strategic agility introduction

Strategic AgilityThe Ultimate Competitive Advantage

Bob Becker

http://www.pd-advantage.com/strategicagility.html (240) 252-8975

© Copyright 2008 Product Development Advantage Group, LLC. All rights reserved. 2

Bob Becker is currently the Vice President of Engineering and Quality at DRS Signal Solutions. He developed his insights about Strategic Agility from 25 years of industry work in a variety high change, high tech, high velocity business environments. As the Founder of the Product Development Advantage Group he leveraged those insights combined with proven methodologies to help clients improve their product development capability and strategic agility.

About Bob Becker

Advantage Group ◊ 24 Main Street, Westford, MA 01886 ◊ (240) 252-8975


Why is Strategic Agility Needed?

The 21st century business world is different: All but the most closely held Information easily

available to anyone, anytime Capabilities change overnight thru alliances Talent is located around the world Rate of market and technology change continues to

accelerate Paradigm shifting inflection points in many industries

Competitive advantages are now temporary



Traditional management systems reinforce the status quo: Waste enormous, valuable energy

generate and assess too much, inconsequential information Drive the business thru annual planning and goal setting

slower cadence than relevant market and technology changes Feature command and control decision making

slow to implement change and often removed from the customer “Systems” build behavioral inertia

changing directions is too hard

Today companies die by doingwhat used to be the right thing

too long



If competitive advantages are now temporary……you need to identify and extract benefit from

the temporary competitive advantages that present themselves.

If companies die by doing what used to be the right thing too long…

…you succeed over an extended period by achieving a short business renewal cycle.


Strategic Agility

The ability to sense and take advantage of opportunities by

planning and executing far-reaching business changes

swiftly and effectively as needed.


Transformational Change Congruence

Identity

StrategiesCompetencies CapabilitiesStructures

Systems Processes

Execution Capacity

Changes Increase as you Move out from Core

Maintaining Alignment of Each Layer (Congruence) is Essential for SuccessfulChange (both magnitude and time to move from core)


Climbing the Strategic Agility Pyramid

FoundationalElements

of StrategicAgility

Combined with Infrastructures

for Agility

Develop a Continuous

SteeringCompetence

FormDefiningInternal

Attributes

To CreateCompetitive

Benefits

Capability ofSustainedBusiness

Advantage

Achieve ShortestBusiness

Renewal Cycle

ExtractTemporary

CompetitiveAdvantages

ImprovedStrategic

Agility


Foundational Elements

These are the fundamental, enabling behaviors and capabilities required to build a strategically agile business.

The cornerstone capabilities of system thinking and proactive, team oriented leadership can form the basis to develop the other foundational elements if starting out.

Applicationof Systems

Thinkingto Change

Proactive& Team

Oriented Leadership

InternalStrategicCapabilityAwareness

Norms ofContinuous

OrganizationalLearning

ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


Application of Systems Thinking to Change Systems are defined by the

interactions of their components, not just the components themselves.

System Thinking isthe discipline for “seeing wholes” Seeing processes of change rather than snapshots

Businesses are systems (and have many) It is the interaction of the parts (people/organization, work to be

performed, processes) that produces value for customers. In human systems, the structure of the system includes how

people make decisions – the operating policies for translating perceptions, goals, rules and norms into actions.


Without an Application of Systems Thinking to Change


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency

You address symptoms that have little business leverage instead of root causes.

Change initiatives typically fail to get desired results.

You keep adding checks and balances which build into an ineffective bureaucracy.


Internal Strategic Capability Sensing Dispassionate view of how an organization’s core and

context activities change over time. Core activities:

Improve shareholder value Goal is to differentiate as much as possible

Context: Everything that’s not core Execute them as effectively and efficiently as possible Differentiating on context is a huge waste of resources

What’s core/context now? How about in 2 or 3 years?


Without an Internal Strategic Capability Awareness

You build up investments in capabilities that offer little value-add.

You under-invest in value-add capabilities eventually forcing you to try to catch up.

Your cost profile is not competitive against more agile rivals.


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


Norms of Continuous Organizational Learning

Learning is supported by habits of extracting knowledge as a regular part of doing business.

