How Agility has Moved Outside the IT Industry and is Shaping Top Companies Around the World
For many, mentioning the word agile conjures up images of software engineers, stickie notes, and bizarre ceremonies. It is easy to dismiss the movement as being applicable to only a small part of the organization, typically IT. Many are surprised to hear that business agility has become a key competitive advantage for some of the highest performing organizations on the planet, including Amazon, Tesla and Netflix.
To understand why agility is so vital, we must first go back 66 million years, when an asteroid struck the earth around the Gulf of Mexico. The impact set off a chain of events that would wipe out 75 percent of life on earth, including the dinosaurs. Of the animals that did survive, many were small mammals and birds. In fact almost no animal weighing over 25kg survived. Their smaller size helped them to find shelter, forage for food, and reproduce more quickly. They were simply quicker to adapt than their larger counterparts.
The competitive advantage of nimbleness is the exact reverse of the natural world during long periods of stability. During these times it is the larger creatures that enjoy a competitive advantage. This is due to an increased ability to escape predators, travel long distances to find resources, and to store energy reserves in the body for the lean times. It seems that during times of stability the larger animals win out, but during times of turbulence, the ability to quickly adapt proves the differentiator.
Today’s leaders would be wise to heed this lesson from history, as a similar dynamic plays out in the business world. There was a time when economies of scope and scale coupled with a relentless focus on operational excellence led to huge efficiency and productivity gains. Over time, a small number of large organizations began to dominate markets.
Efficient execution was the order of the day, and organizational designs reflected that. Fast forward 120 years, and the world today is a more complex, more turbulent, and less predictable place than at any point in its history. Rapid technological advances, deregulation, and an increased interconnectedness have led to significantly lower barriers to entry and a dramatically increased pace of change. These have, in turn, led to fierce competition and the need for constant reinvention in the battle for customers. With the winds of creative destruction blowing harder than ever, like the dinosaurs 66 million years ago, many of the incumbents have been unable to adapt quickly enough.
What started in IT must now be applied to organisations as a whole. It is no longer enough to deliver efficiency against existing products and service. The most effective organizations today are able to do that while simultaneously creating new ones. But many are unable to do so. Think about why an established taxi company didn’t create Uber, why an established photography company didn’t create Instagram, and why an established music company didn’t create iTunes. It’s not that the people in these organizations could not come up with great ideas. They almost certainly could. There are, however, some more systemic issues at play.
Like the proverbial generals always fighting the last war, many leaders are still seeking to build the efficient machines of yesteryear, and are ignoring the most important element of success in today’s world, creativity, innovation, and agility. This leads to an excessive focus on exploiting existing products on service at the expense of exploring new ones. With the ever-decreasing shelf-life of products, this is profitable in the short-term, and disastrous in the long-term. As Peter F. Drucker famously said, “There is nothing so useless as doing efficiently that which should not be done at all.”
Even if leaders do recognize the need to continually innovate to stay relevant, many still struggle to achieve it. A second big challenge is that the nature of innovation work is entirely different than that of operational work. Many are still taught to worship at the altar of efficiency which results in rigid hierarchies and an overly bureaucratic approach with little freedom for those doing the work.
This actively sniffles creativity and innovation. This problem is not solved by merely seeking to change processes, practices and tools. Many make the mistake missing the bigger picture. They fail to create the environment for organisational agility. To do so, they must focus on six key areas: leadership & management, organizational culture, organizational structure, people & engagement, governance & funding, and ways of working.
A movement that was born out of software development has now firmly reached the C-Suite. The days of agile being confined to IT have long gone. The most effective organizations continue to focus on operational excellence for their established business, and on agility when creating the new products, services and whole business. They constantly optimize, evolve, and reinvent. They have managed to combine the power of scale with the nimbleness of a startup. This is the essence of business agility. If others don’t catch on soon, they too will find themselves alongside the tyrannosaurus rex, once mighty, but now a museum piece.
Written by Karim Harbott.
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