Profile of a Disruption

What happens when an earthquake hits Haiti or a tornado plows into a GM manufacturing facility in Arlington, Texas? Such disruptions are classified as low probability/high-impact events which can generate magnified outcomes and their rarity means a lack of experience in estimating both the likelihood and their consequences. In many cases, such disruptions are accompanied by public fear that exacerbates the impact of the initial disruption.

Author Yossi Sheffi discusses this and much more in his book The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage (2005). Sheffi points out that disruptions go through several characteristic stages, even though their severity and duration vary from case to case. The nature of the disruption and the dynamics of the company, organization or countries response can be characterized by the following eight phases that are depicted on the graph.

1. Preparation. In some cases, a company can foresee and prepare for disruption to minimize its effects. Such warnings range from the 30-minute tornado alert GM might get to the several months of watching the deteriorating labor negotiations at the West coast ports. As with Haiti and 9/11, there is little or no immediate warning. Haiti was poorly prepared - - no earthquake had been recorded in over 200 years on the island - - in a region of the world with a preparation focus on hurricanes.


2. The Disruptive Event. This is the time when the tornado hits, the accident occurs, the bomb explodes, a supplier goes out of business, the union goes on a wildcat strike, or any other high-impact/low-probability disruption takes place. For Haiti, this was January 12, 2010.


3. First Response. Once the disruptive event takes place, the first period in the case of physical disruption is the domain of first responders (police, firefighters, first aid workers) who have to attend to the initial damage, if any. The duration of this period is anywhere from the time period required to put out a fire to the months it took to dismantle and clean "Ground Zero" at the World Trade Center. Haiti's efforts started on the 12th and 13th primarily with local resources and limited support systems.


4. Delayed Impact. The full impact of some disruptions is felt immediately. Other disruptions can take time to affect a company or country, depending on factors such as the magnitude of the disruption, the preparation undertaken, and the inherent resilience of the organization and its supply chain. Haiti was immediately impacted by concerns over shelter, medical treatment, food, and water. The massive international response created a very tight airspace over the single runway hindering aid efforts impacting the efforts post-actual earthquake. Additional after shocks created additional delayed impacts.


5. Full Impact. Once the full impact hits, performance often drops precipitously. We saw this in Haiti - - especially in the medical treatment areas given the tremendous number of injured individuals. The recent snow events in Washington D.C. illustrates that some retailers are often unprepared for an increase in demand during panic buying. Examples include gas hoarding during fuel shortage periods, stockpiling food items before a snow storm, and buying lumber for boarding windows in anticipation of hurricanes.


6. Recovery Preparation. Preparations for recovery typically start in parallel with the first response or shortly after they commence. For Haiti, this involved preparing the logistical infrastructure to support a massive recovery effort - - primarily in the context of DOD and USAID personnel and resources.


7. Long-Term Impact. It typically takes time to recover for disruptions, but if customer relationships and civic relationships are damaged, the impact can be long-lasting and difficult to recover from. Haiti may take a considerable length of time to fully recover - - where the word recover may be a moving definition in the context of a historical perspective.