[Photograph by Eckhard Pecher under Creative Commons]
[More on This: Also listen to a podcast where Baba Prasad elaborates on the different kinds of agility you need for different situations and how start-ups can build this capability.]
As the world becomes increasingly turbulent, organizations and business leaders seek ways to cope with the rapidity of change. In fact, "adaptability" has become a buzzword in business parlance today. Agility is often seen as the ability to respond rapidly to changing circumstances, and businesses believe that such agility leads to business success. But agility is not such a simple concept to understand or implement. Here are seven lessons about agility that I have gathered over years of research that resulted in my book, Nimble: How Intelligences Can Help Create Agile Companies and Wise Leaders. These lessons will help your organization - whether it is a start-up or a multi-national company - and yourself - whether you are a chief executive officer (CEO) or an intern - achieve success through agility. These lessons are especially useful to entrepreneurs, because in a sense, the start-up entrepreneur is company and leader rolled into one, and further, because the pioneering entrepreneur is the one who is maximally buffeted by forces of change but has very little resources in hand.
Lesson #1: To be able to survive in rapidly changing circumstances, companies and individuals must be agile
Consider the late 1980s, and consider Digital Equipment Corporation (DEC). As a minicomputer manufacturer, DEC was an IT behemoth, second only to IBM. Spread across 95 countries, employing 120,000 people, and pulling in $14 billion in revenues, DEC was truly a profit-making giant. However, as UNIX workstations entered workplaces and PCs forayed into homes, DEC continued to rely on its miniframes, a technology in which it excelled. An unchanging DEC quickly saw its profits pummelled. In 1992, its board decided to replace Ken Olsen, who had been DEC’s CEO for all 35 years of its existence, and soon, DEC was acquired by Compaq.
This story has repeated itself many times in business history, and the saying "Adapt Quickly or Die", is now common knowledge. There is some danger of confusion here, though. Agility is different from adaptability. Adaptation, in its Darwinian sense, implies that a change has been made that cannot be speedily reversed. A giraffe growing a long neck, humans losing a tail, or reptiles learning to fly, are all examples of adaptation, and these changes are now irreversible. Apart from that, there is a time-element - Darwinian adaptation happens over millennia.
So, not only is adaptation difficult to reverse, but further the notion of speedy response distinguishes agility from adaptability. Adaptability is about slow change, while agility is about quick response.
Adaptability is about slow change, while agility is about quick response.
Lesson #2: In a truly agile company, strategy, innovation, and leadership are integrated
If a company is truly agile, it is very difficult to distinguish whether it is the company that is agile, or whether it is the leader who is agile. The Irish poet WB Yeats asked, "How can we tell the dancer from the dance?" Today, we need to ask, "How can we tell the agile leader from the agile company?"
A start-up willy-nilly embodies this rule. But, as the company grows, thick partitions develop between the CEO's office and the corporate boardroom (which set strategy), R&D and product development (which head innovation), and human resources (which engages in leadership development).
A company's agility is achieved not just by making business processes flexible or by bringing in flexible technologies. In fact, it is extremely necessary for people to be agile. HR Magazine reported a study that discovered that the best leaders are those who are agile—for example, such leaders know "when to stick to their beliefs and when to work collaboratively. They also know when to look at the big picture and when they need to get into the nitty-gritty." ('Leading with the Brain'. HR Magazine, June 2011, 52-53.)
Agile leadership is distributed across the organization from the CEO to the front desk assistant.
A corollary lesson here is that agile leadership is distributed across the organization from the CEO to the front desk assistant. A company like Toyota exemplifies this - every employee from the CEO to the floor mechanic is looking to improve processes and products all the time. As a result, Toyota creates an ecosystem of innovation and leadership that introduces more than 100,000 new ideas every year into its products and processes. To be successful, an agile company will not only try to make its business processes and technologies agile, but also focus on creating a culture of leadership and agility throughout the organization. As Lou Gerstner commented on his experience of transforming IBM in the 1990s, "Culture is everything."
As Lou Gerstner commented on his experience of transforming IBM in the 1990s, "Culture is everything."
Lesson #3: There are different kinds of agility
Too often, we declare that a company is agile or not, based on how it performs in one setting or situation. In reality, however, the company needs to be agile in different ways at different times.
