Tales of the Unexpected: MIT Professor Tells Business To Weather the Storm

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In his new book entitled "The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage", Professor Yossi Sheffi argues that unplanned events Â? such as natural disasters, acts of terrorism, and wildcat strike action Â? can occur at any time, and that Â?a companyÂ?s survival in the face of such disruptions depends on how well the company prepares BEFORE disaster strikes.Â? His message to business leaders is Â?Always expect the unexpectedÂ?.

A new book by Professor Yossi Sheffi - a renowned trade expert, serial entrepreneur and Director of the MIT Center for Transportation and Logistics - has become one of the best-selling business books in the USA just a month after it was published.

The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage, which was published by MIT Press in late August, is currently number seven in the US business best-sellers chart.

The book will make its UK debut on October 10. To celebrate that fact, Professor Sheffi will speak at the Royal Society in London to be followed by a drinks reception. The event will be held from 6pm – 8pm on Monday 10 October.

Professor Sheffi says that unplanned events – such as natural disasters, acts of terrorism, and wildcat strike action – can occur at any time, and that “a company’s survival in the face of such disruptions depends on how well the company prepares BEFORE disaster strikes.” His message to business leaders is “Always expect the unexpected”.

The Resilient Enterprise has proven highly timely, as it examines how businesses operating in today’s globalised economy are increasingly vulnerable to supply chain disruption. Its US publication happened to coincide with the dispute at airline caterers Gate Gourmet, whose sacking of staff triggered a wildcat strike that subsequently forced BA to cancel 700 flights; and the disastrous impact of Hurricane Katrina on the Gulf Coast.

One case study featured in The Resilient Enterprise is particularly relevant to businesses effected by Katrina. The port of Kobe in Japan was ranked the second-busiest in the world until 1995, when the town was decimated by a devastating earthquake. Although the Japanese government rebuilt Kobe's infrastructure, the port never fully recovered it's position, ranking just 29th busiest in 2002. In a recent article in the Boston Globe, Sheffi argues that the implications for New Orleans are clear: rebuilding the infrastructure may not be enough to restore the city. 'It takes time to do all this, and economic activity shifts," says Sheffi. ''Companies may decide to build those facilities in the Port of Houston. Some of this traffic may never come back."

The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage grew out of a research project, funded in part by the Cambridge-MIT Institute, and conducted at MIT’s Centre for Transportation and Logistics. Using a series of detailed case studies, Professor Sheffi’s book demonstrates that a company’s resilience depends more on what it does before an unpredictable event occurs, than on the actions it takes afterwards. The Resilient Enterprise is illustrated with fascinating examples of how businesses dealt with the 1995 earthquake in Kobe, Japan, the 1984 Bhopal chemical leak, the 2001 UK outbreak of foot and mouth and the US shut down after 9/11. However, Professor Sheffi argues that it’s not just global events that can test the resilience of an enterprise. Even a relatively mundane incident, such as a lightning strike, can have a profound impact on a business’s long-term fortunes.

On 17th March 2000, a Philips plant in New Mexico that supplied chips to rival mobile phone manufacturers, Nokia and Ericsson, was hit by a lightning strike. Although the damage appeared limited at first, it compromised the plant’s clean rooms and knocked out production for months. The different organisational cultures in Nokia and Eriksson rapidly became apparent in the different ways the two rival firms dealt with the disruption to their supply chain. Eriksson was initially content to sit back and wait for the Philips situation to resolve itself. In contrast, Nokia’s hands-on approach to supplier relationships meant they were able to secure all existing supplies of required chips, leaving Eriksson out in the cold. While Nokia was able to continue production with limited disruption, Eriksson suffered a $2.35 billion loss to its mobile phone division, and one year later, the firm announced its retreat from the phone handset production market.

“Resilient enterprises compete more effectively in increasingly complex global markets and are hardier than their competitors when disaster strikes,” says Professor Sheffi.

Indeed, regardless of whether disaster strikes or not, how prepared companies are to deal with what Professor Sheffi terms high-impact/low-probability events is in itself becoming a key metric of their market value. According to Sheffi,

“Resilience will become a widely used indicator of competitive strength as more market analysts realise that even well-established enterprises can be brought to their knees when caught off-guard by a sudden supply chain dislocation.”

To watch recent broadcast interviews with Professor Sheffi, please visit: http://resilient-enterprise.mit.edu/index.pl?id=2197&isa=Category&op=show

To read recent press coverage, please visit: http://web.mit.edu/sheffi/www/generalMedia.html


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Tamara Roukaerts