Structural Readiness to Respond

Structural Readiness to Respond

A business should be so structured that it should be able to respond to 'expected' and 'un-expected'. This includes methods related to optimizing operational break-even, managing contracts variability, managing contract exits, having modularity of investments & expenses, having 50% scenario readiness etc...

Topics in Structural Readiness to Respond : -

Low cash and operational break-even

A business should be having a low cash (and not only financial break-even, which break capital expenses as future depreciation hits). The point is to minimize the fixed expenses and optimize the variable expense. Execution-MiH does not support a 100% variability of the expense base, as that would make a business too precautions. The business may end-up paying too high a per-unit cost for the variable services/goods for the sake of variability.

Contracts variability

The contracts with the Vendors, Service providers and channel partners should have easy variability where you can change the volumes and prices linked to certain environmental factors (whoever do not miss out for a long-term lock in if there is a good deal). The exit contracts should also not be having too much penalty. Apart from the volume, price and exit flexibility, one should also work on building variability on the service and product mix. You will never be able to achieve a 100% flexibility on contracts. The idea is to be sensitive to your business assumptions, anticipate the areas of possible change in future and work with your partners to be prepared for the same.

Flexibility on supply chain

An organization should build inherent flexibility in its manufacturing (or servicing) and fulfillment infrastructure. Ability to change the processes, assembly lines, vendor matrix, through-put capacity equips a business to address threats as well as an opportunity. As mentioned in the previous topics one cannot have 100% variability or flexibility, as that can come out to be costly. Flexibility is not only linked to the hardware and configuration of your supply chain, but also the speed with which you can hire the right skills or train your existing staff.

Hard scenario readiness

A business should look at its resilience to absorb shocks. Typical public memory is short, and generally we do not learn from the history. However, the severe economic downturn in 2008-2009, compels organization to look at their staying power in the face of adversities. Every organization should list top-3 hard-scenarios, whereby their customer base, financing sources or their supply lines are eroded by a significant proportion. They should look at what they should be doing in that scenario, and their current preparedness for the same. The good news is that some of that preparedness will benefit the organization within its business-as-usual state as well.