Companies need to use different kinds of agilities to respond to different contexts.
Consider Nokia, which epitomized supply chain agility. An example from 2000 will illustrate. On a March evening in 2000, lightning caused a fire in a New Mexico factory of Philips, which made a critical chip that powered Nokia and Ericsson mobile phones. After Philips surveyed the damage, it informed both Nokia and Ericsson of a delay in production.
While Ericsson surveyed its inventories and concluded it had enough stock to tide over the crisis, Nokia, demonstrating its supply chain agility, went into a firefighting mode. It scoured markets all over the world and garnered all available stock of this critical chip, it set up direct CEO-level communications to keep track of progress, and it got Philips to produce and supply the chip from other Philips factories.
As it transpired, the delay in production at the Philips factory was much longer than Philips had anticipated. Because of Nokia's agility in procurement, it was able to happily overcome the crisis, while Ericsson's mobile phone division suffered tremendously. It lost 3% of its market share, and posted a $1.68 billion loss. It was acquired by Sony to become Sony Ericsson. Nokia was hailed as an outstanding example of agility.
But, soon, as we all know, despite this supply chain agility, Nokia's market share dropped in a matter of few years from 51% to less than 2%. Just supply chain agility was not enough. Nokia needed different kinds of agilities to survive the rapid changes in the market - the demand in the US market for flip phones, a requirement to change the operating system, the emergence of the iPhone and other smartphones. Nokia just did not have the agilities it needed to cope with these new market pressures. It died because it could not respond quickly and well to the changes that the market demanded. Companies need to use different kinds of agilities to respond to different contexts.
Companies need to use different kinds of agilities to respond to different contexts.
Lesson #4: Intelligence drives agility
An examination of human adaptability over the millennia leads us to consider intelligence as a singular enabler of agility. The history of the Clovis people, the first humans to enter the North American continent about 10,000 years ago, is a case in example. Faced with fierce animals like the terrifying sabre-toothed tiger, or giant animals like the woolly mammoths and giant bison that they had to hunt for food, the Clovis people used intelligence to survive. Paleontologists today have discovered special flutings on Clovis spearheads that tremendously improved the Clovis spear’s velocity and piercing capability. It has been discovered that the Clovis people learned to work in teams, trapping animals in ravines and throwing rocks from above. Intelligence drove human survival in inimical circumstances.
Taking this further, advances in psychology lead us to think about multiple intelligences, which drive multiple agilities in both individuals and organizations. Thus, my research has shown that there are five intelligences that drive five agilities in the organization or in the individual - Analytical, Operational, Inventive, Communicative and Visionary.
In an intelligences-driven company, strategy is not so much about plans of action to be executed in the future; rather, strategy is about building capabilities that will allow us to handle multiple eventualities that may unfold in the future. (While I use "intelligence" and "agility" interchangeably, it is important to remember that "intelligence" drives "agility", or in other words, agility is the expression of intelligence.)
Lesson #5: There is a difference between agility and ability
In 1980, AT&T, the American telecommunications giant, was ordered to break itself up into smaller companies - the "baby Bells". AT&T was left with the problem of what to do with its extensive cellular phone bandwidth. It hired McKinsey to advise on this issue. As The Economist reports, "The consultancy noted all the problems with the new devices - the handsets were absurdly heavy, the batteries kept running out, the coverage was patchy and the cost per minute was exorbitant - and concluded that the total market [in 1999] would be about 900,000." This dismal figure forced AT&T to divest its cellular resources and exit the market.
Unfortunately for AT&T, the cellphone market subsequently exhibited explosive growth, and it scrambled in the mid-1990s to acquire McCaw Cellular for $12.6 billion in order to re-enter the cellular market.
Here's an interesting fact: In 1999, there were 109 million users of cellphones - McKinsey's estimate was off by 10,000%! Further, the sales data showed that in 1999, 900,000 subscribers were being added every three days, and by 2007, 900,000 subscribers were being added every 18 hours.
