Resilience-oriented strategic management
For some time now, managers have been faced with the challenge of having to overcome a number of externally caused crises at the same time. These include the coronavirus pandemic, geopolitical conflicts and supply chain problems. There are also crises resulting from political decisions and internal failings. Examples include high energy costs, a shortage of skilled workers and difficulties with digital transformation. This has led to the fourth development stage of resilience-oriented strategic management. In the following, you will learn about the principles and characteristics of such a Strategy 4.0.
In this blog post, I describe how the seemingly necessary resilience offensive in business and politics can succeed.
Mastering crises with resilience
The predominant theme at this year’s World Economic Forum in Davos was the ongoing geopolitical crisis, which is made up of many individual sources of conflict.1 In Germany, criticism of the government is increasing and, as in other countries, there is a crisis of confidence among parts of the population that is threatening democracy.2 In companies, there is growing skepticism about the stability of international relations and the competitiveness of our country. There are more insolvencies, less innovation and, in many sectors, a reduction in employment. 3
The question is therefore how organizations and the people who work there can cope with this new type of crisis situation. One promising approach is to improve resilience. The foundations for this have been laid in various disciplines.
Fundamentals in various disciplines
So far, there are hardly any role models for resilience-oriented strategic management. Economics is learning from psychology how organizations overcome setbacks. Resilience in people and social systems is understood as the ability to overcome crises and possibly even emerge stronger from them.
The foundations for resilience-oriented strategic management come from several scientific disciplines. Operational resilience management, for example, deals with the management of crises in supply chains.4 A separate ISO standard has been developed for business continuity planning. The coronavirus pandemic has led to a focus on the question of what characterizes resilient societies.5 Positive organizational psychology has provided important insights into the main factors of personal resilience.
Of these fundamentals summarized in the figure, personal resilience is of particular importance for a Strategy 4.0.
Main factors of personal resilience
In their PRISM model, the founder of positive psychology Martin Seligman and Gabriella Rosen Kellermann from the coaching platform BetterUp have identified five psychological forces that are crucial for satisfaction and well-being at work in the 21st century.6 These forces are
- P: Prospection
- R: Resilience
- I: Innovation and creativity
- S: Social support and
- M: Meaning and Mattering.
BetterUp has analyzed 150 psychological factors and identified those that have the greatest influence on people’s resilience.
A first resilience factor is emotion regulation. It describes the ability to deal flexibly and productively with negative emotions. The two-stage method, which distinguishes between conscious slowing down and cognitive reassessment, has proven effective.
Factor two is optimism. One way to be optimistic even in difficult situations is to adopt the „best possible self“ approach. This involves visualizing yourself in three years‘ time, for example, under the premise that everything will have gone well.
The third factor is mental agility, which helps you to develop realistic plans for the future when faced with problems. The aim is to keep several options open. This is the case, for example, if you don’t get on with your boss or are disappointed by the culture of your own company. The job market today offers many alternatives for qualified people.
Another factor is self-compassion. This refers to the ability to show yourself compassion in a difficult situation. A typical situation is a lack of sales success, where you should not be too hard on yourself and possibly ask a coach for support.
The important fifth resilience factor is self-efficacy in the sense of the conviction that one can be successful in a certain area. Closely linked to this is agency, i.e. the conviction that you can influence future events.
HR development has the task of training employees‘ PRISM strengths and resilience factors. Managers should work on their Well-being Intelligence and learn to increase their specific skills to improve the well-being of teams and organizations, even under difficult conditions. 7
The fourth development stage of resilience-oriented strategic management builds on these foundations.
Strategy 4.0 for overcoming polycrises
The focus of Strategy 4.0 is on overcoming polycrises. The French complexity researcher Edgar Morin coined the term „polycrisis“ back in the 1970s. It refers to the interaction of several crises that are difficult to predict. In 2023, the World Economic Forum (WEF) took up the topic. System analyses of interactions are presented in system maps. The transition from analysis to deriving measures is only just beginning. This is where strategic resilience comes in, which has now become a potential competitive advantage.
However, there are some myths about resilience, e.g.8
- Resilience is above all a supply chain issue, i.e. primarily an operational task,
- which mainly causes costs and contributes little to value enhancement.
Our experience from a number of resilience projects shows that the strategic importance of the topic of resilience is increasing. An important step here is systematic crisis analysis with a resilience portfolio.
