Resilience in the Age of the Polycrisis

I have often compared supply chain disruptions to buses on London’s Oxford Street — if you miss one there’s always another one coming. However, analysts from the World Economic Forum (WEF) argue the bus analogy is no longer apt. The bus analogy assumes that each disruption (or crisis) is an individual event that can be dealt with as it arrives and that, they argue, that may no longer be true for many crises. In the 2023 WEF Global Risks Report, the authors note, “Present and future risks can interact with each other to form a ‘polycrisis’ — a cluster of related global risks with compounding effects, such that the overall impact exceeds the sum of each part.”

Adam Tooze, the Kathryn and Shelby Cullom Davis Professor of History at Columbia University, asks, “Have we been living in a polycrisis [era] all along?”[1] He suggests we probably have been. He explains, “Pandemic, drought, floods, mega storms and wildfires, threats of a third world war — how rapidly we have become inured to the list of shocks. So much so that, from time to time, it is worth standing back to consider the sheer strangeness of our situation. … With economic and non-economic shocks entangled all the way down, it is little wonder that an unfamiliar term is gaining currency — the polycrisis.”

The Anatomy of a Polycrisis

According to Tooze, the term “polycrisis” was coined by French complexity theorist Edgar Morin, who first used it in the 1990s. As a side note, Morin will turn 103 in July. Tooze notes, “As Morin himself insisted, it was with the ecological alert of the early 1970s that a new sense of overarching global risk entered public consciousness.” However, the term “polycrisis” didn’t catch on until recently. Tooze suggests the term returned to public discussion thanks to former European Commission president Jean-Claude Juncker. In a speech given on 21 June 2016, Juncker stated, “I have often used the Greek word ‘polycrisis’ to describe the current situation. Our various challenges — from the security threats in our neighborhood and at home, to the refugee crisis, and to the UK referendum — have not only arrived at the same time. They also feed each other, creating a sense of doubt and uncertainty in the minds of our people.”[2] Similar crises have continued to combine to create polycrisis after polycrisis.

One polycrisis familiar to everyone was the polycrisis that affected supply chains during the pandemic. As the WEF report notes, “Supply-chain crises of recent years have highlighted the need for resilience in traditional strategic sectors. Reliable and cheap access to the most basic of necessities — food, water and energy — underpins the critical functioning of societies. Early data suggests that current crises are driving a worrying reversal of recent progress.” Today, geopolitical conflicts and climate change keep the world in a constant polycrisis.

Tooze notes, “A problem becomes a crisis when it challenges our ability to cope and thus threatens our identity. In the polycrisis, the shocks are disparate, but they interact so that the whole is even more overwhelming than the sum of the parts. At times one feels as if one is losing one’s sense of reality.” Business leaders know, however, that losing one's sense of reality is not an option.

Coping in Polycrisis Era

Journalist Tristan Bove reports that the next ten years are likely to witness numerous polycrises. He explains, “Multiple concurrent economic, political, and ecological shocks are converging to rock the globe in the next decade, and the world is playing catch-up to address them. The next 10 years are shaping up to be a transformational period for the world economy, which is under threat from a number of interrelated crises. The veteran economist and well-known pessimist Nouriel Roubini, also known as Dr. Doom for his gloomy forecasts of the future, broke down 10 massive economic challenges in his recent book Megathreats, ranging from unprecedented debt chaos to global climate disruption. … While governments and business leaders around the world are racing to meet short-term challenges such as rising inflation and recession risks, long-term risks may converge into a polycrisis by the end of the decade.”[3] As I noted above, I believe we are already enmeshed in a polycrisis.

Waiting to see if an even more severe polycrisis emerges is not a winning strategy. Polly Mitchell-Guthrie, Vice President of Industry Outreach and Thought Leadership at Kinaxis, indicates the emphasis on confronting a polycrisis has revived an even older term: antifragility. According to Mitchell-Guthrie, digital supply chains are much less fragile than paper-based supply chains. Nevertheless, she notes, 70% of digital transformation efforts fail. The reason, she believes, is because those efforts focused almost exclusively on technology. She writes, “There are a couple of decades-old concepts that are the missing ingredients for success: people and process. As much as we conflate digital transformation with technology, without these missing ingredients your initiative will fail. And the true secret sauce to excellence is to fold in systems thinking and organizational learning.”[4]

Mitchell-Guthrie adds, “While the concept [of antifragility] isn’t new, its application to supply chain is emerging, albeit without clear definition yet. I’m sure of this: achieving antifragility in a time of polycrisis cannot be done with outdated, manual systems and processes. Digital transformation is no longer optional. … In light of the magnitude of disruption supply chains have faced since the pandemic and the continued aftershocks, the aim of antifragility is not just resisting shocks and delivering the same results but getting stronger. A polycrisis may not be able to be prevented or predicted, but we can be prepared by getting better each time.”

