UPS does not count seismology among its core competencies. But when that Icelandic volcano blew in the spring of 2010, the logistics and package delivery company’s European hub, which sorts up to 110,000 packages an hour, was able to navigate the disruption.
For years, UPS had fretted about how its European operations would function if a terrorist attack were to shut down or cripple its hub in Germany; its top teams had run detailed planning exercises. So when Eyjafjallajökull began spewing ash, UPS was able to handle the problem.
UPS exemplifies the farsighted companies that are emphasizing strategic agility. These agile exemplars excel along three strategic dimensions, acting on them simultaneously.
In this podcast, the author elaborates on three strategic dimensions of corporate strategy, and goes on to explain how traditional corporate barriers are dissolving as ecosystems become more important. Media Help
The first key to strategic agility is anticipation. Although leading companies are becoming ever more adept at market sensing—and using analytical tools and capabilities to develop actionable insights from what they’re sensing—many others still have ample room for improvement.
That’s especially true for parsing data about demand—and nowhere more so than in emerging markets. Indeed, many Western multinationals will have to work harder to detect changes in the behaviors and needs of middle-class consumer segments in nations like Brazil and Indonesia. In addition, those companies have to get smarter at detecting the emergence of new competitors; they also need to be better at interpreting policy and regulatory moves, and at distinguishing between those that can create new opportunities and those that pose new threats.
However, truly agile organizations realize that information, data and knowledge must be translated into actions that can be understood and implemented through the organization. Take the life sciences industry: Next-generation “option-planning” efforts are being used increasingly to transcend the sector’s typical competitive option-planning exercises, which don’t adequately account for the greater uncertainty facing the industry.
Indeed, option planning is rapidly becoming a regular whiteboarding approach used by managers in many industries to pinpoint the handful of best options for responding to new situations. “Our industry continues to shift,” explains one telecom industry leader. “New competitors and business models are emerging, and new acquisitions and alliances will happen. So we have to be ready to respond. We need to go through the likely options, to identify the issues and have the arguments ahead of time—we won’t have time for that when we have to act.”
At root, strategic agility is a relative concept. Its value is seen in an organization’s ability to continually outrun its rivals by executing consistently. It goes to the heart of the way a company decides how to use its critical resources—its money and its people.
This implementation piece is integral to the holistic view of strategic agility adopted by leading companies; they are constantly refining their ability to shift resources to where they will have the most impact. They know when to apply the brakes to projects whose impact on overall performance is diminishing and when to accelerate on those that promise higher impact. They are, in effect, institutionalizing their learning from both success and failure.
Implicit in that constant refinement and learning is the notion that strategic agility is a characteristic at odds with cultural norms in many large organizations, where the temptation is often to hoard resources to consolidate power. The companies that can apply more fluid approaches to resource allocation are the ones that will be best placed to handle uncertainty and change.
Washington, D.C.-based Danaher Corp. stays flexible by using a mix of business models to run its constantly changing mix of businesses. The highly diversified group—its 2011 revenue was more than $16 billion from operations in more than 125 countries, with products ranging from blood gas analyzers to microscopes—is one of the world’s most acquisitive companies, recently averaging more than 14 acquisitions a year.
Its Danaher Business System, a model that has evolved from a lean manufacturing initiative into a comprehensive management approach, works on two levels. At the “daily management” level, process standardization and efficiency companywide are supported by eliminating waste; at the second level—policy deployment—aggressive senior management-level targets related to product line innovation or geographic expansion are set, ensuring that Danaher is constantly pushing for sustainable growth.
The dynamic aspect of strategic agility extends far beyond conventional corporate boundaries. Many top performers are rethinking the relationship between their organizations and those of, say, customers and suppliers, thus giving themselves additional options by redefining traditional competitors as potential partners and some of their suppliers and customers as rivals. “Frenemies” and “co-opetitors” are part of their corporate ecosystems. For instance, leaders in the automotive industry know it is important to be able to flex resources up and down the supply chain. One reason why Germany’s automotive industry was able to exit the recent recession in such a strong position was that companies continually adjusted payment terms for components and fine-tuned short-term work arrangements as demand for cars ebbed and flowed. That way, the medium-sized and smaller companies they depend on were not forced under by the rapid contraction in demand seen in 2009.
Strategic agility is at its most effective when an organization turns strategic insight into opportunities with clear decision-making guidelines and the willingness to allocate resources that constantly drive premium results.
About the author
Mark Spelman, the managing director of Accenture Strategy, leads the Accenture Institute for High Performance. He is based in London.
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