Achieving strategic agility in unpredictable markets

Some companies seem to have a knack of embracing new ideas and innovations faster than others. In many industries growth and profitability is determined by speed-to-market with new product development. So what makes these companies better at seizing opportunities?

Professor Don Sull, from London Business School,proposes that organizations start off as nimble and agile, but when they grow large it’s how they transition between agility and absorption that determines success.

>>Agility - the capacity to seize opportunities faster
>>Absorption - the capacity to sustain change and deliver long-term shareholder return.

To use a boxing analogy, Mohammad Ali early on in his career had great agility to “float like a butterfly and sting like a bee” but later on lost some of that speed and had to absorb more punches from his competitors, eventually losing the title.

When companies become larger, growth begins to stall as markets mature. Professor Sull suggests that firms can develop absorptive capabilities allowing them to seize opportunities when the perfect storm arises. Some examples are;

>> Diversified cash-flow (General Electric)
>> A war-chest of cash (Microsoft)
>> Powerful tangible and intangible assets (Procter & Gamble)
>> Excess resources and staffing (JPMorganChase)
>> Lock-in via exclusive partnerships or integration (Oracle)
>> Compete in protected markets (Royal Bank of Canada)
>> Strong local market or low cost position (Cemex)

These absorptive capabilities mean companies can outlast others in a war of attrition or scale new innovations quickly. Diversification, strong brands or patents can provide the beachheads to reinforce and attack other customer segments. Strict government regulation and exclusive partnerships can limit new entrants. Finally, a strong local market or low cost position may allow you to absorb price volatility and downturns in international markets.

To increase agility in your business you can outsource or acquire it. Outsourcing requires you find the right partnerships that compliment your core business. Whereas acquiring agility involves you keeping the hardware and rewriting the software by changing organizational structure, key management personnel and culture.
------------- source: www.innovationreactor.com