Most Black Swans are business as usual

Since I came to Australia I know that black swans are common. I actually go regularly feed these swans with my two girls. For my two girls, black swans are as any duck or sheep; perfectly common animals. According to Taleb in his book The Black Swan, black swans follow the 3 following criteria:

  1. The event is a surprise for the observer
  2. The event has a major impact
  3. After the first recording, the event is rationalized as if it could have been expected

The Black swans terminology is currently often used to describe supply chain risk, disaster recovery or business continuity programs. The questions we have to ask ourselves and the scenario’s we have to plan in these programs might be unlikely, but they are not Black Swans.

In the beverage industry it is common to split production of the core recipe in 2 factories. This is done to split the formula to protect IP, but also as disaster protection. There is a change a disaster can strike one of the factories. Being able to produce your core recipe in two factories prevents disruption in the supply chain.

When I was supply chain manager in the beverage industry we were about to close our largest concentrate factory in France and outsource it to 3P in the Netherlands and Spain. As we expected strikes with potential sabotage, we stockpiled frozen concentrate in the Netherlands and Belgium in case anything went wrong with the transfer to the 3P. A sferocious strike did indeed happen and we used all our concentrate stock and even had to look for alternative sourcing, while we were setting up 3P production. Luckily we bought ourselves time to do so. Our business continuity plan, as we called it, saved us. The supply chain was disrupted and it was hard work, but the customer and consumer didn’t notice.

If you want your business to be prepared and continue, treat the following scenarios as if you expect them:

–       Your factory is down a week a month or even longer

–       You main customer or supplier goes out of business

–       Your IT systems are down for a day, a week or….

–       The main ports or borders in your country or continent are closed (happened to me in France, Spain and Italy at the same time)

–       Natural disasters, especially not in earthquake, hurricane and valcano  prone areas

–       Your CEO boarding a plane that crashes

–       The bad winter weather in Europe, that closes down airports every second year

The list goes on and on, but you get the point. Maybe change your mindset and plan these scenarios as if they could happen at any time. Just like my girls who expect to see Black Swans when we go to Albert Park here in Melbourne.

2 thoughts on “Most Black Swans are business as usual

  1. Hi Niels,

    This is a very interesting insight into the ‘Black Swan’ way of things. To plan for uncertainty as the most certain thing to happen should perhaps be the right way to approach it. An interesting observation I made during my visit to Kakinada, a town on South India’s east coast that was massively damaged during the 2004 Tsunami. The tsunami is undoubtedly the worst thing the fishing community of Kakinada ever experienced but they told me that they have made it a point never to forget it – a black swan they sure hope not to see but are prepared for in case it turns up again. As a result – they all got bank accounts and no longer think the clay pot suspended from the roofs of their thatched huts is the safest place to keep their money.

  2. Hi Mubin,
    thanks for your feedback and the very interesting perspective you give on how people adapt on events that happened to them. Makes one put the supply chain angle of Black Swans in perspective

    cheers,
    Niels

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