January 04, 2023 / Blog

No business is immune to a crisis like Southwest’s. Here’s how to create the resilience that will prevent it.

Frank Shultz

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No business is immune to a crisis like Southwest’s. Here’s how to create the resilience that will prevent it.

It’s easy to pile onto Southwest Airlines right now. They made a series of epic mistakes that caused havoc, inconvenience, and in some cases real hardship for hundreds of thousands of people. But before joining the pile-on, business leaders should pause and think about whether they’ve put in place the right systems to prevent their own version of Southwest’s crisis.

The reality of running a business is that efficiency and resilience are often treated like a zero-sum game, and when that happens, efficiency almost always wins out. Investments in efficiency can be seen and appreciated constantly, while investments in resilience may not matter until something goes very wrong. But when things do go wrong – as they just did for Southwest, and as they did for just-in-time supply chains during the Covid crisis – the right resilience plans and tools can make an existential difference.

In hindsight, Southwest’s crisis was predictable. While most other airlines have built at least some supply slack in their hubs, Southwest uses a point-to-point operating model that distributes staff around the country so they can be deployed more efficiently. This model lowers costs, but it is not cost-free. The combination of severe weather and an extremely busy holiday travel period stressed Southwest to its breaking point, since there were no staff available to be reassigned from a central location.

On top of that, Southwest uses a scheduling system that has barely changed since the 1990s. The system was capable of scheduling under normal circumstances, but required manual intervention and phone calls when crew or equipment changes occurred. And when a large number of changes needed to be made over a few short hours, it just couldn’t keep up.

I run a company that builds technology and advises clients on enterprise resilience to prepare for emergency scenarios like this, and I know some of the people who run Southwest’s business continuity program. The thing about key technology risk – like Southwest’s outdated scheduling system – is that diagnosing the problem usually isn’t the hard part. I’d be shocked if the continuity team hadn’t flagged this system as critical and documented the problems inherent in manual workarounds.

Companies typically get tripped up in devising solutions and garnering internal buy-in to implement them. The memos only get read, and the dollars invested, after a crisis. This reactive approach almost always costs companies much more in the long run.

We need to break this cycle. Companies need to lean into enterprise resilience – the term I use to describe a company that builds resilience into its core by making it a top business priority and ensuring that resilience teams have a real seat at the table.  It’s not sufficient to highlight risks annually but do nothing about them, to create continuity or disaster recovery plans only in response to an audit or customer need, or to only practice incident response when “the big one hits.”

Instead, leaders must thread these discussions into everyday operations. For example, when a critical system has known, flagged risks and vulnerabilities that could cause large-scale impacts, a company with enterprise resilience addresses these challenges early and head-on, while planning regular check-ins to ensure they don’t fall off the radar. Enterprise resilience means feeding both small and large threats into a risk-mitigation matrix that can help leaders truly understand how bad the impact could be if the issue escalates.

And all of this must be refreshed regularly, some of it even daily or as circumstances and systems change. A true enterprise resilience system is connected into all of the company’s key data sources – even some that may not seem obvious, such as HR, IT, real estate, and process mining to receive real-time updates. This data, when paired with operational metrics, helps an organization quickly proactively prevent crises by understanding how something small can quickly ripple through a normally stable system.

If Southwest had been able to anticipate the impact of these storms a week, or even a year, ahead of time, they certainly would have done things differently. The enterprise resilience model would have afforded them that opportunity.

Southwest was one of the world’s most valuable brands going into the crisis; it ranks #28 on Fortune’s Most Admired Companies list. Will it even make the list next year? Repairing this reputational damage will take time – and while many will focus on the effort to regain trust with customers, an equally important measure of the company’s long-term viability is whether its leadership takes this as an opportunity to build a culture of enterprise resilience.

Other companies have an even bigger opportunity: embrace enterprise resilience now. Before the storm.

Frank Shultz is Chairman and CEO of Infinite Blue.

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