Mental models are exposed and can be changed.

Litmus test: Is learning supported by the culture or forced process compliance?


Without Norms of Continuous Organizational Learning

You repeat mistakes, creating frustration. You only have a few, overcommitted “go-to

guys” who can solve the tough problems. You take large hits trying to replace institutional

knowledge that leaves for other opportunities.


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


Norms of Information Transparency

Open, honest information naturally flows up, down and sideways.

People at the “top” deliver information as a habit, not “as required”. “Relevance” is in the eyes of the beholder

Messengers don’t get shot Systems support providing the same, timely

information available to all involved.


Without Norms of Information Transparency

Lack of top-down information flow causes dis-engagement, lack of urgency and slows change.

Lack of bottom-up flow forces management decisions without key, timely information.

Lack of information flow between groups causes key activities to take much too long.


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


External Threat and Opportunity Sensing

Continuous external awareness and internalization of upcoming market and technology shifts that could impact the business. Internalize? Eliminate the delay in going from “that

can’t be true” to “face the world as it is” Being late to “sense” (or

“in denial”) puts renewal on hold.


Without External Threat and Opportunity Sensing

Market insights are late which limits both top and bottom line growth opportunities.

Late recognition of threats cause disruptive plan shifts and large remediation initiatives.

Unseen opportunities turn into expensive turnarounds over time.


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


Proactive and Team Oriented Top Leadership

Top executive leadership that: Is biased to make a future rather than react to the

past Promotes team behaviors and shared leadership

in fulfilling the business purpose Key leadership challenges in moving toward

increased agility:Must overcome denial, nostalgia, and arrogance Look beyond ideologies of ‘operational excellence’

and ‘flawless execution’


Without Proactive and Team Oriented Leadership

Near term focus causes strategic turns to be missed.

Command and control at the very top slows adoption of decisions and limits growth potential.

Lack of a team approach at the top level creates silos which limits the potential advantages of synergy.


Thinkingto Change

Proactive& Team

Oriented Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing

Norms ofInformation

Transparency


Strategic Agility Pyramid


Thinkingto Change

Proactive& Team

Oriented Top Leadership


Norms ofContinuous


ExternalThreat &

OpportunitySensing


of StrategicAgility


for Agility

Norms ofInformation

Transparency


Renewal Cycle

ExtractTemporary


ImprovedStrategic

Agility


Human resource processes and systems to efficiently and effectively: Acquire, manage, develop and reward talent Create new structures Reorient people to perform different work

Business information systems for communications and decision making: Financial and other business goals, indicators and results Includes for whom, by whom, what, how and how often

Business processes and authorities for determining and making timely resource adjustments

Infrastructures for Agility

ManagementFocus on Value

GeneratingActivities

An Empowering& ChangeEnabling

Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices

ExtendingBusiness View

with RollingOutlooks


Management Focus on Value Generating Activities

Resource usage is dissociated from resource ownership De-emphasize functional silo power

Systems, measurements and key objectives stress cross-functional view of activities that produce value Activity-based accounting Team goals/rewards


Silo’d behaviors develop which emphasize functional success over the business.

Investments are made and initiatives are completed with little bottom line impact.

The ‘sum of the parts’ is greater than ‘the whole’.

Without a Management Focus on Value Generating Activities




Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices




Engaging Talent Management Practices

Hire based on talent and an ability and willingness to operate in a high change environment. Talent: “A recurring pattern of thought, feeling, or behavior

that can be productively applied.” Motivate people by focusing on strengths, not on

weaknesses. Develop people by finding the right fit, not the next ladder

rung. Use reward systems that support a changing environment.

A litmus test: Is the focus of hiring and pay… the job standard (level and description)? or the person (the talents and evolving skills and knowledge)?


You expend a lot of energy trying to turn people into people they are not.

Your new hires may fit yesterday’s needs like a glove but cannot evolve to meet tomorrow’s.

Many employees are not fully engaged which impacts customer satisfaction and ultimately the bottom line.

