Chief Operating Officer for Castellan Solutionsthe largest provider of resilience management solutions.
If you ask a business leader whether innovation is a good thing, he will most likely say yes. However, the key to introducing value through innovation is to consider the resilience of your business and avoid unacceptable risks. Being resilient means focusing on avoiding disruptions to your productivity where possible, establishing fast-acting recovery strategies and responding effectively to any crisis situation. What does balancing product, service or even business innovation with resilience mean to you? An answer may not occur to you at first, especially if rapid innovation is a core element of your business strategy.
The #1 objective of an organization’s leadership team is to deliver products or services that are appropriately tailored to the needs of their customers. Leaders recognize that what is needed now for optimal delivery of products or services may change in the future – hence the need for innovation. However, a focus on innovation without regard to resilience can lead to problems such as supplier single points of failure, unsustainable practices or communication difficulties. The pandemic and geopolitical tensions have taught countless organizations this painful lesson.
Here is a simple example of a case study. Company X identified a way to save 14% on production costs and extend the life of its product by 21% by introducing a new raw material substitute. However, there are only two sources of this resource, and both come from countries affected by international sanctions. What should leadership do and what would the customer think? Perhaps continuing with the innovation makes sense, or the risk is too great. Being intentional from a resilience management perspective is essential to make the best decision.
Determine the single failure points
Addressing single points of failure is an essential step in balancing innovation opportunities with resilience. It is important to determine your organization’s alternatives to inputs, suppliers and geographic sources if a crisis or disruption occurs with your primary source. Knowing who to rely on when a quick switch is needed gives you and your team peace of mind and minimal delays. Not only do you need to know your replacement, but your organization must consider substitution all the way back into the research and development process to ensure innovation is resilient.
Research and development and product management organizations need to innovate in a sustainable way. Sustainability refers to three main points here: when more than one organization provides the input (ie the raw material used for the product or service); when there is more than one location providing that input; and when the organization, location, or both is stable, both in terms of controls and from a geopolitical standpoint. Failure to innovate sustainably can lead to unnecessary failure, disruption, higher costs and ultimately a poor customer experience.
A common innovation error involves communication between key team members. Business continuity and resilience professionals often do not collaborate with an organization’s research and development and product management teams. This lack of engagement can be directly related to unbalanced financial optimization and customer experience. Instead, work on incorporating resilience as far back into the product or service development process as necessary.
Key to resilient innovation
The key to balancing innovation and resilience is to approach it in a way that includes a fallback plan that allows your organization to return to pre-innovation practices; consider sustainable suppliers and sources when selecting the input for your products or services; and willingness to rely on your substitutes as acceptable sources when your primary source is unavailable.
To effectively transform your organization with this knowledge in hand, there are two actions to steer you in the right direction. First, go back and address some points of failure and vulnerabilities. Prioritize them based on the issues and exposures associated with the organization’s key products and services. Then make it future-proof by considering resilience at an early stage when applying innovation to improve the capacity of products or services.
So go ahead and double down on innovation and focus on opportunities for competitive differentiation. Let your organization evolve and improve, but be intentional and apply resilience concepts as early as the research and development process. The key is balance and sustainability, taking into account the complex nature and fragility of global supply chains.