Resilience is most often considered essential for business continuity planning and risk management. But it is also the key to driving a company’s long-term profitable growth, according to new research at Accenture that was designed to measure the connection between corporate resilience and the ability to create value.
With disruption and change the ever-present new “normal,” resilience matters more today than ever before. This point is highlighted by what we found after analyzing the performance of 1,615 of the world’s largest publicly traded companies across 18 industries with our Resilience Index. The Index measures companies across six dimensions we have found critical to resilience: financial strength, sales, technology, global operations, talent, and sustainability.
So, what did we discover? Only 52 per cent of high-performing companies—those with above-peer-set revenue growth and profitability—outpaced their peers continuously through the business cycle running from the fourth quarter of 2019 to the third quarter of 2023. Forty-eight per cent with profitability and above-peer-set revenue growth at the outset slipped below their peers in terms of growth, profitability, or both. And 11 per cent saw a complete reversal of fortune, falling from the highest performance levels to the lowest, trailing behind their competitors.
This striking reshuffle of the world’s largest publicly traded companies made us wonder, What capability drives high performance through good times and bad? What metric should managers focus on to predict with the greatest possible certainty how their company can get ahead and stay ahead in today’s increasingly uncertain world?
Resilience Is Predictable and Predictive
Our research showed companies need a holistic vision and investment strategy for resilience, which we define as the capability to cope with and capitalize on fast-changing markets. After all, we found evidence that a combination of financial and non-financial strengths captured in our Resilience Index—such as a company’s ability to hire talent and invest in technological innovations—drive and predict long-term high performance. Companies with the highest ratings across all our Resilience Index’s dimensions also had the strongest performance.
In addition, we discovered that companies that build a resilience-focused culture, while investing in multiple resilience-enhancing capabilities and developing the talent needed to unlock the potential of new technologies, have what we call higher “returns on resilience,” meaning faster-growing revenue and profit margins over the long term.
Below, we will examine each of these actions, but first a bit about the returns.
When we analyzed the financial performance of companies considering their underlying resilience fundamentals as measured by our Resilience Index, we uncovered that companies with higher scores across the six index dimensions noted above have a four times greater chance of outperforming their peers over three years. This means they can expect to grow 6 percentage points faster and earn 8 percentage points higher profit margins than the least resilient competitors on average. Those are big numbers. They translate into US$420 million more in revenue and US$704 million more in profit every year for the average company in our sample with US$7 billion in revenue.
Beyond driving performance, we discovered these companies’ resilience scores predicted their performance. Managers and financial analysts usually rely upon purely financial measures like the traditional Altman Z-score to spot if companies will become insolvent. Our resilience scoring methodology predicted both high and low-quartile performers 80 per cent of the time. When we put the existing index data in 2019 into a machine learning model to predict a company’s financial performance, our resilience scores predicted future high performers with 67 per cent accuracy over one year and 82 per cent over three years. This result suggests resilience especially matters to a company’s performance over the medium and long term.
Building resilience-focused culture: Chief executives need to make resilience a personal mission to create truly resilient corporate cultures. In a separate study, we surveyed 570 company CEOs and 2,700 of their employees around the globe to understand the human aspects of enterprise resilience. We found that 85 per cent of these corporate leaders believe their personal resilience has been tested more in the past three years than at any other time in their careers. Sixty-eight per cent admitted they felt unprepared to address disruptive events.
Yet CEOs need to develop their personal resilience to inspire and mobilize employees. Our study found 58 per cent of employees believe their CEO directly impacts their personal resilience and 67 per cent look to their CEO to determine how well their company can cope with disruption. Those employees who believe their CEO leads with purpose are almost twice as likely to consider themselves “highly resilient” in part because the CEO’s clear commitment and vision permeate the organization. Not surprisingly, these employees are 1.7 times more likely to drive a highly resilient enterprise.
Investing in multiple resilience-enhancing capabilities: Just as people need to pursue a combination of actions like exercise, eating well, and getting enough sleep to remain healthy over time, our research findings show companies must invest in and monitor a mix of capabilities broadly defined to optimize their resilience, especially as more embark on transformations.
As things stand, companies tend to treat resilience as a cost to be paid to avoid potentially major negative consequences of unexpected shocks. They try to improve their resilience by narrowly focusing on point initiatives like improving their cybersecurity or supply chains with minor or no impact on the company’s overall competitiveness. Companies should be thinking about resilience in broad terms while managing what we call their “returns on resilience” to achieve sustainable high performance.
Specifically, our research revealed companies that invest in financial, operational, and technological capabilities can better cope with fast-changing markets and improve their chances of sustained industry leadership. For example, one American energy infrastructure company improved its revenue and profits over an extended time horizon, in essence its resilience, after streamlining its operations and investing more in renewable energy projects and technologies to improve its energy forecasting and grid operations.
The combination of initiatives designed to improve the company’s resilience by improving its financial, sustainability, and operational capabilities empowered the company to proactively navigate through shifting energy dynamics by diversifying its revenue streams and launching new products and tools to help customers monitor and optimize their energy use. As a result, the company’s resilience score rose above that of its peers (along with its revenue and profit growth) by 6.5 percentage points and 5.1 percentage points, respectively.
Developing the talent needed to unlock potential of new technologies: Sixty-two per cent of the highest-performing companies in our sample exhibited above-average strengths in technology. We found companies that invest in developing and maintaining technology foundations with advanced technologies like cloud and AI are more likely to sustain a strong financial performance because they have greater flexibility.
However, our research also showed that technology can only take a company so far without people across the organization (from directors to the employees) with the intuition and experience to harness its potential. When we looked at the joint distribution of the talent and technology scores, we discovered that only 25 per cent of the companies in our sample had this combination. The companies with these two strengths are four times as likely to sustain profitable growth over a period of three years and almost twice as likely to leapfrog from the lower-performing companies to the top group.
When measured across both financial and non-financial capabilities, resilience empowers companies to do much more than survive disruption. It drives and predicts future performance.
We hope our research findings will inspire more executives to prioritize resilience in today’s environment of constant disruption and change. Once they do, executive teams will find resilience is measurable, predictable, and predictive. They will also find they have developed a new competitive edge along with the ability to reinvent their companies to deliver superior products and services.