Without Engaging Talent Management Practices




Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices




An Empowering and Change Enabling Organization

Never satisfied with how things are. Encourage, but manage, risk taking. Organizational design should encourage

resource fluidity. Dynamic Work Assignments Dynamic Work Relationships Virtual Work Capability Focus on multidisciplinary teams for key activities

Decentralize the authority to act. Shared leadership


Management forms the first line of resistance to change - which may never be overcome.

Most of your key projects fall short of goals with a primary reason being an inability to staff.

You have few risk takers as employees defer to those higher up who don’t have all of the detail.

Without an Empowering and Change Enabling Organization




Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices




Extending Business View with Rolling Outlooks Having a substantive plan update only once a year is

hazardous in a rapidly changing business environment. Fundamental to successful agility is continuous business

monitoring beyond the limits of an annual plan. Typically this is a quarterly update where a 4-8 quarter

outlook is pushed out one more quarter each quarter.

Year X Year X+1Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1st Review2nd Review3rd Review4th Review

Forecast Actual

5 Quarter Rolling Outlook:


You lose visibility into future business performance as the fiscal year proceeds.

You train your organization to sub-optimize the future for the visible present.

Preventable surprises around the corner cause sudden priority shifts.

Without Extended your Business View with Rolling Outlooks




Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices




Efficient Resource Reallocation

Business choices impacting resource allocations can be made when needed during the year.

Supporting processes and tools are in place to allow for an efficient understanding of resource deployments and the impacts from reprioritizing resources.

Decision makers can be engaged to shift resources in a low overhead fashion as needed to more compelling business opportunities.

Leadership is willing to cancel or delay existing projects and initiatives to fully staff a compelling opportunity.


You may see an opportunity but are unable to free up resources to pursue it.

Faster competitors often beat you to market since you can only reprioritize annually.

You may over-commit resources by attempting to just fit new commitments into an existing plan resulting in time-to-market and quality issues.

Without Efficient Resource Reallocation




Organization

EfficientResource

Reallocation

EngagingTalent

ManagementPractices






Thinkingto Change




Organization

Proactive& Team



Norms ofContinuous


ExternalThreat &

OpportunitySensing

EfficientResource

Reallocation


of StrategicAgility


for Agility


SteeringCompetence

EngagingTalent

ManagementPractices



Norms ofInformation

Transparency


Renewal Cycle

ExtractTemporary


ImprovedStrategic

Agility


Develop a ContinuousSteering Competence

Continuous steering is not continuous change! Hands on the wheel – always scanning forward There are likely plenty of “straight-aways”, turn when

it makes sense

Manage theHierarchy from

Vision toObjectives

GenerateStrategic

Alternatives

FormExternal

PartnershipsAs Needed

Be Proficient atOrchestrating

Change


Form External Relationships as Needed

The best organizations are effective at supplementing their internal capability with mutually beneficial relationships

Short term Medium to long term Permanent

No new legal entity formed New entity Legal status changed

Asymmetric Shared Total (by owner)

Contract AcquisitionNon-equityAlliance

EquityAlliance

JointVenture Merger

Risk and Control

Duration

Entity Formation

Transaction Alliance Purchase


Without the ability to Form External Partnerships as Needed

You must create all your own innovation which gates your ability to consistently win in the market.

Without ‘as needed’ flexibility to expand your competence and/or capacity you can’t leverage new opportunities for which you lack resources.


Vision toObjectives

GenerateStrategic

Alternatives

FormExternal



Change


Manage the Hierarchy from Vision to Objectives The Hierarchy of Intentions ranges from long term

aspirational goals to tactical operating objectives. The best systems are:

Organizational alignment mechanisms Low overhead

AspirationalShared Vision

Focusing Theme

4-6 Focusing Theme Objectives

4-10 Operating Objectives (leverage organization’s Key Performance Indicators (KPI))

Time/Organization/Individual AppropriateCascading of Objectives

Rate of Change

Rarely

Duration of Focusing Theme(Typically 2-6 Quarters)

As Appropriate(Typically1-6 Quarters)

Strategic Goal

As Needed(Typically1-3 Years)

BalancedScorecard


Without the ability to Manage the Hierarchy from Vision to Objectives

You lack the integrity that extends from your vision to your workforce – a key aligning tool to excel at rapid change.

Often, too many things are important, so nothing is important.

Objectives cannot be used to guide priorities.


