Companies have always had to respond to changes. A new competitor moves in down the block. The business across the street lowers its prices. The company next door makes a little change to a product to make it more appealing than our product. New government regulations arise. If a company didn’t react to these changes, it might not even make it.
Isn’t that what agility is all about…changing?
So why do people seem to be making such a big deal about the need for companies to be more agile?
Simply put, if the world was not changing so rapidly, companies could continue operating in much the same way they always have. Compared to today, the business world of yesteryear was glacially slow…but then again, you didn’t have to move quickly. You understood who your competitors were. You likely knew their product plans, but even if you were surprised, any changes they might make would not be so radically different that you couldn’t catch up in a relatively short amount of time. Your overhead compared with that of your competition was in the same ballpark. Your customers often knew only what you told them about your pricing, quality, and product. And while you might listen to them, your customers rarely if ever presented a united voice. Things were methodical, and the pace of change was linear.
Our World Is Becoming Increasingly Unpredictable
But things have changed. Information is growing at an exponential rate. Wired magazine founder Kevin Kelly and Google economist Hal Varian calculated that information has been growing 66% per year for several decades now.1 Based upon the growth in patent applications and published scientific articles, they also surmise that knowledge is increasing exponentially as well. There is a growing culture of collaboration which promotes collective knowledge rather than simply relying upon what the smartest person in the company knows. And this collaboration is no longer confined by the walls of your office or the organization chart of your company. We can confer with someone on the other side of the globe as easily as on the other side of the street. We can involve anyone in our ecosystem – from the supply chain to the customer – bringing even more interdependence and enhanced complexity. In many cases, barriers to entry have diminished. For example, two people in a garage can spin up an entire data center overnight at a fraction of the cost and time of building one. The inter-connectivity of customers and the effect that can have on your business ecosystem adds yet another dimension. Our world is not only moving at a much faster pace, it is accelerating and at the same time becoming more and more unpredictable. VUCA (Volatility, Uncertainty, Complexity, Ambiguity) is an apt description. In short, it’s crazy out there!
This unpredictability is precisely what is driving the need for greater agility in business.
Agility and Reacting To Change Are Not Equivalent
When the pace of change was linear, time was on your side. It was easy to make a few small tweaks to your plans when the occasion called for it. While you might lose a few sales, it wasn’t a “bet your company” proposition. You had the time to react and gear up to make any changes necessary. But with the exponential rate of change today, the problem is not just the speed of change but also the degree of change. Nigel Fenwick puts it this way: “Your company is very likely to face an extinction event in the next 10 years. And while you may see it coming, you may not have enough time to save your company.”2 Time is no longer your friend.
Being agile does not simply mean that you have made up your mind to react to change when it is thrust upon you. Your extent of agility is determined by the degree to which you can change course and the speed in which you can achieve this change. While both a ballerina and a battleship can change course, one would never think their agility is the same. Obviously, the amount of baggage your company carries will make a difference on how agile you can be.
But just as a ballerina cannot unexpectedly change directions in mid-air, your company cannot pivot without a firm foundation. In fact, McKinsey found that “truly agile organizations, paradoxically, learn to be both stable (resilient, reliable, and efficient) and dynamic (fast, nimble, and adaptive).”3 This does not mean that companies must retain their current plethora of rules and structures that keeps everyone in their boxes for fear of hurting company efficiency. Instead it requires everyone to understand the direction of the company and then do what is best to move in that direction while living within a minimal set of standards.
In addition, companies must be able to anticipate change whenever possible. Rather than internal, your focus must be external – upon your customers, the ecosystem in which you operate and even upon the startup community which may spawn your next partner or competitor. Such anticipation increases agility by helping you to prepare, adjust, and adapt. This external focus can also be used to feed your innovation engine bringing value creation4 and helping you to create your own future.
Companies can no longer achieve success by setting sail on a 5-year strategic plan that is revisited just once a year. Nor can organizations afford the time to run most decisions up and down the chain of command. The unpredictability of our world today demands increasing agility to thrive – and perhaps even to survive.
Sources:
1 Kelly, Kevin. “The Technium: The Expansion of Ignorance.” Kk Lifestream, kk.org/thetechnium/the-expansion-o
2 Fenwick, Nigel. The Future of Business Is Digital, https://www.forbes.com/sites/forrester/2014/03/10/the-future-of-business-is-digital/#6e13083a7db8
3 Wouter Aghina, Aaron De Smet, and Kirsten Weerda. “Agility: It Rhymes with Stability.”McKinsey & Company, www.mckinsey.com/business-functions/organization/our-insights/agility-it-rhymes-with-stability.
4 Satell, Greg. “Innovation Is The Only True Way To Create Value.” Forbes, Forbes Magazine, 6 Dec. 2015, www.forbes.com/sites/gregsatell/2015/11/29/innovation-is-the-only-true-way-to-create-value/.
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