This post, the first in a series, was adapted from APQC’s “Strategic Planning and Implementation Best Practices for Achieving Organizational Agility” best practices report. View an overview of the study findings or download the full report.
This post was written by Holly Lyke-Ho-Gland, a research program manager at member-based nonprofit APQC, the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management.
The business environment is fraught with more threats and opportunities than three years ago due to disruptive technologies, the internet of things, more demanding customers, growing regulations, among many other developments. However, organizations have to keep pace with these opportunities and threats and are concerned with their ability to sift through and respond to new opportunities and threats in a timely manner. This is where the concept of organizational agility comes into play.
Organizational agility, not to be confused with the Agile methodology, is the ability to quickly identify and execute initiatives for opportunities and risks that align with overall strategy. This means that organizations have not only to stay aware of changes in their business environments, but also to be flexible enough to change direction and implement new initiatives quickly, both in order to avoid risks and to achieve competitive advantages.
APQC and Strategic and Competitive Intelligence Professionals (SCIP) conducted a survey to look at organizational agility and understand what role strategy has in helping organizations be more agile. To that end, the survey investigated organizations’ agility, strategic planning, information assessment, and implementation practices.
Are all business environments created equal?
The first question that we wanted to understand was: Since not all business environments are the same, do all organizations need to focus on organizational agility to the same degree?
The simple answer is no. The research indicates that the type of business environment the organization functions in will help define the level of agility necessary. According to the article “Navigating the Dozens of Different Strategy Options,” there are four archetypal business environments based on two environmental spectrums: predictability and malleability. Furthermore, which archetypal business environment an organization falls into aligns with a “distinct archetypal approach to strategy.”
The four business environment archetypes are:
- Classic — predictable and unmalleable. Organizations in this environment gain competitive advantages through economies of scale and differentiation, both of which require comprehensive analysis and planning.
- Adaptive — unpredictable and unmalleable. Organizations achieve competitive advantages through continuous awareness of shifts in the business and ongoing improvement and experimentation.
- Shaping — predictable and highly malleable. Organizations in this environment create competitive advantages by working collaboratively with other organizations to shape their respective markets.
- Visionary — unpredictable and highly malleable. Organizations in this environment achieve competitive advantages through comprehensive analysis and by being first to the market or through disruption.
Most of the respondent organizations were either classic or adaptive. This means most of the organizations, in reality, have little ability to shape their business environments. Most organizations’ business environments are predictable (which can increase organizations’ ability to identify opportunities and risk) but are unmalleable (which can negatively affect their ability to execute and take advantage of those opportunities). We also wanted to understand which environmental factor had the greatest influence on the need for organizational agility, so we looked at the relationships between business environments and the importance of organizational agility (Figure 1).
Organizational agility is more imperative for organizations that work in highly malleable environments, such as shaping or visionary ones. In fact, visionary companies are twice as likely to find organizational agility extremely important. This makes sense given that organizations achieve a better competitive advantage by reacting to and executing on opportunities and risks in malleable environments, ultimately enabling them to shape their business environments.
How agile are organizations, really?
The next question was: Though people think agility is important, how agile are organizations really?
As noted earlier, organizational agility is really a composite of two concepts:
- The ability to identify and assess opportunities and risks
- The ability to execute a plan to address or capitalize on those findings.
As we started this project, we posited that there was a direct connection between planning practices and agility. This idea started with PwC’s article “Agility Is Within Reach,” which breaks organizational agility into two components:
- Strategic responsiveness — the ability to quickly identify, assess, and develop plans for opportunities and risks.
- Organizational flexibility — the ability to execute those plans effectively and quickly.
When we broke down agility into the two component parts, strategic responsiveness and organizational flexibility (Figure 2), we found that most organizations are less confident in their ability to execute plans effectively.
Organizational agility is an important practice that helps organizations stay competitive and take advantage of opportunities or risks. Though organizational agility is a two-part concept, most organizations are more competent in strategic responsiveness (the majority rate competent or very strong) than in organizational flexibility (the majority rate underdeveloped or competent). This finding parallels general trends in strategic planning and transformational change. It’s typically not the redesign plans that are the source of the frustrations typically but the implementation practices.
These two concepts run parallel to the major components of strategy: planning and implementation. Hence, the rest of the study explores the relationships between the strategic planning and information assessment practices (e.g., functions involved, methods, frequency, and inputs) with strategic responsiveness and implementation practices (e.g., governance, frequency, communication, and incentives) with organizational flexibility.
However, organizational agility is a continuum, and, though it is a noble concept, not all organizations need to optimize their strategic responsiveness or organizational flexibility. Does this mean that organizations functioning in less malleable business environments don’t need to be agile?
The simple answer again is no. Regardless of the business environment, organizations can still reap some benefits from improving their ability to plan and execute changes quickly, such as improving their ability to implement strategic plans. The crux is understanding the balance between the investment in improvement efforts and the gains the organization will garner.
The rest of this series will look at the drivers and restraints of organizational agility and its two components (strategic responsiveness and flexibility). Hopefully the findings in the future articles will help organizations, regardless of their business environment, identify ways to identify improvements that align with their business goals. Specifically:
- What planning practices improve strategic responsiveness?
- What implementation practices improve flexibility?
- Where to focus incentives and communication strategies to execute initiatives more effectively?
- What are the top obstacles for organizational agility and how can we overcome them?