Barry Kukkuk, chief technology officer with Netstock, details four steps that companies can take to prepare for the unpredictable.
The term “black swan” was coined by Nassim Nicholas Taleb in his 2007 book of the same title. Kukkuk defines it as an event that “no one can foresee, happens out of the blue and has a massive impact.”
The fact that such events are by their nature unpredictable doesn’t mean that companies can’t prepare for them. Kukkuk lays out four ways that they can get ready. The first is to have enough data on hand, and be able to make sense of it. Predictive analytics can help executives understand “how things are going to change in your life.” Companies that relied on static spreadsheets, for example, might not have noticed how lead times for suppliers were creeping up over three or four months.
Second, companies should avoid relying on a single individual with knowledge of the business that isn’t shared by others in the organization. Should that person suddenly be unable to come to work, the company would be hampered in its efforts to cope with an unanticipated event. Instead, it should have in place “a whole team or central system of knowledge.”
Third, it’s important to understand which products in a company’s catalog are the biggest profit drivers, and adjust production and distribution strategies accordingly. Should a company be forced to reduce its product line in an emergency, it should be careful to retain those items that are most important to the bottom line, and jettison the rest.
Fourth, every part and stage of the supply chain is important, Kukkuk says, noting the current plight of automotive manufacturers who are unable to ship whole cars for the lack of enough microchips.
Timely, incisive articles delivered directly to your inbox.