Article two in our series on successful enterprise transformations. Article one discussing the importance of change capability as a key differentiator is available here.
The global economy is in a period of radical discontinuity. Businesses are facing unprecedented challenges, and the pace of change is accelerating simultaneously on multiple fronts: political, technological, environmental and fiscal domains are moving at pace in new and unpredictable ways. All these challenges demand more than just reactive strategies. Organisations must build strategic resilience to survive and thrive in this volatile business environment.
This is reflected in the findings of our 2024 CEO Outlook survey, in which 63% of UK CEOs said they felt under more pressure to ensure the long-term prosperity of their business. This means leaders and their organisations need to build their resilience by developing the ability to anticipate, prepare, respond and adapt to incremental change and sudden disruptions. Mastering this critical capability allows organisations to not only withstand shocks, but to adapt, thrive and capitalise on change.
To achieve this, leaders need to take a more dynamic and integrated approach to strategic planning. This should incorporate a range of realistic, medium-term (5-15 years) scenarios that the business could face in the future (as opposed to shorter term operational scenarios or more abstract alternative futures). Leaders need to consider the different types of risks and opportunities that could arise in each scenario, the potential implications on their business performance and the signals that would indicate that the scenario is materialising. Understanding this will enable leaders to think about how they could take action to ensure their business is better positioned to thrive in the new environment.
Moving away from firefighting mode to proactively developing and prioritising actions to unlock long term sustainable value in their organisation, whether through being more resilient to risks or more ready to exploit growth opportunities in an increasingly unpredictable world.
Understanding strategic resilience
The knowledge to best understand all components of an organisation’s strategic resilience will come from the people within an organisation. However, identifying, accessing and communicating the levers of strategic resilience is rarely straightforward. To unlock this knowledge, an organisation needs to undertake a structured and formal strategic resilience review. This should include a cross-section of informed employees from across the business to develop recommendations and decide how best to act on the findings, in consultation with senior leadership.
KPMG’s approach to strategic resilience reviews uses realistic strategic scenarios to help participants understand the tangible implications and not get lost in the theoretical.
The approach, which takes 8-10 weeks, helps businesses to:
- Develop strategic scenarios (facilitated by trained practitioners) to test certain planning parameters, using the strategic scenarios to underpin assumptions of resilience.
- Quantify estimated implications on order book (volume and price) and cost base. Thinking in kilometres, not millimetres – the review needs to avoid detailed nuances and focus on key themes and impacts that differ from the current assumptions built into business planning.
- Assess the risks and implications of the different scenarios across defined components of strategic resilience, thinking beyond business-as-usual responses to achieve the best outcomes for the business.
- Develop options for actions and mitigations that form a strategic action plan, prioritising the most critical actions (based on value and complexity) and agree how these actions will be implemented. In doing so, they need to make decisions based on what’s best for the business, not what’s best for individual business units or functions.
A strategic resilience review is not a one-off exercise. Monitoring and responding to changes is an ongoing process. It should form an integral part of the business strategy and the business planning process. The review could take the organisation in any number of directions, according to the specific risks and opportunities it faces, from defining a new risk management strategy all the way to an enterprise-wide transformation.
When determining these steps, leaders need to consider what actions the organisation should take to promote and prosper from its preferred future, deter but prepare for alternative positive futures, and prevent and prepare for negative potential futures.
The transition from scenario to action is the most important and hardest step of the strategic resilience review. This is why organisations need to follow a structured process to provide an evidence base for decision-making.
To understand more about how we can help you, please contact our Enterprise Transformation team.
