The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage

author: Yossi Sheffi, Center for Transportation and Logistics, Massachusetts Institute of Technology, MIT
published: July 18, 2011,   recorded: November 2005,   views: 4800

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Yossi Sheffi fires a shot across the bow of business owners who, even after 9/11 and Hurricane Katrina, still have not assessed their organizations’ vulnerability to catastrophe. Sheffi piles on examples of organizations that simply did not have the appropriate mechanisms in place when disaster struck or evolved undetected.

He describes cell-phone maker Ericsson’s sluggish response when a vital chip supplier suffered a fire that stopped production. Rival Nokia quickly sought other chip sources, so when Ericsson “woke up… it was too late,” says Sheffi – “the world-wide supply of chips was gone,” and Sony took over manufacturing Ericsson phones.

Vigilance helps firms anticipate and survive a crisis, says Sheffi. “An organization can be taught to know things faster,” he says, by deploying better detection methods, including statistical process control; and creating layers of defense, as in the airline industry. And corporations must also develop system-wide redundancy and agility, so they “can spring back into action” in case of a shake-up. For instance, says Sheffi, all Intel plants are identical, so people can move effortlessly into production elsewhere if one plant shuts down. Sheffi recalls that when a snowstorm paralyzed a UPS hub at the Louisville Airport, preventing local workers from driving to work, UPS flew other workers in from the rest of the system.

Companies must generate what Sheffi calls “a flexibility culture” in order to get through a disruption. He calls for continuous communications; empowering workers up and down the organization to take responsibility; and “conditioning” employees for dramatic change. In fact, he believes nimble corporations will not merely ride out a major storm, but will have increased opportunities to expand market share, since “an ability to respond quickly to disruption also allows for speed in responding to the market.”

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