Dr. Julian Birkinshaw is a professor of Strategic and International Management and director of the Management Lab at the London Business School. His research focuses on innovation and change in large, established companies. Tim Cooper interviewed him on behalf of the Accenture Institute for High Performance as part of a research project on business agility. In particular, the two discussed how businesses can enhance their agility by engaging more effectively with stakeholders.
INSTITUTE: In your opinion, what is agility, and how can organizations become agile?
PROF. BIRKINSHAW: I view agility as the capacity to anticipate and adapt to change as well as bounce back from challenges. You can often see how agile you are when disruptions hit. These disruptions can come from anywhere, anytime—ranging from a global credit crisis to a volcano in a far-off place like Iceland.
To be agile, companies have to develop three main capabilities: being constantly aware of your external environment, building collective commitment across the company and being resource fluid – that is,mobilizing resources quickly when change occurs. These were first put forward in a book by Doz and Kosonen called Fast Strategy. At the London Business School, we encourage students to think about agility along the same lines. That said, each company is different. So, there is no one-size-fits-all approach to agility.
INSTITUTE: We often come across the idea that an organization’s size can affect its degree of agility. What do you think about that?
PROF. BIRKINSHAW: I think companies inevitably lose some agility as they grow. Startups are usually more agile than large enterprises. As organizations grow, they become more rigid and consequently lose some of their nimbleness. Of course, that doesn’t mean that large organizations cannot be agile. It just means that it’s more challenging for them than it is for smaller organizations.
INSTITUTE: What makes organizations less agile as they grow larger?
PROF. BIRKINSHAW: Many organizations focus too much on efficiency. For instance, they invest a lot of effort into making their supply chains as lean as possible, and as a result, they become too fragile. In the process, they also overlook some key connections with their stakeholders (suppliers in this case).One example that comes to mind is when Manganese Bronze, maker of the London Black Cab since 1948, nearly went bankrupt after a manufacturing fault by one supplier in China was found in the cars’ steering boxes.
There is a great lesson to be learned here. More frequent and productive interactions with their suppliers could have helped Manganese Bronze identify the manufacturing problem more quickly and respond more effectively to the problem. Without a doubt, efficiency is important, but organizations should also design themselves for agility. They need to constantly pay attention to and engage with the environment around them as well as build duplication and redundancy into their operations.
INSTITUTE: It seems that many organizations engage with stakeholders mostly to minimize risk and manage their reputation. What are your thoughts on this?
PROF BIRKINSHAW: I agree that, too often, organizations engage with their stakeholders only when doing so is expedient. For example, some international mining companies start building relationships with local communities only when they are preparing to move their operations into those places. They do this mainly as part of their sustainability and corporate governance agendas (for example, to gain permission to operate in a particular location) rather than establishing ongoing relationships with those communities.
Organizations need to engage with their stakeholders in a more systematic, sustained way. Relationships built through this approach can actually unlock corporate value for companies in the long run.
INSTITUTE: How can organizations better engage with their external environment and cultivate stakeholder relationships?
PROF. BIRKINSHAW: Organizations need ways to systematically absorb information around them and use it to create value for stakeholders. They can do this through personal approaches, like having regular meetings and brainstorming sessions, as well as more formal approaches such as implementing customer-relationship management tools. Social media platforms can play a role as well, especially since most younger workers are digitally savvy.
INSTITUTE: Can businesses show a cause-and-effect connection between their degree of agility and their financial performance?
PROF. BIRKINSHAW: I think it is very difficult to draw a direct link between agility and an organization’s overall financial performance. That said, there are some indirect ways to measure agility. For example, proxies for performance— such as speed to market or new product development—can serve as intermediate metrics that help organizations get a sense of how agile they are.
INSTITUTE: You have given us a lot to think about. We appreciate your time.
PROF. BIRKINSHAW: Thank you for including me in your research. This is an area I find very compelling. I look forward to hearing more about the direction your research will take in the future.