Vision toObjectives

GenerateStrategic

Alternatives

FormExternal



Change


Generate Strategic Alternatives

Life on earth teaches us that variety matters!

Even great strategies decay Scenario planning

Don’t try to predict the future Picture and create a wide range of

possible success paths Commit to a “set” of preferred futures

Counteract the forces that favor investment in “what is” at the expense of “what could be”

Distinguish between risk and newness


Without the ability to Generate Strategic Alternatives

Incremental thinking typically fills the void of strategic alternatives leading to incremental results at best.

When the breadth of strategic alternatives is much narrower than the breadth of change in your environment you will likely become a victim of that environment.


Vision toObjectives

GenerateStrategic

Alternatives

FormExternal



Change


Be Proficient at Orchestrating Change

Capability to efficiently and effectively plan and carry out strategic and organizational initiatives. Effective coordination of communications, actions,

decisions and events to implement change Must learn how to disrupt strong inertial forces

that inevitably favor status quo. Develop norms, systems, and processes that

counter inertia. Inclusive organizational involvement a key.


Without the Proficiency to Orchestrate Change

Status quo wins in all but the simplest change initiatives.

Disruptive, radical surgery is needed in situations that have become intractable.

Turnarounds rarely result in new market leaders.


Vision toObjectives

GenerateStrategic

Alternatives

FormExternal



Change



Attributes



Thinkingto Change




Organization


Vision toObjectives

Proactive& Team



Norms ofContinuous


ExternalThreat &

OpportunitySensing

GenerateStrategic

Alternatives

EfficientResource

Reallocation


of StrategicAgility


for Agility

FormExternal

RelationshipsAs Needed


SteeringCompetence

EngagingTalent

ManagementPractices



Norms ofInformation

Transparency


Change


Benefits


Renewal Cycle

ExtractTemporary


ImprovedStrategic

Agility


Defining Internal Attributes

Underlying organizational behaviors can be changed by moving from being reactive to responsive to generative.

Increase the likelihood of developing and capitalizing on product, process, or business model innovations by: having a view of potential futures nurturing the right talent maintaining values that support innovation leveraging partners when it makes sense

When change is “normal”: organizational effectiveness remains high during shifts the “wake” from changes is not traumatic as in organizations

whose “operating system” reinforces the status quo

EffectiveRenewalWithout

Serious Trauma

AlterUnderlyingBehavior Patterns

InnovateProductively


Create Competitive Benefits

Maximize the likelihood of sustained success in a turbulent environment.

Business success over time is created by stringing together temporary competitive advantages.

A business can do that when it has the ability to renew itself more quickly than it’s competitors.


Renewal Cycle

ExtractTemporary





Thinkingto Change




Organization


Vision toObjectives

Proactive& Team



Norms ofContinuous


ExternalThreat &

OpportunitySensing

GenerateStrategic

Alternatives

EfficientResource

Reallocation


of StrategicAgility


for Agility

FormExternal

RelationshipsAs Needed


SteeringCompetence

EngagingTalent

ManagementPractices



EffectiveRenewalWithout

Serious Trauma

ImprovedStrategic

Agility


Attributes

Norms ofInformation

Transparency


Change

AlterUnderlyingBehavior Patterns


Renewal Cycle

ExtractTemporaryCompetitiveAdvantages

InnovateProductively


Benefits

Allows aBusiness to:

By Leveraging a Capability to:

Built upon:

Enabled byan Ability to:

Set upby:

Capability ofSustainedBusiness

Advantage


Top 10 Strategic Agility Killers

Too many priorities Inadequate information flow Central command and control Denial, nostalgia, and arrogance Poor talent management practices Lack of a systems thinking approach The ‘power’ sits within functional silos Running the firm on an annual cadence Inability to reprioritize resources when needed Extensive job description/competencies ‘complex’


Strategic Agility – The Ultimate Competitive Advantage Battlefield commander mantra: “get inside

the enemy’s decision cycle”.By retrieving, interpreting and acting on

battlefield intelligence faster than an adversary you can perpetually be on the offensive

Businesses with the strategic agility to get inside the competition’s “renewal cycle”have a sustainable advantage!