Pace of strategic renewal must keep in step with pace of change

Pace of strategic renewal must keep in step with pace of change: winning by adapting to what’s changing around you.

Extract from Management Innocation eXchange – Gary Hamel:

We live in a world of punctuation with limited equilibrium, where the future is less of an extrapolation of the past and more of a realization of innovation and new ideas. This is a world where adaptability becomes advantage.  New combinations of technology, competition, and communications are causing fundamental change in venerable institutions and hundred-year-old business models. The pace of change that we thought unsustainable even 5 years ago is constantly being accelerated making the most important question for any organization is this: are we changing as fast as the world around us? For most organizations, the answer would be no.

Adaptability is a fundamental challenge and a potential source of competitive advantage for every organization.  As we tackle this challenge, we need to start with a shared definition of adaptability. What, after all, is the distinction between “agile,” “resilient” “flexible,” and “adaptable?”  To an extent these terms are interchangeable, and whatever the word, any definition is at least somewhat arbitrary.  So instead of consulting the dictionary, let’s get clear about the sort of organizations we are trying to build.

I’m betting you’d like to work for an organization that . . .

– Never takes refuge in denial
– Is positively discontent
– Always plays offense and never defense
– Rushes out to meet the future
– Is relentlessly optimistic
– Regularly reinvents itself and its industry
– Captures more than its fair share of tomorrow’s opportunities
– Frequently surprises both its customers and competitors

   . . . and does all this in the absence of a crisis.   Now that would be an adaptable organization.

I like to make a distinction between operational agility, and strategic adaptability.  Operational agility implies an ability to respond quickly to shifts in demand or customer preference within the boundaries of an existing business model.  A great example of an initiative focused on agility would be Volkswagen Group’s new MQB manufacturing strategy.  (Translated into English, Modularer Querbaukasten means Modular Transverse Matrix.)  The MQB architecture allows a wide range of vehicles (Audis, Seats, Skodas and VWs) to be produced on a small number of platforms.

Strategic adaptability, by contrast, refers to a company’s capacity to reconfigure its underlying business concept, by dramatically rethinking . . .

– Its core mission
– Its primary value proposition
– The identify and nature of the end customer
– The method or channels of distribution
– Its revenue or pricing model
– The markets or industries in which it competes
– Its core competencies
– Its ecosystem of business partners
-The degree to which it is vertically or horizontally integrated
– The basic way in which it produces products and services

To take an example, we’ve all experienced Amazon’s operational agility—its ability to rapidly assemble our unique order from tens of thousands of SKUs and deliver it to us in day or two.  But Amazon is also a case study in strategic adaptability.  During its brief history, it has morphed from a Web-based bookseller, to an online retail platform, to a digital media powerhouse, and most recently, to a leader in cloud computing.

Amazon is rather unique in that it has changed its business model in the absence of a performance crisis.  Usually, major strategic shifts are driven by a financial meltdown, or years of substandard returns.  As I’ve said on numerous occasions, deep change in big companies usually happens the same way it happens in poorly governed dictatorships – infrequently, belated, and convulsively; and for the same reason – a top-down authority structure frustrates bottom-up change.  All too often, by the time an issue gets big enough to attract the CEO’s attention, whether an opportunity or a threat, it’s too late to do anything but react.  A case in point:  By the time Google’s top brass roused themselves to do something serious about social media, Facebook had already built a nearly insurmountable lead.  In my experience, the vast majority of corporate “change” programs are “catch-up” programs.

In my view, it shouldn’t require a financial crisis, swinging lay-offs, a clean sweep of the executive suite and a crippled share price to realign a company’s strategy.  That’s why we need to change the way we change.  Change needs to happen a whole lot faster and a whole lot cheaper than it does now.

To put it simply, we’re trying to maximize the following ratio . . .

To borrow from military doctrine, we’re trying to find ways of tightening the “OODA loop” – the time it takes in a dynamic environment to observe, orient, decide an act.   On the battlefield, the army with the shortest OODA loop usually wins.  The same holds true in business.  If you can make sense of what’s changing more quickly, and redeploy your resources more rapidly, you win.

As the pace of change accelerates, so must the pace of strategic renewal.  Indeed, one of the most important questions for any enterprise today is this:  Are we changing as fast as the world around us?  All to often, the answer is no.

More … http://www.managementexchange.com/blog/what-adaptability?