Resilient business transformation: creating value via re-engineering
A decorative scratch mark - Cognitute
Resilient business transformation: creating value via re-engineering
Plants in pots signifying resilience and growth in business - Cognitute
March 13, 2023
Business Transformation

The onset of the Covid-19 pandemic highlighted how most of the organizations valued short-term profit and efficiency over long-term resilience. With this global insight, many organizations are now prioritizing resilience, but resilience can only be tested when organizations are challenged by unforeseen circumstances or post business turnaround exercise. Objectively, relative resilience of a business can be quantified by comparing their total shareholder return during a crisis quarter to that of their peers in the industry. The resilience of an organization during an unfavorable period contributes to almost 30% in the long-term. Organizations that maintain consistent resilience despite external changes generate value, show a focus on growth acceleration, increased flexibility, and decreased debt during economic duress fueled by negative market forces, global trade wars, and supply disruptions.

Resilience for sustained success during crisis quarters

The value provided by resilience is most apparent during a change, such as the Covid-19 pandemic, which unpredictably or disproportionately impacts critical functions of an organization. At the pandemic onset, many businesses experienced an almost immediate drop in demand, availability of labor, or disruptions in the supply chain. Despite these common threats to business functions, even within industries, the rate and degree of recovery varied widely across organizations. Resilient companies proved to out-compete their competitors in multiple aspects of performance.

Immediately following an external change in circumstances, the impact on business performance for a  organization with high resilience will be cushioned compared to their competitors. This immediate ability to withstand the impact of a crisis is the primary factor for driving outperformance in the industry, with more than 60% of the relative TSR in a crisis period relying on the response immediately following the event. Long-term recovery, in comparison, accounts for the remaining 40%.

While many programs for large-scale change during or after a crisis prioritize cost reduction, growth acceleration is shown to be the primary contributor to value created through successful resilient transformation. A large-scale transformation that targets growth acceleration results in an average improvement of +6pp of performance relative to the industry average. Comparatively, transformations that target cost reduction result in a decline in future resilience.

A trend graph representing the worth of resilience - Cognitute
The worth of Resilience throughout Shock and Recovery.

After the shock: the value of resilience in stable quarters

In the recovery period following the initial “shock”, the speed of recovery of an organization is a key factor towards out-performing competitors and maximizing profit and growth. Resilient businesses consistently benefit from a faster speed of initial recovery following an external change. Although resilience provides a consistent competitive advantage across industries, the difference in value is more noticeable in highly volatile industries, such as consumer durables and technology, compared to sectors which experience a consistent, stable level of demand.

Another variable in business recovery from a crisis or external change of circumstances is the extent of recovery that the organization is able to reach. Performance during crisis periods has a disproportionate influence on long-term performance in the industry, and accounts for 30% of the long-term relative total shareholder return, despite crisis periods occuring much less frequently than stable periods. Shareholder returns of organizations operating within the same industry diverge from each other during crisis periods, with the average TSR gap between under- and over-performing businesses almost doubling in times of crisis. A business transformation that is growth-oriented provides a significant resilient advantage during this recovery period by facilitating the capability to thrive in new circumstances and capitalize on new opportunities for organization-wide growth.

Many businesses may aim to recover only to the level that they previously functioned at prior to the crisis, but in fact, resilient organizations can adapt and benefit from crisis conditions, allowing them to surpass their previous TSR and cement a position in the industry, that is better than their pre-crisis level. For long-term outperformance in the industry, resilient business turnaround doubles the chances of an organization sustaining outperformance. Non-resilient organizations will have to perform extremely well during stable terms, with no room for error, to achieve the same level of success as their resilient rivals.

Is it possible to sustain resilience across all areas in the face of any crisis?

Every crisis faced by an industry or organization is multi-faceted and unique. The challenges introduced by a global pandemic are markedly different to the threats of a global recession or political upset. Resilience designed specifically to mitigate one type of crisis may become useless or disadvantageous when applied to a different type of change. This has introduced the idea of general resilience, and whether it is possible to make a business globally resilient in the face of any external change.

Recent data shows that general resilience is possible, but needs thought-out, expert process transformation to be achieved. Generally resilient businesses are able to outperform competitors in a vast majority of crisis quarters, sustaining a long-term competitive advantage and gaining the ability to profit from times of uncertainty.

