From Agility to Strategic Agility
As companies struggle to cope with turbulent change in business environments, they follow one of two paradigms, which I call the "Bear and Hikers Paradigm" and the "Broken Cup Paradigm."
The Bear and Hikers Paradigm comes from a popular joke that circulates on the internet. As the joke goes, two hikers are crossing a large grassy plain, when they spot a bear in the distance charging toward them. The hikers realize that the only option is to run. As soon as they begin to run, one of the hikers stops, opens his backpack, and starts to change from his hiking boots into the running shoes that he has pulled out of the bag. His bewildered friend exclaims, "Don't you realize you can't outrun the bear?" He replies, "I don't need to outrun the bear. I need to outrun you."
While the punch line takes us by surprise and makes us laugh, we realize that the hiker is willing to sacrifice a friend without hesitation; he has no consideration beyond the immediate circumstances, leave alone any thought of the friend surviving and spreading the word about the hiker’s selfishness. This is a paradigm that attracts many companies as they deal with rapid change. For such companies, agility is all about expedient, fast action that does not bother with long-term thinking.
But there is another model for companies to follow when dealing with rapid and unpredictable change: the Broken Cup Paradigm. This comes from a true story that two researchers, Nicholas Burbules and Paul Smeyers, heard from a woman in her sixties. The woman was elaborating on the reasons for her success in managing a large kitchen in Chicago.
The Broken Cup story is as follows: As a little girl, the woman was helping her mother wash the dishes in the kitchen. Suddenly, a cup slipped from her hand, fell to the floor and smashed into pieces. “Without hesitation,” said the daughter as she recalled the incident more than 60 years later, and before she could even cry, the mother picked up another cup, threw it to the ground, and said, "See? It doesn’t matter."
This is a simple story that is a part of everyday life. What does it illustrate, though? Most apparently, of course, the story is about how the mother reassures the child that material things do not matter and that all of us make mistakes. Beyond that we can also argue that the mother's action conveys she is not angry with the child. At a deeper level, however, this story is about handling failure—specifically about how to handle somebody else’s failure.
More generally, it is about how one handles unforeseen, unpredictable events in life, and how we can use such events to create moments of learning. Considering that the daughter was recounting the story 60 years later, it is clear that the experience had formed a "lesson" that has stayed with her for decades. The Broken Cup Paradigm helps companies to think about long-term impact while being expeditious in the short term, and to move from simple agility to "strategic agility".
How to Enable Strategic Agility in your Organization
The challenge that companies face with strategic agility is to enable both short-term responsiveness to change and long-term consideration of the impact of the response.
Companies can do this by focusing on four enablers of strategic agility: people, principles, processes and technologies.
Processes and technologies, which drive operations, have more of an impact on short-term performance, while people and principles are connected to the culture of the organization, and have a greater impact on long-term performance.
As I have articulated in my book, Nimble, by focusing on all these four enablers, firms can build for both long-term enduring excellence and for short-term dynamic performance. The following sections are adapted from my book.
For the world’s most successful companies, processes are at the heart of the actualization of strategy—they embody the principles of the organization, and also the interactions between people in the company.
Given the understanding that companies achieve competitive advantage not only because of what they do but also because of how they do it, processes become central in enabling strategic agility. Processes such as those concerning human resource policies or corporate governance drive the slow-moving long-term performance of organizations, while production-oriented processes which react to the dynamics of operating environments drive short-term performance.
Processes actualize a company’s principles and ideologies. Thus, although Cisco is committed to its employees, its success derives from its ability to implement the values that stem from this commitment: Cisco relies on a comprehensive system of policies, processes and leader behaviours that are aligned and internally consistent with its innovative culture. Proctor & Gamble, for instance, has transformed its R&D process by crowdsourcing—creating a network of researchers outside of P&G who contribute ideas for new products.
At the most basic level, technologies enable processes, but, more critically, they allow different ways of executing a process. Apart from increasing organizational efficiency and operational costs, technology can also boost resilience and agility.
In the commercial banking industry, for example, when compared to a human teller, ATM and internet technologies increase productivity and reduce transaction costs dramatically. At the same time, by providing additional channels through which the bank can deliver service to its customers, these technologies improve the resilience and agility of the bank.
Quite often, the introduction of technology creates a platform that enables innovation of business processes and products. Japanese car manufacturers and Charles Schwab offer good examples of how technologies can be used not only to innovate, but also transform their respective industries.
Much research has pointed out the value of people within organizations. For instance, when visionary chief executive officers (CEOs) are in place for a long time, it creates stability and direction within the organization, and not surprisingly, such companies exhibit enduring success.
What we found interesting in a study we conducted at Wharton was that it is important even at the ordinary worker level to spot and retain talent. When such talent walks out of the door, so does extremely important corporate knowledge that may take years to re-establish in other employees.
Individuals and their interactions primarily determine the ethos of the company—and by ethos, I mean, in the Aristotelian sense, the ‘genius' of an institution or system, or the collective habits that generate the spirit of the organization and govern its response to rapidly evolving situations. Thus, a company’s ability to nurture employees and to foster collective spirit drives strategic agility.
Principles articulate the character of a company. They becomes the Standard Operating Procedures of not only the ethical makeup of a company but also reflect its commitments such as "customer-centric" or "innovation-driven," for example.
An unwavering adherence to principles develops "character" both in individuals and in organizations, and creates what becomes known as "the company's way" of doing things. Whether the principles are connected to ethics (being honest, following fair practices, and so on) or are more business-centric (put customers first, think web first, innovate, and so on), principles portray to the world how the company perceives it, and the world in turn reciprocates this perception.
The turbulence of the business world calls not just for agility, but for strategic agility, that allows companies to respond quickly to short-term needs while simultaneously keeping long-term good in mind. Processes and technologies enable short-term responsiveness, while culture-related factors like people and principles enable the long-term thinking. To become strategically agile, companies need to develop all these four enablers of strategic agility.