Mitchell-Guthrie goes on to note, “Four out of five leaders expect to use artificial intelligence and machine learning (AI/ML) in their supply chains, making it one of the leading drivers of digital transformation.” One of the benefits of artificial intelligence is its ability to analyze large numbers of variables simultaneously. To bring together technology, process, and people, Enterra Solutions? created the Enterprise Growth WarRoom? offering for consumer products and retail companies.

As the press release announcing this new offering noted, "The rate of change experienced by companies due to inflation, changeable consumer behavior, challenging supply chains, and other macro issues is faster than their ability to adapt with their existing tools and processes. Guided by Enterra’s Strategic Intelligence Unit, Enterra’s new Intelligent Agent-driven offering will deliver a quantitative system-based approach to driving growth, competitiveness, and resiliency for global organizations." This team of highly capable individuals uses a capability which, a couple of months later, we announced was available from the SAP? store — the Enterra Business WarGaming? solution. As that press release noted, "Enterra Business WarGaming? integrates with SAP S/4HANA? and SAP S/4HANA? Cloud and delivers anticipatory analytics to systemically scale enterprise competitiveness and resiliency for customers." These capabilities can help business leaders rapidly explore a multitude of options and scenarios, which is critical now and in the future.

The WEF report notes, “A wide range of disciplines aim to gather intelligence about the future, ranging from economics, business management, investment funds and insurance, to urban planning, climatology, virology and civil protection — but the track record around the use of foresight to enhance risk mitigation efforts remains mixed. The underestimation of — and therefore lack of preparedness for — emerging macro risks (like ‘grey rhinos’ and ‘black swans’) reflect challenges posed by high levels of uncertainty, low levels of information, conflicting data and cognitive biases. Yet systematic progress is possible. Enhanced risk identification and foresight can be a key enabler for strategic decision-making, agenda-setting and resilience measures, helping to prioritize areas that would benefit from data collection and monitoring, risk controls and resources, and redundancies. The first task of foresight is to identify future developments, risks and opportunities. Both horizon scanning and scenario planning are useful tools that can examine and build on ‘weak signals’ in qualitative and quantitative data sources to better anticipate emerging trends.”

Concluding Thoughts

Tooze isn’t very sanguine about past and current efforts to deal with a polycrisis. He concludes, “[Confronting polycrises] is an unrelenting foot race, because what crisis-fighting and technological fixes all too rarely do is address the underlying trends. The more successful we are at coping, the more the tension builds.” Because supply chains mostly address symptoms rather than causes, it may be more appropriate to call this an era of permacrisis. Journalist Adela Suliman reports, “We’ve all been living in a state of permanent crisis, a ‘permacrisis’ if you will, according to lexicographers at the U.K.-based Collins Dictionary who have anointed it the word of the year for 2022.”[5]

According to Collins Dictionary, “permacrisis,” is defined as “an extended period of instability and insecurity.” Suliman notes, [“Today’s permacrisis involves] the challenges posed by climate change, the war in Europe, a cost-of-living crisis and, in many quarters, political chaos.” You are likely to hear a lot more about polycrisis and permacrisis in the years ahead. Tooze explains, “If you have found the past few years stressful and disorientating, if your life has already been disrupted, it is time to brace. Our tightrope walk with no end is only going to become more precarious and nerve-racking.” Which is why digital transformation remains critical for organizations and supply chains.

Footnotes

[1] Adam Tooze, “Welcome to the world of the polycrisis,” Financial Times, 28 October 2022.

[2] Jean-Claude Juncker, “Speech by President Jean-Claude Juncker at the Annual General Meeting of the Hellenic Federation of Enterprises (SEV),” European Commission, 21 June 2016.

[3] Tristan Bove, “We’re in a new ‘polycrisis’ era and the World Economic Forum just warned us what to prepare for,” Fortune, 11 January 2023.

[4] Polly Mitchell-Guthrie, ‘Polycrisis, Antifragility, and What’s Missing from Digital Transformation,” Logistics Viewpoints, 23 February 2023.

[5] Adela Suliman, “‘Permacrisis’ is a dictionary’s word of the year in ‘truly awful’ 2022,” The Washington Post, 1 November 2022.