Definition of Strategic Agility
Strategic Agility is an organization’s ability to think ahead of the market, quickly mobilize itself, adapt to market shifts, fill capability gaps, capture new revenue ahead of the competition, and even create new markets. Strategic agility requires going outside of systems, structures, and processes, and allowing fluid organization of teams to achieve loosely defined missions. It is an innovation playground.
Strategic Agility Construct
The main dimensions of strategic agility, as illustrated in Figure below are:
- Strategic Sensitivity
- Strategic Rresponse
- Collective Capabilities.
Below is a detailed elaboration of the strategic agility construct, sub-dimension and the required IT services. In addition, examples of IT are provided but note that IT could have more other roles than stated.
Strategic sensitivity is further classified as strategic foresight and strategic insight. Strategic response is viewed from an internal response orientation and external response orientation. And collective capabilities are made up of human resources capabilities, infrastructure resources capabilities and information resources capabilities. These dimensions are described in Table 1 below and in addition the role of IT is stated. This multi-dimensional construct of strategic agility was developed from literature review, for instance, Doz and Kosonen (2008), Overby et al. (2006), and Sambamurthy et al. (2003). In addition the strategic agility construct and its sub-dimensions was reviewed by academics and practitioners in two research workshops.
Achieving Strategic Agility
Strategic Agility occurs in two main ways: either as a by-product of Operational Agility or through use of an explicit playbook to generate market-creating innovation.
- By-product Of Operational Agility: At Spotify, for instance, Discover Weekly was intended to solve a known problem with an existing product: the difficulty that existing users were having in locating music that would truly love, in Spotify’s vast library of millions of songs. Users were spending most of their time searching for songs, rather than actually listening to music that they loved. Discover Weekly not only solved that problem for existing users, by matching users’ tastes with billions of existing playlists and presenting a fresh personalized playlist to each user each week. The innovation was so wildly successful that it brought in tens of millions of new users and became in effect brand in itself, in some countries perhaps even better known than “Spotify” itself. Spotify’s approach to innovation is mainly based on the lean-startup principle that views the biggest risk in innovation to be building the wrong thing. In essence, you start by imagining what you have in mind. Then you check whether any customer would want it. Then you build a prototype. Then you go on tweaking it, adding features that may help monetize the feature. While this approach can work well in terms of improving existing products for existing users, it has several limitations in terms of systematically generating market-creating innovations.
- First, in an ongoing organization as opposed to a startup, Agile teams are mainly focused on making things better for existing users. If the improvement creates new markets of users and non-users, that is a happy accident, rather than the main goal. To get more consistent success in generating market-creating innovations, an explicit focus on attracting non-users is needed.
- Second, market-creating innovations sometimes involve eliminating features, not adding or improving them. Paradoxically, less may be more. Thus, a firm may generate market-creating innovation by eliminating elements that it or other firms are marketing as high-value for customers. The resulting simplification can sometimes perform the dual function of lowering costs and drawing in vast numbers of new users. A classic case is Southwest Airlines which based its business on eliminating the very features which the rest of the airline industry trumpet: meals, lounges and seating choices. As W. Chan Kim and Renée A Mauborgne point out in in their classic book, Blue Ocean Strategy, “Southwest offered high-speed transport with frequent and flexible departures at prices attractive to the mass of buyers… the company emphasizes only three factors: friendly service, speed, and frequent point-to-point departures… it doesn’t make extra investments in meals, lounges, and seating choices. By contrast, Southwest’s traditional competitors invest in all the airline industry’s competitive factors, making it much more difficult for them to match Southwest’s prices.” For many customers, fewer features and lower prices plus a friendly and timely service adds up to a package that is a better deal. Yet the decision to eliminate seemingly popular features is not one that is easily taken at the level of the Agile team. Agile teams are generally focused on adding new features requested by existing customers. Teams are unlikely to propose or carry out experiments to eliminate key services that would bring in new customers, since it is usually assumed that features being used by existing customers must be valuable to them. Moreover, existing features typically have their own constituencies within the organization: a team that has created a feature often becomes a lobby for retaining and improving it. Unless there is a explicit decision at a higher level to pursue the elimination of features with the goal of attracting new non-customers, it is unlikely to happen. Thus, traditional airlines had difficulty emulating Southwest’s low-cost model with its spinoff Ted, in part because of internal lobbies to keep running the airline the way it has always been run.
- Third, market-creating innovations can lead to self-cannibalization of the firm’s existing products and so generate a reluctance to interfere with a current revenue stream. Thus, it wasn’t an easy decision within Apple to include a music-playing capability in the iPhone, because it cannibalized the market for the iPod. Initially, even Steve Jobs himself is said to have opposed it. It was only the realization that if Apple didn’t disrupt itself, some other competitor would do so that led to the eventual decision to include music playing in the iPhone. Thus, eventually a decision was made to sacrifice the revenue stream from the iPod in favor of the larger potential gains from the iPhone. Such a decision is never easy and typically it has to be taken at the highest levels of the organization.
