Businesses have always had to adjust to changes within their environment to ensure success and survival. Yet the nature of change in today's world is palpably different from times past. Rather than isolated circumstances or gradual evolution, companies today face brisk, simultaneous and continual environmental shifts. Rapidly advancing technology has facilitated new customer experiences and operational models and customer power has increased. All of this has weakened traditional barriers to entry and heightened the need to explore new bases for competitive advantage.
Consequently, companies must become more fundamentally agile--ready to sense and respond to changing circumstances. Most organizations understand this requirement but may not feel prepared to face it. A 2018 study by Oliver Wyman and IESE indicated that only 26% of organizations would rate their agility skill level at "high" or "extremely high," yet 89% rated its importance to their future success at either "high" or "extremely high." Perhaps more challenging, 70% of organizations felt they had only a "medium" or "low" chance of actually achieving agility.
The challenge for many organizations is that true agility requires more than simple operational adjustments or the traditional programmatic approach. While conventional change techniques treated business transition as a discrete event--a contained shift while all else remained constant—today transformation cannot be an overlay to our business; it must be our business. Companies must instill the desire and capability to continuously align what the market wants, what the company is offering, and how it is delivered to ensure long term success.
To assess the agility of any business, consider five basic questions:
Does the organization demonstrate effective control related to critical management attributes?
How cognizant is the organization of transitions and trends in their external environment?
How co-creative and collaborative is the organization with its external constituents, particularly its customers?
Are the company's building blocks of culture, structure, people and processes change-ready and capable of being quickly adjusted?
Does the organization possess the critical transformation capabilities necessary to innovate and lead change effectively?
Question 1: Does the organization demonstrate effective control?
There is sometimes a tendency to confuse agility with anarchy, an unchecked environment lacking in discipline. In reality, the opposite is true. Successful adaptation requires a steady foundation. To get where you want to go, you need to understand your starting point. Control facilitates flexibility by allowing leaders to understand if, when and how their organization should respond to threats and opportunities and effectively measure the result.
A solid foundation of control involves many elements. The first is a clear strategy and mission. Agile organizations are purpose-driven, allowing them to rely on the judgment of well-informed distributed leadership rather than rigid practices and structures. Second, you must have relevant and accurate data, informed by a sound information management strategy, clear definition and ownership, and broad transparency. Third, it is essential to have clearly defined roles and responsibilities at a group and position level. An unambiguous governance structure is essential in times of both fluidity and stability. Finally, you must know and understand your key processes. They should be continuously defined and documented. These elements of control enable leaders to identify the need for business adjustment, set a course for change, and identify and manage any potential risk.
Question 2: Are they cognizant of their environment?
Before you can react to shifts in your environment, you must know they exist. The second element of successful adaptation is cognizance—the continuous awareness and appreciation of your surroundings. Agile organizations effectively scan their environment to discover both opportunities and threats.
Functional cognizance requires that companies be observant and perceptive, equipped with well-defined monitoring systems and practices which detect relevant developments related to customer behavior trends, competitive threats, technological advances, and geopolitical shifts. They must also be able to effectively interpret the implications of these trends and assess the nature and extent of their impact across the various facets of the organization. Although often overlooked, companies must also develop practices to package and communicate this information to leaders and other change agents to stimulate interest and action. This third capability is critical to translate environmental signals into constructive change programs.
Question 3: How co-creative and collaborative are they?
The business environment of the past often allowed for more inward focus and self-determined approaches. Today's pace of change demands a stronger connection with critical external parties such as customers, partners, suppliers, and regulators. While environmental cognizance may help you understand that change is required, successful organizations will also exhibit the willingness to empathize with, engage with, and respond to key stakeholders. Designing and operationalizing the best go-forward solutions often comes through collaboration and cooperation with various stakeholders.
The most critical connection is to the customer. Many agile organizations co-create with customers during the development process and external input can also help design optimized operational and support functions. For instance, many organizations found that a successful response to the Covid-19 challenges involved closer partnership and re-imagined relationships with their vendors or suppliers. The essential element is the cultural tendency and operational readiness to seek input and support from the most productive sources, inside or outside the organization.
Question 4: How "change-ready" is the organization?
Organizational agility is a departure from the traditional approach to strategy and business modeling. Historically organizations often staked out a strategic territory based on advantages such as established reputation, market share, or scale, then aligned and perfected practices that protected their claim. To fortify their position leaders promoted steadiness and consistency, baking the propensity for stability into every aspect of the organization including systems, structures, people, and culture.
Today the competitive advantages of scale, location, reputation are increasingly threatened by nimble offerings and experiences that better meet customer desire. To respond effectively, companies must re-imagine all of their foundational elements to promote fluidity. For example, like agile project management practices, agile organizations tend to rely on a network of empowered, objective-centric teams, and the movement to informal organizing constructs that support innovation and experimentation. Operating models replace organizational siloes with more dynamic structures that reflect and facilitate cross-functional workflows. Resource pools reduced fragmentation by allowing central sourcing of broadly needed skills. Within the talent domain, recruiting and development should foster a diverse workforce that can learn and adapt quickly and is comfortable with ambiguity, complexity, and change. Processes and systems must also be architected to anticipate future growth and adjustment. Finally, culture and leadership practices must encourage and celebrate innovation, initiative, flexibility, and failure.
Question 5: How "change-competent" is the organization?
One of the challenges of many transformation efforts is the simultaneous need to manage both ongoing operations and change initiative, often leading to resource capacity and capability challenges. While key players across the company should always be deeply involved in critical transformation efforts, skilled resources dedicated to innovation and transformation are often critical for mid-size to large organizations.
There are a number of capabilities that support organizational agility including innovation and design thinking, transformation strategy and leadership, program and project management, and change management. While some companies rely on external resources to do this work, those dealing with a steady diet of transformation benefit greatly from building their own capabilities in these areas.
Assessing an organization’s progress in each of these five areas will help you understand an organization’s ability to adapt. The transition to business agility can be difficult and may take time, often best achieved in stages. It is important to remember that it will not happen by chance or proclamation. The only way to develop sustainable adaptability is by deliberately align the organizational model with this new way of being.