Four Strategy Shifts Toward Building an ‘Antifragile’ Supply Chain
In a year that will undoubtedly go down as among the most disruptive in history, social distancing isn’t the only form of isolation supply-chain leaders have had to practice. In the face of a global pandemic, they have also had to break away from old ways of thinking and acting to make critical shifts to successfully navigate a new supply-chain era.
Despite many of these shifts already being in motion, challenges related to COVID-19 served to accelerate or solidify them. The ability to successfully produce the following four shifts is proving to be table stakes for companies to compete on a global playing field.
From building resilience to becoming “antifragile.” Though COVID-19-driven disruption has turned “resilience” into a business buzzword, what is much less talked about and understood is the concept of antifragility.
This concept was developed by Nassim Nicholas Taleb, Distinguished Professor of Risk Engineering at the New York University Tandon School of Engineering, and co-editor-in-chief of the academic journal Risk and Decision Analysis. Antifragility refers to the capacity of a system to not only resist disruption but to benefit from it.
Resiliency and antifragility differ fundamentally. An adaptive system withstands disruption in the face of volatile conditions and unknown variables. In contrast, an antifragile system does not adapt to these acute stressors but instead harnesses and transforms them to advance its capacity, performance, and output. In other words, adaptive systems adapt, but antifragile systems evolve. If the pandemic has taught leaders anything, it’s that a shift from building resilience to becoming antifragile is mission critical.
From innovating supply chains to innovating mental models. Of course, antifragile systems don’t create themselves; they must be innovated by the human beings who control them. Innovation begins with the recognition that solutions and the strategies for achieving them do not yet exist. Marshall Goldsmith’s maxim, “What got you here, won’t get you there,” is instructive. Or, as Albert Einstein famously said, “You can’t solve a problem using the same kind of thinking that created it.”
This means that leaders must not only innovate supply-chain systems but also innovate their mental models, which are essentially personal algorithms. Peter Senge, Senior Lecturer at the MIT Sloan School of Management, tells us that our mental models are “Deeply held internal images of how the world works that limit us to familiar ways of thinking and acting.” Familiar ways of thinking and acting quickly proved to be no match for navigating a global pandemic, highlighting the need for a shift from innovation as merely a design competency to a core leadership competency.
From forecasting market demand to real-time, rapid response. It’s one thing to forecast market demand; it’s another to accurately identify and strategically respond to emerging threats or market-based opportunities as they’re unfolding. For the latter, leaders must develop agile organizational structures while also deploying the latest digital technologies.
Artificial intelligence, blockchain and surface-mount technology platforms help leaders build supply-chain agility, reliability, and scalability by managing and “opportunizing” complexity and revealing the hidden order in chaos. These applications increase visibility and transparency, enabling leaders to rapidly reconfigure their supply chains and business operations to capitalize on dynamic demand.
Agile digital technologies can also help leaders make the shift from forecasting demand to actively influencing it. Leaders who operate from innovative mental models while leveraging digital technologies are better able to shape market trends. This, in turn, fast-tracks their company to the front of the line for gaining first-to-market advantage.
From outsourcing production to forming strategic partnerships. For more than two decades, companies have been offshoring production, with China-based manufacturing being the go-to for cost-effectiveness. But for companies in the business of security-sensitive or critical components, China is no longer an option, making the shift to alternative sourcing mandatory.
Leaders are faced with the challenge of forming strategic partnerships with suppliers that can deliver the cost-benefits of China-based manufacturing without regulatory liabilities. The most successful are turning to solutions in the Philippines and other locations that are less immune to U.S.-China trade tensions and geopolitical risk.
Companies have not only offshored production to China, they’ve also offshored talent. True, leaders are actively investing in developing the in-house talent they’ll need for bringing successful products to market. But this is a longer-term plan that does not address the current skills crisis.
This fact is driving a surge in demand for partnerships with suppliers that deliver top in-house talent, a wealth of alternative sourcing solutions, and integrative, end-to-end operations. All three variables are critical for closing the talent gap and ensuring supply-chain security and compliance in the wake of widespread disruption and recent trade legislation.
If the last year is any indication, the irruption of unprecedented risk may increasingly be the norm, with antifragility representing the new paradigm for a new supply-chain era. To this end, seismic shifts must be undertaken that involve intentional distancing from old ways of thinking and acting. Mental models, innovation, agility, partnerships, and more — everything must be rethought and refashioned to drive not adaptation but evolution. Those who succeed in this quest will find that disruption need not lead to breakdown but breakthrough.
Mark Dohnalek is president and CEO of Pivot International, a global manufacturing, engineering and product-development company.