- Fourth, work on improving existing features can be suitable for low-investment market-creation, as at Uber and Airbnb. But it’s rarely a solution for innovation that requires substantial technical innovation or financial investment. When the firm is imbued with lean-startup thinking, the firm often ends up pursuing a series of “small bets”, to the neglect of “big bets.”
- Fifth, if corporate incentives flow to people who can “move the needle” by showing immediate results from improving an existing product for existing customers, then any slow-moving “big bets” under consideration will tend to morph into “small bets” that generate quick wins. The pressure to “get results now” will make it harder to attract top talent to work on expensive slow-gestating investments that could have huge gains if they were to be pursued. And those who are working on developing something completely new may become discouraged as they will have no immediate results to show for their efforts. To overcome these pressures, top management must delineate the importance of winning “big bets,” even if their gestation is slow, and create specific incentives to accomplish them.
- Finally, lean-startup thinking is not well-suited to deal with decisions on market-creating innovations involving large investments in a new product, when no one knows in advance whether the idea will work or not. Often, it isn’t possible initially to put a prototype in front of potential users and see whether they will use it and be thrilled by it. In most cases, there will be no “hard data” on which to base a decision. In the absence of an explicit playbook to foster market-creating innovation, decisions on such large investments will tend to be based on corporate politics: the loudest voice having the most hierarchical clout will end up making the call. In the absence of hard numbers, proceeding with the investment will often be perceived as presenting too great a risk and the investment will be abandoned. If a decision is finally made to go ahead with investing in a capital-intensive innovation after a bruising battle at the top, it can be hard for the organization to change course even if actual data starts to show that the firm is on the wrong track. In such situations, the firm may continue to invest in a losing proposition, until it turns into a disaster that is too obvious to ignore.
- A Playbook For Market-Creating Value Propositions: A playbook for Strategic Agility provides the basis for generating market-creating value propositions that systematically create new markets for products or services that will enjoy strong demand and growth from both customers and non-customers. The aim is to create products or services that enjoy little competition, precisely because they meet a need in the marketplace that is currently not being met — the so-called “blue oceans” of profitability. Market-creating value propositions involve a shift in thinking from the known to the unknown — from existing products to unknown products, and from users to non-users of the firm’s products. This in turn means redefining how needs are being met and in the process, discovering value for customers and non-customers from elements that lie outside current thinking, within both the firm and the industry. It also means a shift from thinking of outputs of the organization to considering outcomes for the customer or end user. “Instead of thinking of your company as providing a particular type of product or service — electric power, health records management, or automobile components,” writes consultant Norbert Schwieters, “think of it as a producer of outcomes. The customer needs to get somewhere, so you’re not a car company; you’re a facilitator of that outcome. The house is cold, so you help make it warm, possibly without supplying the necessary fuel… Customers, in turn, are making fewer purchases to accumulate physical things and more purchases to achieve outcomes, convenience, and value.” Thus Christensen and colleagues argue in their book, Competing Against Luck, against “defining customer needs through typical market research and then delivering against them.” This can lead to a focus on “functional needs without taking into account the broader social and emotional dimensions of a customer’s struggle… And in many cases emotional and social could be on the same plane as functional needs — and maybe even be a driver.” For example, the Rolex watch is a status symbol, and most of its value is based on the intangible deliverables.
Elements of Strategic Agility
Laying a solid foundation for a strategically agile organization requires three key elements.
- Clarity: Developing strategic agility starts with getting clear on winning. Without it, people and organizations typically end up going in many different directions, especially when faced with unexpected change. Most leaders can pretty quickly provide the financial objectives. You want to enable everyone in your organization to understand the business of your business and have the ability to make the best possible decisions day to day and moment to moment to get the organization to its destination. And you have to communicate why the destination is the one that it is including how it will benefit customers and employees. Having a vision of winning that people understand makes it easier to get and keep everyone working on the same page throughout the year.
- Focus: If getting clear on winning represents the starting point for strategic agility, keeping people focused on the goal is the driving force behind getting there. Front-line employees tasked with delivering your product or service day in and day out can easily lose sight of the big picture. You can help them stay focused by constantly communicating your company’s definition of winning in many different ways and with as much specificity as possible. For example:
- Start every meeting by reviewing the organization’s top three strategic goals and how they will help everyone win.
- Post visual cues and “brain prompts” throughout the company to remind people of the destination – what it looks like when you’ve arrived at the goal.
- Make sure individual employees understand how their jobs contribute to the organization achieving the goals.
- When things change, communicate how the company will still win and why.
- The more you keep people focused on winning, the better your chances of hoisting the trophy at the end of the game.