Principles for achieving general resilience

General resilience is a complex concept that hinges on an adaptable, fluid, and data-based business transformation process. Organizations that are structured for a high level general resilience and have undergone successful company transformation design and incorporate systems centered around core principles of developing and maintaining resilience.

A plant growing in rough conditions representing resilience - Cognitute


All organizations may hope that good times for business will last forever, but times of external pressure, global crisis or reduced profit are inevitable. A forward-thinking approach to resilience acknowledges various possibilities for non-ideal outcomes that may disrupt the industry, and defines which of these are more likely to occur.

Processes and systems such as contingency plans are put in place to mitigate these potential situations before they occur, and early indicators are monitored so that crises can be identified with use of an early warning system before there is a noticeable impact. Process transformation allows monitoring of early warning signals such as unusual events, activity of competitors, or reduced recovery time from smaller events helps to anticipate the onset of a crisis before it takes hold. Use of a forward-thinking approach to resilience provides the advantage of anticipation, increasing preparedness to weather a crisis without being blindsided.


Transformations that target decreased debt and improved flexibility are shown to effectively boost resilience. Reduction in intensity of fixed assets results in improved adaptivity through shifts of costs toward other variable expenses. An adaptable system will be able to smoothly and efficiently adjust to changes in circumstance, such as differing dynamics in the industry. If a business is able to adapt to a change in dynamics, this brings about a significant adaptive advantage and competitive edge within the industry. Portfolio mixes and investments can be shifted toward different sources of growth following a crisis.
Alongside gaining an adaptive advantage, an adaptable business will be able to shape the future dynamics of the industry in a way that confers long-term benefits to the organization and creates greater value. Experimentation with various actions such as digital business transformation allows beneficial systems to be up-scaled and further tuned with algorithms to allow agile action in unpredictable times.


A diverse approach to resilience allows creation of multiple sets of options for reaction to an event, as an aspect of the business transformation process. Diversity can be leveraged in several areas, such as sources of revenue and operations.

Diversity in sources of revenue, such as customer base and sales channels, provides protection against a sharp drop in demand during crisis terms. This is because these diverse revenue sources will each respond differently to an event, cushioning the impact on overall profit and preventing catastrophic failure.
Diversity of operations incorporates diversity across the supply chain via digital business transformation to digitize production or processes, or expanding available production options, with the purpose of increasing the range of alternative options during a shock.


Buffering can be used to create redundancy, which provides a cushioning effect against unexpected events. Operational buffers, such as redundancy in stocks, talent, and production, helps organizations to be flexible during unexpected fluctuations in supply and demand.

Financial buffering involves achieving a higher cash-to-operating-cost ratio, alongside a lower debt-to-enterprise value ratio. Maintaining these ratios provides a layer of financial cushioning allowing operations to be sustained during a crisis, and allows distressed assets in the corporate debt market to be purchased during crisis terms. Business transformations with the aim of decreasing debt burden and lowering debt-to-enterprise ratio result in increased performance within the industry during dips in the market, with an average performance increase value of 2.5pp.

Businesses that have lower reliance on legacy assets have the flexibility to identify and seize new opportunities in the market during or after a crisis, and have the ability to easily adapt to and monopolize on advances in technology. Larger proportions of variable costs, along with reduced ownership of assets, translate into the flexibility to closely associate revenue with costs during a dip in the market.

Using these core resilience principles, organizations can begin a shift in mindset where resilience, adaptability and forward-thinking planning are valued and prioritized over short-term financial returns. Leaders who prioritize resilience are able to look at business systems as a whole, instead of as separate functions, and use this information to create disproportionate success during both stable periods and times of crisis.


  • Brende, Børge, and Bob Sternfels. “Resilience for sustainable, inclusive growth.” McKinsey, 7 June 2022
  • Deegan, Tom. “Transform for Resilience: An Imperative for Good Times Too.” Boston Consulting Group, 14 July 2021
  • “Future proof: Solving the 'adaptability paradox' for the long term.” McKinsey, 2 August 2021
  • O'Keeffe, Dunigan, et al. “Getting Business Resilience Right.” Bain & Company, 7 January 2021


Chiamaka Ihekwoaba
Chiamaka Ihekwoaba
Content Strategy Consultant