Crisis analysis with a resilience portfolio
A crisis analysis begins with the identification of important crises in the past and present. In a resilience portfolio, the causes of these crises and approaches to overcoming them are examined. In terms of causes, the portfolio analysis distinguishes between internal failures, external triggers and the presence of both. Overcoming crises may have been unsuccessful, successful or even contributed to preparing for similar crises. This analysis supports a deeper understanding of the causes and an answer to the question of why the crisis has not yet been successfully overcome. One negative example is the digitalization crisis in the public sector, for which there is unfortunately still no solution in sight in Germany.
A challenging further task is the analysis of the connections between crises in organizations. For example, the digitalization crisis often interacts with the shortage of skilled workers. Such analyses can be used to derive strategic resilience programmes that organizations should launch together with their stakeholders.
Strategic resilience programs together with stakeholders
There are complex interactions between resilience-oriented strategic management and other social systems. An organization’s strategy is embedded in policy at international, national and regional level, which can have different degrees of resilience. There are close links between a resilience-oriented policy and a resilient financial market. The same applies to politics and society. In addition to the direct impact of strategic management, these external factors also influence the resilience of employees. The design of strategic resilience programs is therefore an extremely challenging task that requires expertise in dealing with complexity.
Companies can build on their experience in program management. This is a temporary management task consisting of the planning, management and controlling of related projects. Intersectoral programs are defined as cooperation between stakeholders from business, science, politics and society. Despite its current importance, this topic has been surprisingly little researched to date.
Strategic resilience programmes in organizations can be triggered by external factors or internal failings. Resilient managers and employees are an important success factor. Suitable forms of collaboration with stakeholders should provide positive reinforcement. The first step is to bundle important resilience initiatives. Agile performance management, e.g. with the Objectives and Key Result (OKR) method, has also proven its worth here. 9
Resilience offensive for smart meters and electromobility
One example is the resilience offensive for smart electricity meters launched by start-ups. When we published the book Smart Energy in 2011, I would not have thought it possible that the energy transition and the change to new, sustainable business models in Germany would take so long.10 In 2009, the European Union (EU) set the target of equipping eighty percent of consumers with smart meters by 2020. The German stakeholder ecosystem with its players from politics, authorities and established energy suppliers has fallen far short of this target.
The three start-ups Tibber, Octopus Energy and Rabbot Charge, which are actually competitors, are now launching a resilience offensive. Their aim is to use smart electricity meters to finally enable dynamic electricity tariffs and thus create a profitable digital business model. They are cooperating with an intermediary company that bundles customer inquiries.11 This example shows that individual players can regain the power to act even in a difficult situation if they take decisive action.
The situation with electromobility is even more disappointing. Back in 1994, following a project for a major car manufacturer, we published a book showing how the transition to a sustainable mobility system could succeed.12 However, it then took a very long time for Tesla to show the established providers how to implement a successful new business model with electromobility and digitalization. The German government wants to see 15 million electric cars on German roads by 2030. There are currently just under 1.5 million electric cars. Politicians, German car manufacturers and suppliers have clearly lost their way on the road to electromobility and now need a resilience offensive.13 What the offensive could look like in concrete terms is still largely unclear. What is certain is that the next shot must be a good one. This means that electric cars must become more affordable and more everyday-friendly. Hopes are therefore pinned on a new generation of electric mobility.14 At the same time, the political framework conditions should improve. Resilience is thus created from the inside out and from the outside in.
Countercurrent of inside-out and outside-in approaches
One lesson learned from successful programs is that overcoming resilience deficits must start from two sides:
- Personal resilience, the resilience of an organization and its partners (inside-out resilience) and
- the resilience of politics, the financial markets and society (outside-in resilience).
The interaction of forces acting from the inside out and from the outside in creates a powerful counter-current resilience that requires close cooperation between business and politics.
The German economic miracle after the end of the Second World War was the result of such a process. The difference to the creeping deindustrialization that is currently emerging is that our country was in ruins back then. This catastrophic situation mobilized enormous resilience forces. As with the example of the frog in a pot of water that is slowly heated and does not react, today we also seem unable to mobilize our collective forces.
