Platt Perspective on Business and Technology

Building crisis management capabilities into the basic business infrastructure 1

Posted in strategy and planning by Timothy Platt on October 27, 2012

This is my first installment in a series in which I will more systematically outline and discuss risk and crisis management processes, and best practices for building them into a business’ basic organizational infrastructure. It is also, I add, a direct continuation of a separate series that I recently completed (see Operational Failure Rates, Feedback and Remediation, and Risk Remediation Processes at Business Strategy and Operations – 2, postings 323 and loosely following for Parts 1-4.)

The primary topic of that series was defining operationally and strategically fragile and robust systems as collectively comprising an organizational process-based business taxonomy. And I ended that series in Part 4 by stating that I would be writing and posting to this series next, here using the terms and approaches of that taxonomy as a foundation point for discussing and operationally planning for crisis management capability. And to repeat a point I made at the end of that posting:

• “A big part of preparing for the worst, should it arise, is to develop effective operational and strategic robustness in basic ongoing systems in advance.”

So I begin this series by fleshing out in a more practical sense how to build and maintain robustness. And I begin that by citing a business analysis tool set that in one form or other is familiar to most business leaders: Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis.

• The basic goal here is to identify and catalog, and in some sense quantify known and knowable sources of strength, weakness, opportunity and threat.
• And for this, specificity is very important and each item identified here should be functional process-based, and with outcomes of those actions (or explicit inactions) quantified as to impact.
• You want to be able to determine value for each entry in your list according to a single scale so you can explicitly compare between individual entries and across the complete set, and this scale should correlate with monetizable valuation.
• SWOT analysis is not deterministic, with each entry in your list either happening or not and with certainty as to which. SWOT analysis is always probabilistic, and the value of any entry on your list is more formally a mathematical product found by multiplying the impact should an event occur by the probability that it will. So an event that would have tremendous impact should it actually occur but that is essentially impossible to happen, would by this reasoning hold at most a low value in developing your overall SWOT assessments model.
• But in the real world you have to allow for black swan events and the occurrence of unexpected, and seemingly very low probability events happening. Ultimately, we only know so much as to the actual probability of occurrence of many of the event entries that might go into our analyses here. So we need to think in terms of occurrence probability ranges, and SWOT evaluation event valuation ranges.

And this brings me to a process model that I presented in Part 3 of the preceding series as cited above. I had just formally defined strategically fragile and strategically robust systems as:

• Strategically fragile systems are characterized by strategic decision making processes that are narrowly based, and that primarily if not exclusively focus on linear extrapolations from past, current and tried and true.
• Strategically robust systems allow for and seek to account for new and different. Everything is at least potentially on the table even if time and energy constraints do limit the conversation and meeting length.

And I stated that when you seek to make systems more robust, begin your planning with the strategic assessments and analysis that would comprise a more strategically fragile approach, but do not stop there. Simply take that as a baseline to further plan from as you specifically plan and build for robustness.

• Strategically fragile systems tend to be unaware of risk probability for the events that SWOT analyses are applied to, and they tend to focus on a very limited set of event types of possible occurrences for them.
• Strategically robust systems are more nuanced and strategic planning that goes into them is more aware of context and patterns, when evaluating likelihood (e.g. an event occurrence that might in general be rare and unlikely might be much more likely in specific event contexts and if specific circumstances have already developed.)
• And as previously discussed in my prior series, robustness and both operationally and strategically, is all about flexibility and about systems learning and evolving so as to decrease risk and increase likelihood of positive outcomes.

I am going to continue this foundation discussion in my next series installment. Meanwhile, you can find this and related postings at Business Strategy and Operations – 2 (and also see Business Strategy and Operations.)

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