The difficult path from efficiency to resilience
Can our growth-oriented economy find its way from efficiency to resilience? And what will it take to do so? Our dossier “Ready, steady, resilient?” looks at the global economy, companies – and yesterday, today and tomorrow.
IT services are the export hit of the Ukrainian economy. The sector accounts for around 38 percent of the country's economic output and business continued to grow solidly at 6 percent in 2022. This is all the more remarkable because of the impact of the war on Ukraine, its economy and not least the Ukrainians themselves.
A look at the economy as a whole also shows this: since the beginning of the full-scale Russian invasion, the country's overall economic performance has dropped by about 35 percent - factories and administrations were destroyed, people fled or were called up to serve on the front lines. How could this massive crisis apparently pass the IT industry by without a trace?
Resilience in times of polycrises
This issue of our What Next web magazine explores the question of how resilient our economy is proving to be in this time of polycrisis and what strategies companies are using to become more resilient. Our authors spoke to business experts and corporate leaders.
What is surprising at first glance is clever calculation on further examination. Ukraine's IT sector is a prime example of economic resilience. It drew its strength from the experience of an earlier crisis that has since been overcome: the Corona pandemic. During the lockdowns and quarantines, companies equipped their employees for mobile working, made processes more flexible and trusted that business would continue even if everyone worked from home. The strategies learned could be applied again after the outbreak of war. In addition, agile processes and quick decision-making provided an important time advantage to respond to new challenges. This meant emergency power generators, internet connections via satellite, servers and IT hubs abroad could all be organised comparatively quickly.
Therefore the Ukrainian IT sector unusually represents strength through change. This becomes all the more important in times when crises overlap and reinforce each other. The economic historian Professor Adam Tooze from Columbia University speaks of “polycrises” in this context. Since the 1970s at the latest, it has been foreseeable that steady economic growth automatically leads to sharply increasing economic risks: "But it's one thing seeing the shape of something, it's another seeing its reality.” What we now call a polycrisis last existed in the 1920s but with quite different causes and consequences. And once the polycrisis is underway, it is irreversible which means the world will definitely look different afterwards than it did before.
Resilience means reacting quickly and flexibly to shocks and crises and adapting to new situations through innovation.
“Resilience means reacting quickly and flexibly to shocks and crises and adapting to new situations through innovation," says Professor Jakob Edler of the Fraunhofer Institute for Systems and Innovation Research (ISI). Speed, flexibility and continuous learning are essential factors to better master future crisis, possibly even to avoid them completely. A high level of resilience pays off not only in the long term, but also in everyday business: it makes business processes more flexible and strengthens the ability to work innovatively - as the Ukrainian IT sector has proven.
We have never seen it like this before? Crisis and how companies have dealt with them, in retrospect.
An important prerequisite for this, however, is the willingness to invest. In well-equipped jobs, stable supply chains and optimal value creation, for example. But investing in an ongoing crisis is difficult. The business consultancy McKinsey recommends focusing on a few weak points:
- identify the most important material risks and subject them to a stress test.
- make decisions on how to minimise these risks quickly and efficiently
- implement measures in agile teams and monitor their success.
The result will be an organisation that is pre-emptively prepared for potential crises, ready to respond quickly in the event of an incident, and which returns quickly to its former strength or becomes even stronger afterwards.
… is fascinated by the adaptability of large and small companies under the impact of the crises of our time. His work on the current What Next dossier has given him unexpected insights into their strategies and concepts.
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