Engineering adaptability

 

What does accelerated change mean for organisations? Accelerated adaptation. Or put another way, agility.

Agility is an over-used word in business these days. The perceived sexiness of agile development methods spilled out of the product labs and the IT function and into the rest of the business. It’s a useful word but you have to define what you mean when you use it outside of those product or project contexts.

Perhaps it first makes sense to define what it means in those contexts. Here, agile development is about formalised alternative approaches to the classic ‘waterfall’, where all possible requirements are captured at the start of a project and then development continues until those requirements are met. Agile approaches are instead iterative, testing requirements with the customer at every stage. This avoids long product builds where the end result has either diverged from the customer’s original (or real) need. Or products that become less and less fit for purpose over the life of the project.

Organisational agility

In a broader organisational context, agility is about the ability to change rapidly in response to a variety of signals. Agile methods may be part of this response but this is really about the capability of the organisation to receive those signals, process them, and act on them quickly.

For clarity, that’s three clearly different capabilities that I’ve defined before:

• The antennae to detect change signals from inside and outside the organisation and particularly from adjacent spaces — often blind spots from which the most serious challenges may come
• The ability to process this information and build a response plan rapidly, gaining assent from, or at the worst compelling change in, the relevant parts of the organisation
• The flexibility to act on that response plan at speed

Change signals

Examples of signals that might trigger this chain of responses include:

• Internal functional failure or degradation
• Accelerated direct competition
• Adjacent market competition
• Customer channel shift
• Collapse of product or service relevance

I’ll break those out in more detail

Internal functional failure or degradation

How fast could you rebuild one of your core business functions if it appeared to be failing? How much disruption would it cause? How would you know it was failing in the first place?

I haven’t worked with an organisation where one or other unit wasn’t failing the rest. But they often don’t know they’re failing and nor do their managers — at least, they can’t prove it objectively. They don’t have the benchmarks against which to measure the performance of procurement, finance, HR or IT teams.

That’s not to say they don’t have some metrics in place, but these metrics are usually operational and based on a historical idea of how that unit should perform. They don’t measure its contribution to the organisation’s wider goals.

This isn’t easy. Part of the problem is often a disconnect between what these functions think their role is and what it should be for the long term health of the organisation. Only with a proper alignment of expectations and measurement built around those shared expectations will you ever get a signal that something is wrong.

Accelerated direct competition

The most obvious form of signal is direct competitors applying the accelerating effects of technology to overtake. But this is perhaps the rarest example I see and the one for which most organisations are reasonably well prepared. They are focused on the rear view mirror, so see these organisations approaching in the outside lane.

Adjacent market competition

This is the blind spot. The one that people don’t see coming until it’s too late. Or that they are too arrogant or ignorant to acknowledge. This is the Netflix vs Blockbuster battle. Kodak vs digital (and now the rest of the camera industry vs the smartphone). It’s HMV vs iTunes or Yellow Pages vs Google.

Customer channel shift

The way customers communicate with their suppliers, and buy from them, is changing.

Case in point: a couple of years ago a friend asked me to speak with the MD of a small-ish (a few tens of millions) manufacturer. He was about to push the button on a new website costing a few tens of thousands — perceived as a big investment for him. He had cold feet and wanted to check his strategy before paying out.

I looked at his business — selling to service providers, retailers and manufacturers — and asked him a few questions. One of the first was “Do you sell on Amazon?” He got quite annoyed at this point. “You’ve got the wrong end of the stick. We only sell to other businesses.” I convinced him to bear with me and go onto Amazon’s website, and type in some keywords related to his products. “Oh shit,” was his response, or words to that effect.

To his surprise (though obviously not to mine), his competitors were already selling their wares there. More to the point, his distributors were selling his products there. And he had no idea.

Collapse of product or service relevance

The lifespan of products is getting shorter and shorter. Take the ‘hoverboard’ for example. In the space of six months it went from appearing under the feet of celebrities and costing the thousands, to being a huge phenomenon (and costing hundreds), to being effectively banned from the streets, killing the market.

Monitoring such rapid rise and fall in relevance is a challenge.