Enterprise Resilience Readings Summer 2021

Check out the new list on bestinenterpriseresilience.com of organizations that have been assessed as Best in Enterprise Resilience™

My summer 2021 favorite books include the cool novel Klara and the Sun by Kazuo Ishiguro for pleasure reading — definitely check it out because it goes many steps further about the implications of AI versus/with humanity than my How To Speak Machine book. It does it in a way that really draws you in, and makes you think about the post-pandemic future, digital transformation's impact, and good ole' human love.

On the "do my work better" reading list I've dug deeply into all the books by MIT Professor Yossi Sheffi. Professor Sheffi literally wrote the book on enterprise resilience in 2005 with his bestseller, The Resilient Enterpise: Overcoming Vulnerability for Competitive Advantage. I admit being ignorant back in 2005 about the whole science of resilience — for at the time I was deeply interested in figuring out The Laws of Simplicity, and I hadn't become aware of how dangerously complex the world had become. And yet at the same time I knew that there could be no simplicity without complexity (BTW that's the 5th Law of Simplicity). I'm thinking that perhaps if I had just left my building at MIT and walked just fifteen minutes to Professor Sheffi's building I may have gotten going with "The Laws of Complexity" instead. So instead of taking fifteen minutes back in 2005, I've taken fifteen years. Call me patient in getting to the really good stuff in life. #amiright?

Key Takeaways on Enterprise Resilience, Part 1

Sheffi's first book lays out a definition for vulnerability as addressing three questions:

1. "What can go wrong?"
2. "What is the likelihood of that happening?"
3. "What are the consequences if it happens?"

When these three questions can get answered, you're able to figure out:

1. There's A TON of things that can go wrong. It's scary to live on a hunk of rock with an ultra-hot molten center that's speeding around the sun at roughly 1,000 miles per hour.
2. Of the things that can go wrong, all of them are unlikely to impact you today. Just some of them may happen today (and tomorrow), and you want to know which ones.
3. If the thing that can go wrong happens, will you care? You want to know if the many "assets" that you manage (including your own human life asset) will be impacted.

"...the surface of the earth at the equator moves at a speed of 460 meters per second--or roughly 1,000 miles per hour. ... The earth is moving with respect to the CBR (Cosmic-microwave Background Radiation) at a speed of 390 kilometers per second." —SciAm

Assuming that a so-called "critical event" has happened, you then need to consider the three operating consequences:

1. "What should managers focus on?"
2. "What can be done to reduce the probability of a disruption?"
3. "What can be done to reduce the impact of a disruption?"

Sheffi makes a continuing point through all of his books about how we often try to be most fully prepared for the "most likely" and "most impactful" critical events. But the ones we want to be ready for are those that are "least likely" and "most impactful" — because it's where our maximum vulnerabilities lie.

Standard Operating Procedures ("SOPs") are how every organization at scale tries to prepare for impactful critical events of all kinds. Sheffi recommends five principles to exist in those processes:

1. Redundant: Be multi-layered and balanced so that you can be adaptive.
2. Organized: Your baseline activity needs to be separated from the threat.
3. Team-Oriented: Leverage partnerships and collaboration fully.
4. Enculturated: Everyone in your organization needs to be security-minded.
5. Practice: Drills at the foundations of your SOPs. "Drill, drill, and drill."

Towards the end of his first book, he lists 7 steps to reducing vulnerabilities:

1. Organize for action with readiness
2. Assess vulnerabilities beforehand
3. Reduce disruptions when possible
4. Collaborate to maximize security
5. Create redundancies across and in layers
6. Design for resilience for all supply chains
7. Invest in training and create the culture

Key Takeaways on Enterprise Resilience, Part 2

In his second book, Professor Sheffi lays out what had changed since 2005 by the year 2015:

• "More trade, more distance, longer lead times, more players" — the ability to containerize easily into the "intermodal container" format. By 2010, this universal form of transport resulted in embodying 60% of the world's seaborne trade by the year 2010. Sheffi points out that in 1999 the largest container ship could haul 8,700 TEUs (Twenty-foot Equivalent Units); whereas by 2013 the largest ship could carry 18,270 TEUs. In 2021, the HMM Algeciras is said to be the largest container ship with 23,964 TEUs; and in case you remember the ship that was stuck in the Suez Canal earlier this year, it could carry 20,388 TEUs.
• "More variety" — companies are selling more kinds of products, or more SKUs (Stock Keeping Units), in smaller lot sizes which means it's harder to predict demand with the dramatic increase in variables. You can experience this easily by walking into a supermarket in the United States and feel bombarded by the many choices available. To manage the supply/demand of so many items is a non-trivial task that isn't getting any simpler.
• "More technology, more complexity" — introducing new technologies into products means things like automobiles are less about mechanical machinery and more about being supercomputers on wheels. This opens the door for many new issues to arise that include dramatically broadening the kinds of suppliers that need to get sourced by a business — which in turn introduces new vulnerabilities that need to be accounted for.
• "Complex, broad, long, and ... vulnerable" — we experienced this firsthand with the shortage of toilet paper and other products within the United States. Everything has been hyper-optimized with global supply chains that connect a tiny store in your neighborhood to goods being created on the other side of the world in China. Because of a laser-beamed focus on achieve "efficiency" as a means to improve a business, we've in turn made supply chains much more brittle and unable to withstand any disruptive force.

My favorite part of how Sheffi's second book on resilience closes is the powerful advice:

"Be risk-versed. Not risk-averse."

It's all too easy to want to not take on risk. But the point of competing for advantage is your ability to manage risk — not to avoid it altogether.

Key Takeaways on Enterprise Resilience, Part 3

I had the rare opportunity to sit with Professor Sheffi recently to talk about his new book, The New (Ab)normal. So I figure that sometime, likely during the fall, I'll post about what he shared with me. Stay tuned! —JM

References

• "The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage." Yossi Sheffi. MIT Press, 2005.
• "The Power of Resilience: How the Best Companies Manage the Unexpected." Yossi Sheffi. MIT Press, 2015.
• "The New (Ab)normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19." Yossi Sheffi. Self-published, 2021.
• "Intermodal Container" via Wikipedia
• "How fast is the earth moving?" via SciAm