Captain Contingency

Building redundant IT systems is most important for technology-intensive industries such as financial services. But even universities and other organizations with less pressing need for immediate backup should evaluate which types of data are most crucial to their daily operations.

MIT logistics expert Yossi Sheffi talks with CIO about what companies can do to recover quickly from almost any type of disaster.

When the South Tower of the World Trade Centre collapsed on Deutsche Bank's New York facility, the German banking giant lost its connection to the US markets. Almost immediately, however, backup systems in Ireland kicked in, and Deutsche Bank went on to clear more than $US300 billion in transactions that same day.

After the September 11th attacks, and more recently hurricanes Katrina and Rita, companies such as Deutsche Bank have been able to bounce back because they planned for the unthinkable (a situation which hopefully more than a few far north Queensland businesses did too in the wake of hurricane Larry). Yossi Sheffi, director of MIT's Centre for Transportation and Logistics, calls these organizations "resilient".

In his recent book, The Resilient Enterprise, Sheffi says companies and government agencies need to take a systematic approach to disaster planning. The list of things that can go wrong is endless, especially in this age of supply chains that stretch around the globe, leaving companies vulnerable to strikes, natural disasters and civil unrest far from home base. Companies need to start cataloguing what could go wrong, but they also need to examine their cultures to make sure theirs is resilient. Companies that recover in the face of devastation are those with redundant systems, but they also empower all levels of employees and create a sense of passion for work, Sheffi says. Company cultures that promote resiliency should be equipped to respond to almost any disaster.

Building redundant IT systems is most important for technology-intensive industries such as financial services. But even universities and other organizations with less pressing need for immediate backup should evaluate which types of data are most crucial to their daily operations. It's a simple equation, Sheffi says. "It's better to pay something now, than to possibly lose your business in the future," he says. Sheffi recently spoke with CIO about what makes companies resilient and how CIOs can build a case for a comprehensive plan to keep IT systems up and running when the unthinkable strikes again.

CIO: Several recent disasters have shown that companies and their IT leaders need to be prepared for the unknown. What have we learned, for instance, from Hurricane Katrina?

Yossi Sheffi: We've learned that the fates of companies and government agencies are sealed before the disaster hits. Organizations that get ready perform well; those that don't prepare don't do well.

Just look at FEMA. They were hiring people with no qualifications, and they had not set up adequate communication systems. This was happening for years. And New Orleans had not responded to warnings three days before the storm hit. On the flip side, we should look at Wal-Mart and Home Depot, which responded quickly. They have both spent years building up their emergency room and communications systems so they can respond to any natural disaster. These companies are able to change course when conditions change abruptly.

What should companies be doing right now to emulate Wal-Mart and Home Depot?

They need to look at company culture. There is something in the DNA of resilient companies that is missing from those that falter and suffer. It goes beyond just redundancy. First of all, communication is key, and I've found that resilient companies communicate obsessively. The US Navy is a good example. On aircraft carriers, there are lots of so-called listening networks that allow lots of people to listen to communication between pilots, the tower and the landing signal officers and others. It may sound like a lot of chatter, but everyone is listening intently so they can react immediately if something goes wrong.

Another factor is empowerment. At Toyota, for example, every worker can pull a cord and stop production if they see a quality problem. If they pull it, the line stops and a team of engineers descend to see what is going wrong instead of just letting the line keep working. This is an effort to prevent the making of bad cars. The same thing happens on a Navy carrier, where every sailor on deck has the right and responsibility to stop flight operations if they see a problem developing. This is amazing because you're talking about what could be a 19-year-old with one year of training having the right to stop a multibillion-dollar ship with 6000 highly trained sailors on deck. In disasters, it's clear that you have to react immediately, and it's possible that one sailor could see it coming.

The third characteristic of good culture is a passion for work. Navy sailors, for example, don't think about their job as driving big ships, they think of their job as defending freedom.

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