, developing breakthrough products, or making acquisitions amid market turmoil. Energy and healthcare companies successfully pivoted their business mixes toward renewable energy and digital health through decisive capital reallocation. Vestas Wind Systems, for instance, made several offshore wind investments during the pandemic.

Building Lasting Resilience

Leaders recommend several best practices:

1. Set KPIs and rigorously measure progress across all dimensions, as Rockwell Automation does.
2. Hone future-scanning abilities to catch and respond quickly to change, like GM has done with EVs.
3. Communicate transparently on resilience plans with stakeholders, as Siemens does regularly.

Companies that are able to make their resilience efforts broader, more forward-looking, and bolder are most apt to outperform peers in the years ahead. Some of these are:

1. Diversification and Innovation in Response to Supply Chain Challenges

• Intel’s Semiconductor Expansion: In response to global semiconductor shortages, Intel announced significant investments in new chip manufacturing facilities in the United States and Europe. This move not only aims to mitigate supply chain risks but also positions Intel to meet the growing demand for semiconductors in various industries.
• Apple’s Supply Chain Diversification: Apple has been diversifying its supply chain, moving some of its production facilities out of China to countries like India and Vietnam. This strategy is designed to reduce geopolitical risks and reliance on a single region.

2. Adopting Sustainable and Future-Oriented Business Practices

• Amazon’s Climate Pledge: Amazon’s commitment to becoming net-zero carbon by 2040 demonstrates a proactive approach to environmental sustainability, a crucial aspect of long-term resilience. The company is investing in renewable energy and sustainable logistics solutions.
• Tata Motors’ Electric Vehicle (EV) Initiative: India’s Tata Motors is aggressively investing in electric vehicles, aligning with global trends towards sustainable transportation. This shift not only addresses environmental concerns but also positions the company to capitalise on the growing EV market.

3. Leveraging Technology for Operational Efficiency

• Reliance Industries’ Digital Transformation: India’s largest conglomerate, Reliance Industries, has been heavily investing in digital technologies to enhance its operational efficiency and customer engagement, particularly in its retail and telecommunications sectors.
• Siemens’ Focus on Digital Industries: Siemens has been expanding its digital industries segment, leveraging AI and IoT to offer smart manufacturing solutions. This strategic focus enhances operational resilience and addresses the growing demand for digitalisation in industry.

4. Strategic Partnerships and Collaborations

• Google and Airtel Partnership: Google’s investment in Bharti Airtel, one of India’s leading telecom providers, exemplifies strategic partnerships aimed at enhancing digital infrastructure resilience. This collaboration is set to boost Airtel’s network capabilities and expand its offerings in the digital services space.
• Jio Platforms’ Collaborations: Jio Platforms, part of Reliance Industries, has formed multiple partnerships with global tech giants like Facebook and Google to develop new digital solutions for the Indian market, enhancing its technological capabilities and market reach.

5. Investing in Human Capital and Workforce Development

• Infosys’ Reskilling Initiatives: Indian IT giant Infosys has been focusing on large-scale reskilling programs for its employees, preparing them for future technological shifts. This investment in human capital is crucial for maintaining a competitive edge in the rapidly evolving tech industry.

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