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strategy and business
 / Spring 2006 / Issue 42(originally published by Booz & Company)


Yossi Sheffi: The Thought Leader Interview

The reason the system works so well is that there’s no approval process. Those designers do it basically on their own. Sure, they make mistakes, but the system is so fast that it’s clear very quickly what the mistake was, and three weeks later it gets corrected.

S+B: I imagine it makes a difference in the attitudes of people who work there.
In resilient companies, you always find passion for the work. In the book, I quote an executive from Southwest Airlines who said, “We’re trying to take the bricklayer and convince him or her that they are building a cathedral.” Navy seamen don’t think about their job as driving big ships. They think about the job as defending freedom. Dell refers to the attitude of its employees as the “see the hill, take the hill” mentality. If there’s a challenge, attack it. Don’t ask for permission. Just do it.

Passion starts with understanding the mission of the entire company, being part of the mission, and buying in on it. You understand the greater goals of the company, and you care. If there’s a danger to the organization, you’ll go out of your way to help.

Instilling this level of passion requires obsessively communicating what the company is about, what’s going on, and what challenges it faces. UPS, for example, broadcasts all its weekly management meetings to the entire company.

The simple fact is that resilience grows out of communication, passion, flexibility, and agility, and they are all tied together. A very good company is naturally a resilient company, because a very good company is flexible and can respond to the marketplace. A very good company will have all its functions and people aligned with its mission, with its vision.

For the best examples, look for companies that operate in very uncertain markets — consumer electronics, high technology, fashion, and service organizations. In consumer electronics and high tech, the rate of change of the product is so fast that the uncertainty in terms of demand is huge. You have to design a responsive supply chain to fulfill the market demands yet not get stuck with surplus inventories. The fashion industry is another example; it changes with the whims of teenagers in unpredictable ways, forcing companies to adapt quickly. These companies find it relatively easy to build in flexibility for disruption recovery because, at the core, a supply disruption and a demand spike are not all that different. In each case there is not enough supply to meet the demand.

Service companies like UPS, FedEx, and American Airlines are also models of resilience. They cannot accumulate an inventory of their product, so a disruption means lost sales without a chance to recover by selling the product later. In addition, many service companies’ operations are affected by weather, road construction, crime, and other environmental phenomena, giving them continuous drills in disaster recovery. Many of the best practices for building flexibility and the ability to recover quickly from disruptions were developed by service companies.

S+B: What about companies outside those industries?
Companies that don’t have a lot of practice in this, like manufacturing companies, can insert uncertainty into their operation. Intel, for example, will do a Red Team exercise. They’ll come to a plant and tell the plant manager: “You know this part that comes from your number-one supplier? Well, that supplier just had a fire, and now that supplier is gone. What do you do now? How do you recover?”

The difference between having a business continuity plan and this process is huge. Think about the fire drills you had when you were in school. Nobody gave you a little piece of paper and said, “In case of fire, do that.” They said, “OK, there’s a fire, and everybody go outside.” You actually conduct the exercise, you get to understand what to do, and you see if there are problems with the plan before it’s too late.

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