September 9, 2013
There was a time when economies of scale swamped all other corporate attributes – and a time of stable competitive advantage – where sticking to a single core competency was sufficient. Big companies dominated. Sure, they were slow to react to market change, but they had huge cost advantages and could lock down distribution channels, suppliers, and other sources of strength.
But that is last decade’s thinking. Seventy percent of the companies that were on the Fortune 1000 list a mere 10 years ago have now vanished – unable to adapt to change. In those 10 years we’ve seen digital disruption change the business landscape. We’ve watched the Internet become pervasive, embraced cloud-based applications that update multiple times a year, acquired mobile devices that connect everywhere in the neighborhood and around the globe, and embraced information workers who use their own tools to do corporate work on their own time.
Today, companies must break away from the assumption of sustainable competitive advantage and embrace adaptable differentiation, i.e., develop an agility advantage. But what does this mean? Forrester defines business agility as the quality that allows an enterprise to embrace market and operational changes as a matter of routine.
In a new report, we’ve identified 10 measurable dimensions that shape an organization’s business agility. Two are market dimensions: market responsiveness and channel integration. Three are organizational: knowledge dissemination, digital psychology, and change management. Five are process-focused: business intelligence, infrastructure elasticity, process architecture, software innovation, and sourcing/supply chain. On each of these dimensions, companies must demonstrate an awareness of how to be agile, and they must also be able to execute in an agile way.
Measuring business agility in this way is not easy, but it is possible. And the results yield some amazing insights.
For example, of the CIOs and CMOs that we interviewed, most were highly aware of how to be agile on process dimensions like business intelligence, process architecture, and infrastructure elasticity, but they failed on ability to execute on these dimensions. In the business intelligence function, for example, companies can pinpoint where analytics can help, but they have not distributed the capability to the business. This disconnect creates huge frustration. Companies are spending money on systems that give them high visibility into what they need to do, but they can’t do much about it.
We saw the opposite problem in market responsiveness. Many companies have put systems in place to respond to market shifts, making it easier to move resources to face up to the threat. But their systems are woefully behind on identifying when those shifts occur. They’re flying blind.
The true power of this 10-dimensional model of business agility is in gap analysis – seeing exactly where a company is not ready to respond to an event. For example, a company facing digital disruption – like a publisher dealing with eBooks, or a taxi company dealing with Uber – needs strengths in market responsiveness, digital psychology, and change management. Assuming the crisis isn’t urgently upon them, investments in these areas will pay off more than, say, investments in process architecture.
In a world rife with change, dominance is fleeting; only agility creates sustainable advantage. As we move forward, the market must put a premium on agility and companies must measure it along with other key metrics.
Visit our new business agility site to complete a brief assessment to determine your organization’s readiness for change.