Back in the dot.com boom around 2000 I was Chief Technology Officer of a start-up that changed direction 180 degrees in 6 months.
Within the first six months we had speed: we had our solution up and running to demonstrate a net-market for trading materials between cable manufacturers and their suppliers. (The solution cost around £200k – it had to, we only had £5 million of initial funding for the first 18 months). However despite getting to market quickly, it soon became apparent this was not what the industry wanted. Suppliers worked cooperatively with their customers: it was not a “drive price down market” but a trusted relationship where suppliers helped with R&D and technology developments. What did we do?
In month seven we produced a prototype collaborative supply chain solution for the same market and demonstrated it to a cable manufacturing company. Five or six months later one of the biggest cable manufacturers in the US bought our solution for their 300 suppliers and the net-market was quietly dropped. We had conducted a complete strategy change inside six months. Now that is speed and agility.
According to a McKinsey survey Agility and speed is what organisations want. In Building a nimble organization: A McKinsey Global Survey Executives are convinced they can boost business performance by improving how well the organization can shift its strategic direction and how fast it can execute its operational objectives, but at the same time they are grappling with how to achieve this. Nearly 90% of respondents said agility: the ability to change direction was important. Over 85% said that speed, the ability to deliver objective quickly, was important. Bear in mind that this survey was in 2006, two years before the credit crisis where agility and speed were tested to extremes for many organisations and the realisation for the need increased further.
So what stops organisational agility and speed? The organisational barriers highlighted in this survey are clear, but varied: Over centralisation and yet a lack of coordination. Slow decision making yet poorly communicated objectives. Boundaries that restrict information flow and restrictive rules and practices.
The behavioural and cultural barriers show a similar picture: Employees show a lack of purpose, they tend to refer decisions upwards, company politics consuming time, over-analysing decisions and failing to hold individuals to account.
In their later view on organisational agility Competing through organizational agility, (2009) they define three types of agility that help organisations to compete: strategic, portfolio, and operational agility. They suggest that many organisations rely on a single source of agility – just one of strategic agility, portfolio agility, or operational agility and suggest this can be dangerous. This comes from the work of Don Sull is professor of management practice at the London Business School and author of The Upside of Turbulence.
What are these three forms of agility: They define them as follows:
1) Organisational agility is your organisation’s ability to exploit revenue improvement and cost reduction opportunities within its core business. To do this more quickly, effectively, and consistently than your rivals.
2) Portfolio agility: This is your ability to re-allocate cash and more importantly people, across your portfolio or companies, businesses and operations, to best effect. The Sage of Omaha would like this – asking where best to allocate capital and resources.
3) Strategic agility: Despite reading the article three times their definition of strategic agility is not spelt out. It seems to rest on the ability of managers to monitor for unexpected events, seize opportunities and mitigate risks.
I think we can be more precise than this. We believe strategic agility is about managements ability to ask refine, test and revise their strategy based upon the three main questions from our Strategic learning Model. A model that in part evolved to accommodate the rapid change of strategy that we as a management team experienced in that dot.com. Those three questions are:
1) Operationally how are we doing,is this working? Do we need to change things?
2) Is our strategy working as we expected – if not how do we refine and change it and re-communicate and re-socialise it. Can we re-plan and re-allocate resources? Do we need to refine how the strategy is being implemented?
3) Is our strategy still relevant? Are we monitoring the external environment for changes, assumptions, risks, and competitor moves or moves in the market? Do we need to change the strategy slightly or fundamentally?
These are the three main questions defined by the strategic learning model that we use with all our clients. It is based on a model of how people and organisations learn. The great feature of the strategic learning model is that it will handle traditional top down annual strategy, planning, budgeting and implementation. It will also handle iterative, entrepreneurial, bottom up strategy. It can be operated at any speed you like depending upon the drivers and events or the speed of responsiveness required. Thus an organisation, and its management teams, can learn to be more strategic, then more agile, and then add speed as well.
These two McKinsey articles are well worth reading. They have some great examples, but leave you wondering what to do next.
Our answer to that is to for you to look at our strategic learning model and ask yourself the question – how well are we doing each of these arrows on this diagram?
Our answer to the problems of organisational behaviour and culture is to start treating people as human beings, and to improve the organisation’s decision making a management team at a time. This is a part of our culture of performance approach.