- Connection: Connection starts with having a powerful vision people can believe in and feel good about, and it also requires giving honest, candid performance feedback on a regular basis. Feedback has always been an essential ingredient of high-performing teams. With increasing numbers of Millennials and GenZers entering the workforce, it has become more important than ever. Employees of all generations want feedback, especially when delivered in a timely and constructive manner. However, Millennials and GenZers will demand it – from their managers and their peers. If you don’t give it to them, they will find another workplace that does. Moreover, these younger generations expect to be able to give feedback as well. They have grown up in a social media world that makes it easy to give instant feedback to anyone, anywhere, at any time. Those born since the advent of smart phones don’t know any other way in their social lives, and they expect the same type of communication on the job. This may take some getting used to for leaders who grew up in a work environment where feedback was mostly top-down, one-way. But you need to get good at it if you expect to keep talented young people who buy into your vision of winning.
Today’s rate of change won’t slow down any time soon. Making strategic agility a top priority will allow you to respond to it (rather than react) without losing focus and will keep your organization on track to win.
Enabling Capabilitiies for Strategic Agility
In their book 'Fast Strategy: How strategic agility will help you stay ahead of the game' (2008), Yvez Doz and Mikko Kosonen formulate 4 Key Enabling Capabilities for Strategic Agility:
- Strategic Sensitivity (seeing and framing opportunities and threats in a new way, in time)
- Casting a wide net.
- Multiple levels of analysis.
- Including understanding of one's creeping and binding "lock ins".
- Collective Commitment (collective decision-making and commitment)
- Keep the top level meetings focused on strategy.
- Create culture of holistic accountability instead of silos.
- Make time for full information sharing and interaction.
- Treat personal objectives and concerns as critical inputs.
- Have a FAIR process that allows for needed UNEQUAL resource allocation.
- Resource Fluidity (fast and efficient resource mobilization, redeployment)
- Some resources are more fluid (money, brand) than others (key people, fixed inputs, special relationships with clients).
- Challenge is cognitive and political rather than procedural or financial.
- Generative growth (on the edges) is key.
- Maximize knowledge sharing with outside parties (Compare: Co-Creation).
- Management Depoliticization
- Most top teams are, for natural reasons, collections of independent individuals with strong opinions rather than inspiring and innovative teams.
- Teams need to be organized for mutual interdependencies, with incentives to match.
- Cognitive diversity is a key precondition to high-quality internal dialogs (Compare: Cross-Functional Team)
- Use young rising leaders as a shadow management team focused on the future.
- Have an OPEN strategy process.
- Leaders must learn to ASK and ADAPT rather than to DECIDE and TELL.
Measuring Agility of Organizations
Need to measure agility
Agility, since its inception in 1991, has been the Buzzword for all the industries in today’s globally competitive dynamic market. Companies try hard to achieve an upper edge over competitors in this continuously changing and unpredictable market.
- Agility is very important to stay competitive in the market
- Measurement of agility gives enterprise measure of its competitiveness and readiness for changes in the market
- Measuring agility identifies “less agile” areas in an enterprise and thus it can plan for improvements
Methodology of Agility Measurement
Lean is a pre-requisite for being agile. Lean enterprise uses tools like Value Stream Mapping, supplier management, TAKT time, flow, TPM, set-up, Poka-Yoke, Kaizen, production planning, pull, inventory, uptime measurement, equipment flexibility, employee training, skill development and quality awareness etc. to achieve the goal of waste reduction. Going from lean to agile is a transition and agility indicates the state of the company. It is a continuous improvement process. Thus study of leanness measurement tools becomes imperative while developing agility measurement tool. A quick survey of tools to measure degree of leanness shows that there are 7-10 tools in practice. Some of them are listed below. 1. Lean Manufacturing Screening Tool Developed at University of Toledo.
2. Virginia Philpott Manufacturing Extension Partnership(VPMEP) Lean Assessment Tool
3. A model for Evaluating the degree of Leanness of manufacturing firms
4. Assessment tool by Saturn Electronics & Engineering Inc.
5. West of England Aerospace Forum (WEAF)
6. Lean Aerospace Initiative – Lean Enterprise Self Assessment Tool (LAI-LESAT)
7. The Lean Extended Enterprise Assessment Process (LEEAP)
- What Does Strategic Agility Mean? -Future Lab
- Strategic Agility Construct and Dimensions -Nicholas Mavengere
- Achieving Strategic Agility -Forbes
- Key Elements of Strategic Agility -Human Factor
- Key Enabling Capabilitiies for Strategic Agility - 12Manage
- Measuring Agility of Organizations -Ameya S Erande, Alok K Verma
- Embedding Strategic Agility: A Leadership Agenda for Accelerating Business Model Renewal Yves L. Doz and Mikko Kosonen
- Strategic agility-driven business model renewal: the case of an SME Anna Arbussa, Andrea Bikfalvi and Pilar Marquès
- Strategic Agility Capabilities, Factors and their Effect on Organizational Performance: A Case Study of Iranian Banks Mehdi Orojloo, Kamran Feizi, Maryam Hojati Najafabadi]