Biological systems have long been an inspiration in the study of complex systems. High resilience in the face of an uncertain, changing environment is the essence of evolutionary biology and natural selection. Similarly, business resilience is fundamental for a company to withstand major disruptions and survive an unpredictable, turbulent future.
Today, one of the most critical post-pandemic priorities must be to restore and strengthen the resilience of the nation and the world. What will such a world look like? Some of the potential changes, the unknown unknowns, are nearly impossible to predict. But others are easier to anticipate because they’re essentially an acceleration of existing trends.
So far a number of businesses have demonstrated resilience in responding to the pandemic. But many have not. And with the April unemployment rate rising to 14.7%, and the virus spreading almost unabated, the nation is in need of a level of resilience last seen in the mid-Twentieth Century, when the interests of business and society were closely aligned.
But first let me briefly summarize some recent demonstrations of digital resilience.
Digital infrastructures. Fortunately, we never had to test the internet’s ability to keep the US going following a military attack or invasion, - it’s main objective when it was first developed by the US Department of Defense in the late 1960s. But, who would have thought that 50 years after the launch of ARPANET, it would be a global pandemic that’s now been testing the internet’s ability to fulfill its original objective of keeping nations and economies going during arguably the biggest shock the world has experienced since WWII. We can expect to accelerate the deployment of ultra-high-speed broadband bandwidth, 5G, IoT, and near-universal internet access, as well as critical improvements to cybersecurity and data privacy.
Online e-applications. For years, many found all kinds of reasons not to embrace telemedicine, online learning, work from home, virtual meetings and other kinds of e-applications. But, necessity is the mother of invention. We’re finding that not only do these e-applications work remarkably well, but they offer a number of important benefits, like not waiting for a doctor’s appointment in a room full of sick people, or not having to travel to participate in a 45 minute meeting. In the coming years, we can expect a number of innovations in online e-applications, especially a superior user experience.
Digitization and AI adoption. A 2019 McKinsey study found that a quarter century into the digital age, even the world’s most advanced economies--the US, Europe and China--had only achieved around 20% of their digital potential. Another, recent McKinsey report on the state of AI adoption found that while AI is becoming more mainstream, “much work remains to scale impact, manage risks, and retrain the workforce,” in over 95% of companies. We can expect the rate and pace of digitization and AI adoption to significantly increase.
Automation and the Future of Work. We can expect that the pandemic will have a major impact on the future of work, as public and private sector institutions accelerate their embrace of technologies and automation. Recent future-of-work studies, like MIT’s ongoing Work of the Future, will have to be revisited along with their policy recommendations.
Let me now discuss a few of the actions taken by the U.S. in the mid-Twentieth Century that fostered an ecosystem built to support resilience.
From the 1930s to the 1970s, a period that spanned the Great Depression, WWII, and the height of the Cold War, the interests of business and society were closely aligned. Keynesian economics, named for British economist John Maynard Keynes, was the standard economic model during this period. It was a pragmatic, mixed model of capitalism, based on a predominantly private sector economy but with an appropriate role for government.
The immediate post-war period saw a significant expansion of government support for scientific research in universities and R&D labs, the expansion of educational opportunities, like the GI Bill, and massive infrastructure projects including, of course ARPANET, the digital infrastructure that eventually became the internet.
The past several decades have seen a significant decrease in government support of R&D and education. A recent task force on Innovation and National Security noted that “Washington has failed to maintain adequate levels of public support and funding for basic science. Federal investment in R&D as a percentage of GDP peaked at 1.86 percent in 1964 but has declined from a little over 1 percent in 1990 to 0.66 percent in 2016.”
Educational initiatives by the federal and state governments have also been significantly reduced, despite the fact that education is more important than ever. A recent report on US Leadership in the 21st Century reminded us that the expansion of public high school education and state universities in the first half of the 20th century was a critical ingredient in the US becoming the world’s most successful economy.
But it wasn’t only the government that reduced its focus on resilience. So did business, as explained in The High Price of Efficiency, a 2019 Harvard Business Review article by Roger Martin, professor emeritus and former dean of the Rotman School of Management at the University of Toronto.
“Why would we not want managers to strive for an ever-more-efficient use of resources?,” asked Martin. Of course we do. But, an excessive focus on efficiency can produce startlingly negative consequences. To counterbalance such potential negative effects, companies should pay just as much attention to resilience, - “the ability to recover from difficulties - to spring back into shape after a shock… Resilient systems are typically characterized by the very features - diversity and redundancy, or slack - that efficiency seeks to destroy.”
Let us also hope that the social contract between institutions and individuals-- be it firms and employees or governments and citizens--will also be revisited and significantly improved, including health care, education and other critical social safety-net programs.
Irving Wladawsky-Berger worked at IBM from 1970 to 2007, and has been a strategic adviser to Citigroup, HBO and Mastercard and a visiting professor at Imperial College. He's been affiliated with MIT since 2005, and is a regular contributor to CIO Journal.
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The Urgent Need to Strengthen the Nation’s Resilience - Wall Street Journal
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