Page 115 - The Resilient Organization

102 Part Three: Step 2. Building Resilience into the Organization

REAL-OPTIONS REASONING FOR RESILIENCE

Real-options reasoning suggests that options have value in limiting the
exposure to downside events (and thereby provide a source of
resilience). They thus allow for more activities of discovery commonly
prone to failure such as entrepreneuring (McGrath, 1997, 1999).
Options are a way to hedge against uncertainties in the competitive
environment. As shortcuts to a possible action or a loss limit, options
have value independently of whether any one option is eventually
followed through on or not.

Innovating through Resource Scarcity

A grand alternative to relying on reserves against unexpected events is a
competence I call resource-scarce innovation (Gibbert, Hoegl, &
Välikangas, 2007). Its essence is captured in the old saying, “Necessity is the
mother of invention.” Resource-scarce innovation breaks through problems
by finding solutions that require radically less (or different) resource usage
than before. This is in contrast to the prevailing orthodoxy which suggests
that problems that are slow to solve may require additional resourcing.
In actuality, the resource shortage is propelling the push to innovation.
For example, an R&D project may require more time or more staff to be
completed. This may be true in some cases, but the presumption is that the
problem must be solved within the existing operating or thinking frame-
work. Such a resource-driven mindset (Hoegl, Gibbert, & Mazursky, 2008)
easily foregoes the opportunity of finding entrepreneurial or innovative
solutions (Starr & MacMillan, 1990) at much lower resourcing levels. Such
resource efficiency, then again, is likely to add to the resilience of the
corporation by way of making do with less—or lowering its fixed costs.
Please note that this efficiency, or making do with less, is not a matter
of leverage, as discussed before. This is resilience that stems from human
ingenuity or entrepreneurship: it is about solving the problem with a differ-
ent determination. Resource-scarce innovation breaks out of the framing
that the issue could be solved only if a little more were invested. Rather,
solutions are teased out by changing the assumptions. For example, instead