McKinsey did misestimate the number of prospective subscribers, but that does not mean that McKinsey lacked analytical ability. In fact, McKinsey was quite good at analysis. The problem was that it used projections based on what it was seeing in the market - these projections would perhaps have been quite accurate for a traditional product. McKinsey did not account for the fact that cellular markets demonstrate network effects, and that in markets dominated by network effects, growth is not linear, but exponential, parabolic.
If McKinsey had examined how AT&T landlines grew exponentially between 1900 and 1910 when the telephone become commercially viable, it would have perhaps advised AT&T very differently. Most thinking on "strategy as a set of capabilities" tends to confuse "capability" with "agility". Agilities are not just abilities; they are abilities that can be flexibly bent to suit different situations.
Agilities are not just abilities; they are abilities that can be flexibly bent to suit different situations.
Lesson #6: Sustainable competitive advantage comes from visionary agility
Agility may help provide quick responses but visionary agility provides the individual or the company with the ability to think "into the future" - what will be the long-term impact of the current "speedy response"? How wide will be the impact of this decision? Visionary agility provides a "beyond-me, beyond-my-company" thinking that allows people and companies to not accept knee-jerk responses to situations as optimal solutions, and instead to move them from just being "intelligent" to becoming "wise".
Visionary agility provides a "beyond-me, beyond-my-company" thinking
EID Parry, the sugar company in south India, epitomizes visionary agility. In December 2011, a cyclone called Thane devastated the fields that supplied the sugarcane for EID Parry’s factories. In a seemingly strange act, EID Parry bought the uprooted cane, and also the damaged pre-harvest crop from the farmers. Such cane provides very low juice yield, and this situation was complicated by the fact that EID Parry’s main factory was severely damaged. But EID Parry did something even more strange - it paid the farmers the same rate for the damaged cane as it would have for good normal cane, and incurred a loss of Rs. 45 million.
Why? The explanation is that for EID Parry, the concept of 'the collective' goes beyond its factory and its employees: it includes its suppliers, the poor sugar cane farmers with small land holdings.
The consequence? Farmers who are tremendously loyal to the company, who follow its directions on sugarcane farming, which in turn leads to higher juice yields than the farms of other factories, and the ultimate and not-so-negligible fact that EID Parry consistently outperforms its competition.
Lesson #7: The truly agile leader or company develops all five intelligences but uses them in context-sensitive ways
Life experiences and business turbulence do not allow us to predict robustly what kinds of agilities we will need to cope with unfolding circumstances.
Organizations today are rocked by the winds of change - technological shifts, globalized markets, unforgiving and unpredictable competition all team up to create the chaotic swirls of business turbulence. As they struggle to establish a strategy in this maelstrom-like mix, they have a lot in common with the individual actors who make up the organization. And life throws curveballs at the individual actor all the time. You’re entering a grocery store and a two-year-old is running out fast into the heavy traffic of the street. A key person on a crucial project you are heading calls in sick at a critical time. You’re waiting at the railway station and see an old man, lost, walking on the tracks, unmindful that a train will arrive shortly. Not every situation is negative. You’re stuck in a traffic jam, and find the driver in the next lane romantically attractive, and that person suggestively rolls down the window.
Many situations are less dramatic. A young associate wants your advice on whether to go to graduate school or take up a new job. You suspect a close friend is doing drugs and have to find the best way to get her over the addiction. The notion of leadership is not only one of Napoleonic triumph and imperial grandeur; more often, it is embedded in the everyday acts that we engage in as we chisel out selfhoods of ourselves and of those around us. Sequences of these small acts make what the poet Emily Dickinson called "internal difference, / Where the Meanings, are".
True agility is in developing the capabilities to handle all kinds of eventualities and in using those capabilities that are needed in a particular context. Combining all the previous lessons about agility that I have discussed so far, the analogy would be that the five intelligences are primary colours that can be mixed in different proportions to produce any colour, but the medium is visionary intelligence. There are methods to measure these agilities in people and organizations, and ways to cultivate those that are lacking, but that is another topic, beyond the scope of this article.
The Bottom Line
Today's turbulent world requires that we rethink strategy not as a set of plans to execute in the future, but as a set of flexibilities that we need to develop to handle an unpredictable future as it unfolds. The five intelligences - which drive five corresponding agilities - allow individuals and companies to gain leadership positions and sustain them.