“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change."Charles Darwin
Turtles aren’t the sexiest creatures in the animal kingdom. They can’t run fast. They can’t fly. They don’t have big sharp teeth or claws. They can’t puff themselves up to look menacing. Compared to the raw power of a tiger or a falcon, turtles are kind of lame.
What turtles do have is a variety of protective strategies - swim away quickly, use camouflage, snap with jaws, and if all else fails, retract into the shell and wait. Creatures elsewhere in the animal kingdom are pretty much screwed if they’re cornered by a predator. Turtles have a fighting chance - they win because they’re the armored tanks of nature. They can also eat many different things and go into hibernation when times get tough. That’s why they tend to live so long.
Tigers, on the other hand, rely on their strength, power, and speed to chase down their prey. When times are good, tigers are the kings of the jungle. If prey becomes scarce or they lose their hunting prowess due to age or injury, death takes them quickly and mercilessly - no second chances.
What the business world needs is more turtles and fewer tigers.
How to Handle the Unexpected
The world is a fundamentally uncertain place. Unexpected things happen - some good, some bad. You never know when Mother Nature, Lady Luck, or a hungry predator will decide that today is not your day.
Resilience is a massively under-rated quality. Having the toughness and flexibility to handle anything life throws at you is a major asset that can save your skin - literally and metaphorically. Your ability to adjust your strategy and tactics as conditions change can be the difference between survival and disaster.
Resilience Has a Price
The thing about resilience is that it’s not “optimal" by nature - flexibility always comes at a price. A turtle’s shell is heavy - they could certainly move faster without it. Giving it up, however, leaves them vulnerable in the moments when moving a little faster just isn’t fast enough.
The primary reason many businesses (and many individuals) are in trouble in the current economic climate is a lack of resilience. In an effort to chase a few more short-term dollars, many businesses trade resilience for short-term power - and pay a hefty price.
A classic example is the big investment banks. Keeping cash reserves on hand to deal with the unexpected has become “ultra conservative" and “inefficient" - it’s become “best practice" to leverage the entire company 30-40 times to eek out a few more cents in earnings each quarter, leaving the business explosively vulnerable to a very small decline in revenues.
Imagine operating a business with no cash reserves, no insurance, and high levels of debt. The reduced expenses may juice your returns for a few months or quarters, but the moment your revenues decline even by a little or someone decides to sue the business, you’re sunk.
Unfortunately, many of the advanced financial manipulation tactics taught in business schools implicitly trade resilience for paper returns - and once-successful businesses pay the price by going out of business when times get tough. Leverage works just like rocket fuel - depending on how it’s used, it can propel your business to dizzying heights… or make the whole operation explode.
Planning for Resilience
Here’s what makes a business resilient:
- Low (or zero) outstanding debt.
- Low overhead / fixed costs / operating expenses.
- Substantial cash reserve for contingencies.
- Multiple independent products / industries / lines of business.
- Flexible workers / employees that can handle many responsibilities well.
- No single points of failure.
- Backup systems for all core processes.
Planning for resilience as well as performance is the hallmark of good management. It’s certainly not sexy, mostly because the benefits suffer from absence blindness. It can, however, save your hide when things get rough. Think less like a tiger and more like a turtle, and your business will be able to withstand pretty much anything.
How resilient is your business? Your personal life? What could you do to increase your flexibility and toughness in the face of the unexpected?