Startups aim to accelerate execution and grow fast. But when conditions change, they have no strategic reserves. A resiliency strategy pays dividends.
Organizations tend to focus on increasing efficiency and productivity. So, once a strategy is designed, we aim to execute fast. But if every person and penny is dedicated to speed and growth, what happens when something unexpected occurs?
We all know that unpredictable things happen, but we build strategy believing it’s unlikely. Strategies are usually conceived one-at-a-time—and there is no back-up when conditions change.
That makes sense in a world in which the unexpected is rare. But as David Hand explains in The Improbability Principle, weird events are not rare. They are the norm.
Complex systems, like financial markets, contain so many variables and possible combinations of them that unusual things happen regularly. Those systems teeter on the edge of chaos. To keep from succumbing to it, we create fail-safes.
Resilience Vs. Growth
A start-up client of mine had a hard time raising a Series A. Once he did, it was less money than he had hoped. The strategy he had pitched called for massive, fast growth. That would take even more funding later.
He suspected that raising the next round would be just as hard. So, he proposed a modified strategy to his board—one that few startup founders consider.
Instead of investing the new monies in rapid growth, they would slow the pace, aiming for profitability within 18 months. Yes, PROFITABILITY.
Rather than scale the product to add new verticals, they would focus on retention and upsell features for customers, as well as a pared-down version that could sell faster and to a broader market.
The board was split. But he ultimately won them over with some careful negotiation.
The last three months (which started in December, 2024), have made his strategy look prescient. The company is on solid footing; even as new funding becomes harder to find.
Salmon, Squirrels and Honeybees
Even evolution favors resiliency.
While salmon generally return to their birthplaces for spawning, they vary the migratory routes to get there. They are hedging. If every fish went the fastest route, the whole school would vanish with a single predatory run-in.
The process costs efficiency. But it ensures some fraction of the salmon will reproduce.
Plus, some salmon spawn in different locations. And they stagger their egg-laying season, with some fish doing so earlier and some months later.
These many exceptions represent optionality. Each divergence is less efficient than the ideal. But they create redundancy, and thus, resiliency.
Fish aren’t the only species who hedge. Squirrels hide nuts in myriad different places. And contrary to myth, they do not remember them all. So, some nuts go unused. But the whole cache is never in danger. Squirrels optimize for survival, not wealth.
Even “busy” bees surrender productivity for resilience. Only a small part of the hive forage for nectar. The remainder stay back, idle. If the foragers all perish, the idlers survive.
Evolution and Investment
In business, we face the same issues—that large changes or events are likely. So, does the optionality that benefits animals also apply to strategy? And is it worth a loss in efficiency or productivity?
The hedge fund, NZS Capital, thinks so. They look for optionality as one key trait in the organizations in which they invest—even at the expense of the fastest growth or greatest ARR.
That makes sense as an investor—unless you are a day trader. We want our investments to be durable over the long term.
Is that any less true for the organizations we lead? Yet, the entire start-up ethos is to go “all in” and grow as fast as possible. That comes at the expense of resiliency.
Strategize for Resiliency
We all have “givens” that we assume are true in our enterprises.
But consider how many organizations considered their “just-in-time” supply chains as reliable “givens”.
The pandemic upended that premise. But it could as easily have been labor strikes, shipping accidents, port closures, bridge collapses or high tariffs—all of which have occurred since the pandemic.
Jeff Bezos is famous for pointing out that, while many things would change, customers’ desire for low prices and fast shipping would not.
But the rest of us tend to rely on those phenomena most likely to change: investor behavior and funding, competitors, trends, and customer behavior. Those are all volatile –and yet integral to many startup strategies.
What are the things that don’t change? Of course, as Amazon has exploited, a love for low prices and fast delivery. But there are others.
Customer Preferences:
- Ease of Use
- Quality
- Time savings
- Prestige
- Transparency
- Autonomy
Business preferences:
- Security
- Efficiency
- Control
- Infrastructure Flexibility
- Fixed Cost
This is far from an exhaustive list. But it’s a starting point. Is your strategy built upon volatile premises? If it is, you may be sacrificing its future.
Tighter Capital Markets
Investors often seem adventurous when they sign a deal sheet. But when demand drops, or competition heats up, or costs rise, they will suddenly sound like 1975-era bankers. That sudden parsimony can tank your strategy through budget cuts and extra pressure to sell.
High growth strategy—the kind that relies on massive and recurring investment—is not ideal in uncertain conditions. Investors get spooked. Unless you are growing geometrically, it’s probably not fast enough to allay their anxiety.
Reduced Demand
Often, when your conditions change so do your customers’. Whether you are B2C or B2B, the massive uncertainty in the market will alter their behavior.
Business customers stop focusing on growth and instead hoard cash. However foolhardy, they don’t even invest in the very things that would increase their survivorship (like more efficient infrastructure—or strategy consulting!).
In that event, you need a way to sustain (or alter) demand in new conditions.
Hopefully, your strategy relies on the least changeable conditions.
But if it was built with the belief that the current conditions (say, the AI hype), will remain the same, everything could become moot at any moment.
Options
The smartest strategists resist single path dependency. But there are far fewer smart strategists than LinkedIn would suggest.
If we made the error of overlooking resiliency, and now, something fundamental has changed, how can we adjust?
We need optionality; just like the scrappy, diversified salmon.
- If the B2C market is tighter, can you sell to small business or enterprise?
- If high compute costs are slowing your LLM-based development, can you ship a light-weight version?
- Are there markets that are attractive because of the turbulence?
With Chinese tariffs at 135% (As I write. But it could be anything on another day.), even Amazon will suffer. But they have the cash reserves to wait it out—whether it lasts for months or years. You and I don’t.
Scenarios
If your strategy is the type that burns lots of cash but might catch fire—you must think about the alternate possibility. What if something changes? What if your assumptions don’t hold up? In other words, you need a Plan B.
That doesn’t mean you should bootstrap. But you need options that have been crafted in advance so they’re deployable on a dime.
It all starts with your scenario planning.
Scenario planning should happen twice during strategy creation.
First, in the basic design of your model. What is your unfair advantage? There are different scenarios that will drive different hypotheses.
But you also need to consider the Greased Slide, Low Friction, and Straight Uphill versions of your strategy.
These start from the same value proposition—but each under different conditions.
When you have lots of funding, slightly more resistance, technical snags that slow shipping—or a crazily uncertain macroeconomic climate.
Unless everything remains advantageous, you may need to pivot.
In the Greased Slide version, you expect high growth and sufficient funding. But in the Straight Uphill version—as global unrest leaves businesses paralyzed—you need a way to build your company with far less revenue or a different model.
Maybe it means recalibrating your development and calling on reserves. It may also mean targeting new markets or altering pricing to meet the moment.
In an uncertain world, resilience trumps productivity.
Yes, it is more efficient to work full out and save nothing. But it also cannibalizes your probability of survival.
You can only fulfill your vision if you are still alive. [click to tweet this thought]
