Picture a little girl skipping rope. The rope twirls over her head in a neat arc, and as it comes down toward her feet, she’s ready. She jumps. The rope goes under without tripping her. The faster the rope turns, the faster she jumps. She laughs, enjoying the game. It happens over and over again, and creates a strange paradox: Is the girl in a stable position only because she is constantly in motion, or is she able to jump with agility only because she is stable?
This is a metaphor for business success in today’s turbulent globalized world—organizations are finding that to be ahead of competition, they have to be both continuously dynamic, and also stable at the same time. The turning rope represents the changing market conditions—competition, supply situations, technologies, or customer preferences, for instance—that call for short-term performance. The staying-in-place represents the organization’s values, culture, and habits—the ethos—that generate long-term value. In order to consistently outperform competition over long periods of time and deliver long-term shareholder value, companies today need to demonstrate both consistently outstanding short-term corporate performance and also sustain and better performance year after year. The best companies achieve balance and stability and also are in constant motion.
As companies manage for short-term performance, there is a temptation to focus on fire-fighting to manage immediate and local crises. Successful companies realize that it is critical to develop long-term value, but they also realize that this takes time—sticking to principle and purpose, building customer loyalty, or establishing a reputation cannot be achieved overnight. This calls for a radical change in corporate attitudes—managers will need to suspend, even banish, what Jim Collins in Built to Last has called the “Tyranny of the ‘OR’”, which allows only one of the two alternatives (short term or long-term value) to be entertained. They will need to understand that both the components of enduring corporate performance will need to be fostered and managed in the organization. And this is why a culture of embedded agility becomes essential for enduring corporate excellence.
Embedding agility in an organization means that every employee is agile, every process is flexible, and an agile mindset governs the organization. When agility becomes natural in an organization, employees follow simple rules to achieve dramatic results.
The classic example of complexity science comes to mind—a huge flock of birds flying in formation, dynamically altering course, maintaining almost faultless coordination even as they swoop and turn. In 1987, Craig Reynolds did a computer simulation of flying flocks. He discovered that each bird in his simulation follows three simple steering rules:
1. Avoid bumping into other birds (crowding).
2. Fly in the same direction as the birds in front of you (alignment).
3. Stick with your flockmates (cohesion).
From the context of stability and agility, it is interesting that the rules simultaneously call for agility (movement with the flock), and stability (position in the flock). In the context of business, the company’s vision provides a direction and ensures stability, while to maintain that direction, employees and processes will have to be dynamic and flexible. As Reynolds puts it, birds flying in a flock “is a particularly evocative example of emergence: where complex global behaviour can arise from the interaction of simple local rules.” This is particularly important for companies operating in business turbulence. And, which company today does not face turbulence?
British Cycling and aggregation of minimal gains
The British Olympic Cycle Team provides a brilliant example of how simple rules provide both agility and long-term direction. In 1996, British Cycling, the governing body for sports cycling in the UK, was bankrupt and notorious for the way it managed the sport. It was described by the president of Union Cycliste Internationale (UCI), the world governing body for sports cycling, as “a completely black spot in the international cycling market.” By 2004, two gold medals, one in 1992 and one in 2000, were all that it had earned.
In 2003, Dave Brailsford became the performance director of the team. The team now had a vision: British cyclists had to be the best in the world. Then, Brailsford conceptualized and implemented a simple rule called “aggregation of marginal gains”. He explained this as: “The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.”
This led to a number of small improvements that would have been otherwise overlooked. For instance, the recognition that seams in clothing increased wind resistance caused the team management to create a one-piece aerodynamic jersey. The realization that cyclists were not performing at peak in the initial rounds because their muscles were not warmed up led to an innovation called “hot pants” which made athletes ready to perform at top speed from the beginning of the race. Better hand washing techniques and use of hand sanitizers reduced illness and consequent training absences. Many such “minimal gains” had a dramatic impact together—in the last two Olympics, the British Cycling team has dominated the sport, capturing 16 gold medals, and in the last four years, British cyclists have won the Tour de France three times.
Toyota and continuous innovation
Take any list of the top innovative companies in the world (such as the one released recently by BCG) and you will find Toyota consistently featured in the top 10. One of the prime reasons for this is that Toyota has built a culture of innovation, and surprisingly, for all the noise in the innovation world, Toyota’s innovativeness is not focused on disruption. In fact, estimates are that Toyota implements 50,000 new ideas in its cars every year (see for instance, Yuzo Yasuda’s book 40 Years, 20 Million Ideas).
Now, using a rule-of-thumb that only about 5% of ideas that are generated get implemented, a rough arithmetic tells us that about one million ideas are generated every year at Toyota. Surely, Toyota is not bringing out one million new disruptive car models very year. No, what Toyota is doing instead is following what has come to be called “The Toyota Way”—a focus on continuous innovation, by which every employee constantly scrutinizes products and business processes for what can be improved. The result is not just innovation in products, but more importantly, the creation of an innovative mindset, and an organizational culture of innovation.
One can derisively call this ‘continuous improvement’, but there is no denying the fact that such idea generation and gathering across the organization creates a culture that is hungrily hunting for the next best thing for the company to do. Amidst the thousands of micro-innovations, such as refining the rearview mirror position or optimizing a painting process, once in a while emerges a Toyota Prius, a full hybrid electric car rated by the United States Environmental Protection Agency and California Air Resources Board as among the most environmentally-friendly vehicles sold in the US.
In sum, for a company to succeed in turbulent environments, it needs to think not only of speedy reaction, but also consider the dimensions that transform the reactive response into a wise response. In the intelligences framework, speed is achieved by the four intelligences which drive four corresponding agilities—analytical, operational, inventive, and communicative; it is the overarching visionary intelligence, however, that brings in a consideration of the long-term, and provides stability with a beyond-me, beyond-company approach. Just as the ancient mariners who voyaged rough unexplored seas, twisted and turned in the face of uncertainty, but were always guided by a pole star that remained stable, companies in turbulent environments, must have both agility and stability. The co-creation of these two seemingly opposite capabilities is the challenge of business strategy today.