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6 Types of Resilience Companies Need Today

Here is an excerpt from an article written by Paul Polman and  Andrew Winston for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

Credit:  Marie Emmerman/Skizzomat

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When severe storms hit in tropical climates, buildings may fall, but most palm trees survive. They bend but don’t break. They have resilience. Can your organization say the same?

In today’s volatile and uncertain world, companies will face many crises. Natural disasters destroy property and disrupt operations. A discovery of human rights abuses in a supply chain breaks consumer trust earned over years. A hostile takeover bid shakes a business to the core. New competitors and technologies upend the industry. A global pandemic changes everything.

One of us (Paul) ran the consumer products giant Unilever for a decade. With operations in 180 countries and brands that reach a couple billion people each day, Paul and his executives had front-row seats for every kind of crisis. They saw how our two big existential challenges, climate change and inequality, along with multipliers like rising transparency and pressure from stakeholders, create emergencies. These megatrends are accelerating, so the way companies respond can protect or destroy value quickly.

By tracing decisions Unilever made to create both traditional forms of resilience (financial flexibility, portfolio diversity, and organizational agility) and less-obvious forms (driven by purpose, trust, and stakeholders) that changed the company more deeply, we aim to show how leaders can best prepare for the world ahead.

The Building Blocks of Resilience

A company can’t thrive amid uncertainty without financial, portfolio, and organizational resilience. These are table stakes today — and essential preparation for sudden shocks and long-term crises.

Financial flexibility.

When Paul arrived at Unilever in 2009, the company was stagnant. Revenues were down, the stock had been flat for over a decade, and investment in the future of the company was limited. The business had very little financial resilience.

His team worked fast to begin the challenging work of getting the business moving again. This involved setting solid but achievable growth goals and ramping up investment in people, brands, R&D, and manufacturing to improve quality and stay competitive. Seven years later, revenue was up 33%, to $60 billion, and Unilever’s stock was performing better than that of its peers and the European FTSE index.

That foundation is important, since today’s biggest challenges are creating real financial pressure. At one point, the effects of climate change were costing Unilever more than $300 million per year. For example, droughts in Brazil reduced reservoir capacity, triggering water restrictions and preventing people from showering as frequently, which caused shampoo sales to shrink by 15%. Only companies with already healthy balance sheets can weather such storms.

Portfolio diversity.

At its most basic, having a diverse mix of products smooths out the ups and downs in any one business. If a cold spring reduces ice cream sales, for example, it’s good for soup to be in the portfolio. During Paul’s tenure, Unilever boosted its acquisition rate, buying into new, future-fit categories and bringing many purpose-driven brands into the mix.

As the world moves toward a net-zero economy, entire products and value chains in transportation, energy, buildings, and much more will vanish or change dramatically. Companies with a single set of products in a category — for example, those that make only parts for internal combustion engines — will not survive the coming transition. They will need a more diverse product line to stay competitive.

Organizational agility.

Paul’s early work at Unilever also included structural changes to build organizational resilience, since the global colossus was too decentralized into country and product fiefdoms. A reorganization around major product categories and a big reduction in management layers created a leaner, more agile, and more outward-looking company. Leaders could get faster feedback from markets about what was working and what needed more investment, and were able to identify possible problems before they became crises.

All companies, but especially those with long supply chains, will face continued pressure to justify how they and their partners operate and to understand the social, political, and economic dynamics their businesses are involved in. Human rights abuses or corruption will not stay hidden for long. Local disruptions can quickly have outsize consequences if left unaddressed. An organization set up for better information flow, one that empowers on-the-ground employees to notice and talk about looming problems, will be better prepared for (or able to avoid) surprises.

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Here is a direct link to the complete article.
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Paul Polman works to accelerate action by business to achieve the UN Global Goals, which he helped develop. He was the CEO of Unilever from 2009 to 2019 and has been described by the Financial Times as “a stand out CEO of the past decade.”
Andrew Winston is one of the world’s leading thinkers on sustainable business strategy. He is an adviser and speaker on how to build companies that profit by serving the world. His books include Green to GoldThe Big Pivot, and Net Positive.


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