Are You Enabling an Agile Business?

Business leaders often use agility to describe their business plans and strategic initiatives, but it’s often little more than just a vision. Agility is something that requires planning and a full incorporation in business and management processes. It is philosophy and action. And most of all it requires courage and commitment. But what does “agility” really means to business, and how does it help achieve higher levels of efficiency and success?

Innovation once took years to result in new technologies and marketable products. The use of radio waves to detect metallic objects and enable long-distance communications was first theorized in 1904. Three decades later, the theory resulted in the first practical application of radio detection finding. By the beginning of World War II, the United States, United Kingdom, France and Germany had their own versions of radio detection and ranging―what we now call “radar.” Radar opened the door for the accidental discovery of using microwaves for cooking and, in 1947 the first microwave oven was installed in a Boston restaurant.

Contrast the evolution of the microwave oven with Google. The Internet juggernaut didn’t invent search technology, but did see the need for a better means for organizing and finding Web-based information. Founders Larry Page and Sergey Brin initially took their concept to Yahoo! founder Jerry Yang, then the master of the nascent Internet, offering him a way to provide a better search service to his millions of users. Yang was impressed by the idea, but didn’t see the practical application. He told the Google boys to prove themselves independently; the idea being that Yahoo! would simply buy Google if it showed signs of commercial success. We all know how that story is playing out.

Constant change is the new dynamic of the global economy, and makes agility even more necessary than at any point in business history. Consider the following:

  • Only 74 of the original 500 companies in the S&P Index are still on the list 40 years later―a mortality rate of more than 10 per year.

  • The average life span of an S&P 500 company has steadily decreased from more than 50 years to fewer than 25.

  • Projecting forward, it’s likely that only about one-third of today’s major corporations will survive as significant businesses for the next quarter century.

Given such high stakes, it is not surprising such terms like agility, resilience, adaptability and innovation reverberate off the walls in corporate boardrooms and executive suites. Most people acknowledge that agility is the key to capitalizing on innovation and achieving success in the fast-paced and rapidly evolving marketplace. However, there’s no common definition for what agility means in practical terms. Agility probably has as many definitions as means for implementation. For purposes of our discussion, we define agility as “the ability to see and seize opportunities in the marketplace”. Resilience is the flip side of the same coin: “the ability to react to unexpected changes”.

Agility is proactive and has a positive connotation. Resilience is reactive and has a negative connotation. The distinction is important. The evidence of agility and resilience is an organization’s survival, perseverance and, ultimately, success. It has the ability to move quickly to introduce new products, revamp business processes and create new business models. And it has the resilience to bounce back when unexpected threats take their hit.

Agility is Survival

Companies don’t survive unless they’re agile and innovative. Even multibillion-dollar powerhouses must recognize when a shift in their original knitting needs to evolve in order to adopt new technologies, products and businesses as the market changes to ensure continued growth. Agility is the catalyst. Survival is enabled. Success is the result.

Agile companies have what athletes and soldiers call “situational awareness”. They put themselves both in a position to observe what’s happening and have the wherewithal to act upon intelligence. Agile companies establish formal relationships outside of their walls with customers, partners, suppliers and the public. These relationships are their antennae on the world, sensors of change, either opportunistic or threatening. Internally, they tap the minds of their employees in ways other companies do not and use technology to track what is going on in near real-time.

Customers are the ultimate reality check. No company today would say that its customers were not its top priority. The reality is that most companies ignore their customers. The best example of that willful ignorance is the US airline industry. Challenged by security requirements, rising fuel, equipment and labor costs, most of the major U.S. airlines have cut back on amenities and features while increasing fares and levying fees for everything from preferred coach seating to blankets and checked bags. Needless to say, passengers aren’t thrilled with these charges or the declining level of service. Customer satisfaction ratings with the US airlines have steadily declined since 2001.

While nearly all airlines are struggling, those that have paid attention to customer satisfaction and improvised ways of compensating for cutbacks are capitalizing the pain of their peers and attracting disenfranchised customers. Southwest Airlines, a company known for basic amenities but attention to customer service, out paces the rest of the industry by a wide margin―79 points on the American Customer Satisfaction Index. The industry average was 62 points in 2008.

Agile companies turn customer dissatisfaction into a competitive advantage. And smart companies are using new and innovative methods and tools to measure customer affinity and satisfaction.

FedEx, for example, launched a Web-based tool that allows customers―both senders and receivers―to track in real time the progress of package delivery in its system. Netflix, the Web-based movie rental company, and Amazon, the world’s largest online bookseller, both utilize complex algorithms to determine customers’ preferences, community recommendations and user interaction with the website to predict movie interests and make purchasing recommendations.

New Tools, New Thinking

The public is increasingly a source for inspiration and agility. In traditional product and marketing models, companies would assemble focus groups in their target marketplace to determine if they had the right look, features and messaging to sell the product. In today’s Web-based economy, companies are leveraging Web 2.0 applications and social networking tools—such as Linked In, Facebook and MySpace—to solicit consumer feedback and input during the design and marketing phases.