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Achieving Agility

What is agility? And why is it hard to achieve?

Amanda Setili | Setili & Associates

One in a series

agilityIn my work with organizations in every industry, I have discovered that the most consistently successful companies – the fastest-growing, the most profitable, and the most rewarding places to work – are the most agile.

These organizations are able to see and respond to changes in the marketplace more capably – and quickly – than their competitors.

In years past, companies could pick a strategy and stick with it. Perseverance was rewarded. Once they established competitive advantage – whether from lower costs, higher quality, or a superior customer relationship – they could often maintain it for years, even decades.

Nowadays, however, change comes faster – and companies can surge ahead of or fall behind competitors in mere months.

Agility is the ability to see and capitalize on new opportunities quickly. It has three components:

  • Market agility
  • Decision agility
  • Execution agility

Each company has unique challenges that threaten its ability to be agile. Some excel at gaining market insights and identifying opportunities, but get bogged down in the decision-making stage and let opportunities pass them by. Others falter in the execution stage.

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Components of Agility (click to enlarge)

Some execute superbly, but miss market signals – and head fast in the wrong direction as a result.

BlackBerry (formerly RIM) had a blinding confidence in its core product, believing that its large installed base, proprietary network, and superior security features would enable it to maintain market dominance.

But the company was too slow to improve, and saw its share of the smartphone market drop from over 40 percent in 2008 to only 5 percent in 2013 – and less than one percent in 2014.

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 Agility is the ability to see and capitalize on new opportunities quickly.

In a similar vein, Microsoft once dominated the technology industry. Since 2000, however, Microsoft has struggled in almost every arena it has entered, including tablet computers, music players, search, and social networking.

Meanwhile, newer players such as Google and Facebook have raced by Microsoft and radically changed the way we live.

Blockbuster, Borders and Hewlett-Packard have similarly fallen from their prominent positions and have not recovered, at least to date.

What was the cause of these companies’ troubles? Each had smart people and resources to spare, but they ignored the signs that change was needed.

In some cases, they failed to see opportunities to capitalize on change; in others, they recognized an opportunity but failed to act in a timely and effective way.

I have observed five primary obstacles to achieving agility:

1. Companies lose touch with customers, and leaders lose touch with their own employees. As a result, they receive poor, late, biased, or no information at all about emerging customer needs, changes in competitor capabilities, or the possibilities being created by new technologies. When a new opportunity does arise, they often fail to see and act on it.

For example, one company I worked with became so focused on operational cost reduction and efficiency that its leaders failed to notice when three of their largest customers shifted a major portion of business to a new competitor.

Had they noticed earlier – or responded faster – they could have prevented a major loss in revenue. Unfortunately, the revenue loss effectively erased the profitability gains they had worked so hard for.

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 In some cases, companies fail to see opportunities to capitalize on change; in others, they recognize an opportunity but fail to act.

2. Companies employ financial incentives that motivate short-term thinking and doing “more of the same.” To compound this, many leaders do not know how to deal with unpredictability in a systematic way. They therefore hesitate to take action without irrefutable data supporting the new direction.

I once worked with a company leader who had identified an attractive strategic opportunity, but was slow to act. The leader wanted to conduct additional research and fact-finding to be certain the initiative would not hurt his quarterly earnings.

But while he was gathering data, his competitor took action that preempted him. His company never fully recovered.

3. Leaders become wrapped up in daily challenges and business as usual, which keeps them from investing time in imagining what the future might hold or how they might take advantage of coming changes. They fail to effectively bridge corporate silos and encourage real debate regarding their company’s future direction.

Microsoft stayed focused on retaining profits in its historically strong product lines – Windows and Office – while the market was shifting to tablets and smartphones.

As a result, the company’s share of Internet-connected computing devices has declined from 90 percent in 2009 to only about 20 percent today.

4. Organizational structure gets in the way. I recently met with an executive at a leading supplier of financial services technologies. I knew that the company had identified a major new product opportunity more than five years ago, so I asked him how they were moving ahead.

“We haven’t made much progress,” he explained. “The capabilities we need to pursue this are spread across three or four different business units. Each would get credit for only a small portion of the revenue, so they have little incentive to go after the opportunity.”

5. Even if companies see opportunities and make a timely decision to pursue them, leaders often fail to communicate the compelling, inspiring vision required to harness their employees’ full energy, creativity, and agility.

IBM’s revenue has declined for last 10 quarters (as of the third quarter of 2014), as the company struggles to keep up with the market shifts to cloud computing and mobile.

The company’s CEO, Ginni Rometty, devotes immense time to internal communication – knowing that the company stands the best chance of success if every employee is fully engaged in making IBM a leader in these areas.

In future columns, I’ll talk about how agile companies overcome these obstacles, and how they hone their organizational agility to take advantages of emerging opportunities. goldbrown2

Adapted with permission of the publisher, Jossey-Bass, from The Agility Advantage: How to Identify and Act on Opportunities in a Fast-Changing World by Amanda Setili (Setili & Associates). Copyright (c) 2014 by John Wiley & Sons, Inc. All rights reserved. This book is available at all bookstores and online booksellers. Click here to learn more.

 

amanda
Amanda Setili is managing partner of the strategy consulting firm Setili & Associates, whose clients include Delta Air Lines, Home Depot and Walmart. She previously held positions with Global Food Exchange, McKinsey & Company, Asia Connect in Malaysia, and Kimberly-Clark. She lives in Atlanta, Ga.

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