This assessment of the situation has contributed to the realization that our companies urgently need the fifth development stage of unifying strategic management.15 The hope is that our country will emerge stronger from the polycrisis. Unfortunately, however, many people’s trust in our institutions has been shaken for some time. A key challenge in the transition from the fourth resilience-oriented stage to the fifth is to regain this trust. The dialog-based action discussed in my last blog post forms an important basis for this.16
Better management of complexity
The aim of resilience-oriented strategic management is to better manage complexity. In the five development stages of strategic management, there has been a paradigm shift from mechanistic to complexity management. This shift began in the early 1990s. The starting point was two findings, namely:17
- The realization that relatively mechanistic concepts, such as portfolio analysis, are not sufficient to achieve lasting strategic success and
- the application of evolutionary theories and the more recent complexity theories in business and politics.
For a long time, these findings have not been given the importance they deserve in management theory and practice.18 With the increasing importance of the topic of resilience, this could change.
Another form of management and political consulting plays an important role here. I would like to briefly outline such impact consulting with a positive effect.
Impact consulting with a positive effect
Over the past hundred years or more, two different consulting approaches have developed, largely separately from each other. One approach is classic management consulting, which can be business, technical, IT and legal-oriented. The focus here is on content. This is why it is referred to as specialist consulting. Examples of this are the topics of strategy, growth, M&A, cost reduction, business processes and restructuring. Not least due to the numerous scandals involving large consulting and auditing companies, criticism of their business models has increased. 19
The second consulting approach is organizational, management and personnel development. This approach is based on organizational psychology. It is rooted in action research, which emerged in the 1940s and was founded by Kurt Lewin, a psychology professor who emigrated from Germany to the USA.20 The focus here is on people in social systems. It is therefore referred to as behavioral consulting. Examples include the topics of learning organizations, change management and positive business coaching. Unfortunately, it is often difficult to gain access to top managers and politicians with these concepts, as the management levels usually have little training in organizational psychology. In view of the increasing importance of generative artificial intelligence (AI) in the job market, it can be assumed that further training programs will become increasingly important for a large number of employees.21
Impact consulting with a positive effect is a synthesis of these two approaches. This synthesis is more interdisciplinary in nature. It combines specialist consulting with behavioral consulting. The focus is on overcoming new, complex challenges. This is the positive effect of such a synthesis, as the impact of traditional management consulting on topics such as innovation, sustainability and resilience is often rather low or even negative. The reason for this is that many consultants ignore organizational psychological aspects.
An interesting AI-based tool for measuring the positive impact of executives has been developed by the University of Oxford together with communications consultancy Kekst CNC. This Executive Impact Score (EIS) analyzes the communication of executives and provides suggestions on how they can improve their explanation of innovative strategies, for example.22 The pace of speech and the right balance between information and emotion are important success factors. Another field of application is communication with different stakeholders, where credibility and authenticity are important.
In our accompanying research on impact consulting, which we have been practising for a long time, we are investigating how the EIS and other innovative concepts improve the impact of consulting and personnel development programs. This provides important impetus for the design of future career paths23 . It is already foreseeable today that the importance of the topic of resilience will continue to grow.
Increasing importance of resilience
One of the reasons for the increasing importance of resilience is that, despite the shortage of skilled workers, many companies are making massive job cuts, particularly in middle management. However, the qualification profile of the employees who become available often does not match the requirements in the areas that are looking for staff. Due to the rapid development of large language models such as ChatGPT, this trend is currently accelerating.24 The possible answer is systematic retraining, which is also publicly funded. However, such reskilling places considerable demands on the resilience of those affected.25
In addition to the resilience of individuals on the outside, the resilience of politics on the inside is becoming increasingly important. Large European companies are calling on the EU to improve the framework conditions for industry. A ten-point Industrial Deal is intended to supplement the Green Deal in order to preserve high-quality jobs. A key point is the correction of slowing regulations at EU level, which should be less contradictory and complex.26 It remains to be seen whether a new EU Commission will meet these demands.
Conclusion
- The numerous crises of recent years have led to the emergence of the fourth development stage of resilience-oriented strategic management
- One of the foundations for this Strategy 4.0 is provided by positive organizational psychology
- The improved resilience of people in social systems has now become an important strategic competitive advantage for organizations and countries
- Based on a crisis analysis, managers should improve their ability to implement strategic resilience programs together with relevant stakeholders. One challenge here is coping with complexity
- New forms of impact consulting combine specialist consulting with behavioral consulting and thus achieve a positive effect
Literature
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