Get fit for business in the 21st century
We live an uncertain world that makes sudden and unanticipated demands on business leaders. They must prepare for the unexpected, respond quickly to changes and be able to steer a new course at a moment’s notice.
To blunder on through uncertainty, working in the same way and hoping conditions will soon improve, won’t work as a strategy, as many companies found out to their cost during the most recent recession.
Agile businesses, by contrast, are able to thrive and prosper in even the most disadvantageous markets, says Mark Thomas, a business strategy leader at management consultancy PA Consulting, because they can “respond to changing external circumstances, accurately and quickly, and derive a competitive advantage from those changes”.
In an age of uncertainty, he says, it’s never been more important for businesses to stay agile. “There’s very little point in business leaders waiting for business to get back to ‘normal’. That’s not the world we live in today,” he says.
For example, the sovereign debt crisis in several eurozone economies is still yet to play out; there’s the potential for a serious financial crisis in the world’s second largest economy, China; and with its recent government shutdown, the United States came perilously close to a self-inflicted economic default, the effects of which would have been felt worldwide.
Factor in a vast worldwide derivatives bubble that continues to build daily, the heated political situation in the Middle East and the impact that unexpected natural disasters can have on global supply chains, and business leaders will see that there’s plenty of scope for new and unpleasant surprises down the line.
Businesses that can address their own complexity to become truly agile will be successful and continue to deliver market growth
But in order to become more agile, many businesses need to shake off the legacy of their past and urgently rethink strategy, says Mike Greig, a partner at management consultancy PwC. In some cases, a major overhaul of current operating models will be required because these have developed by a process of “historical accident, rather than organisational logic”, he says.
That makes them overly complex, extremely hierarchical, dogged by duplicated business processes and sub-optimal use of the technologies that may not enable them to enter new markets or launch new products and services.
Mr Greig’s prescription for these companies, which hanker after business agility, but can’t see how to reach it from their current position, is three-fold: simplify, standardise and share.
“Most business leaders don’t understand how unnecessarily complex their organisations are; how many different ways employees are getting simple tasks done and how many different investments are going on. A lot of complexity is hidden from senior management, so that’s where simplification comes in. It’s about surfacing that complexity and picking it apart,” he says.
Standardisation, meanwhile, is a process of implementing single processes and systems across the organisation, to help reduce costs, improve customer experience and deliver against business goals.
The sharing element comes from ensuring that these new standardised processes are adopted right across the organisation. “It’s about alignment and making sure you’ve got companywide agreement on priorities and how things will be done in future to drive the business forward,” says Mr Greig.
Businesses that fail to adapt, he adds, will find it increasingly difficult to compete. Some will not survive. “However, businesses that can address their own complexity to become truly agile will be successful and continue to deliver market growth, even in difficult markets.”
They will also free up time, energy and resources to focus their energies on customer experience and innovation. That’s increasingly important at a time when, macroeconomic threats aside, many companies are facing unexpected competition from new “challenger” brands that are using digital technologies to transform the ways products and services have been delivered.
James McQuivey, an analyst at IT market research company Forrester Research, calls them “digital disruptors” in his recent book, Digital Disruption: Unleashing the Next Wave of Innovation. They’re companies like Amazon, which has totally disrupted the bookselling industry; or Expedia, which has done the same in the travel sector; or Pebble, the company producing digital watches, which threatens to outpace traditional watch manufacturers.
Their deft use of technology allows these younger upstarts to “undercut rivals, get closer to customers and disrupt the usual ways of doing business”, says Mr McQuivey. And they do all this, he adds, “at lower cost, with faster development times and with greater impact on the customer experience than anything that came before”.
The only way established companies can hope to fend off their attacks is to behave like digital disruptors themselves. They must join the revolution or be swept aside in the race for customers’ hearts, minds and money, he says.
The agile imperative, then, has never been stronger. It’s time for business leaders to step up, get agile – or get out.