Don’t Be Agile, Be Smart Agile

Don’t Be Agile, Be Smart Agile

With the increasing pace of change in terms of technology disruption, globalization, and the changing nature of work itself, what should companies do to ensure they continue to survive and thrive? This article is my take on research published in Strategy+Business.

The researchers looked at “winning companies” – companies that had a reputation for being consistently successful. They also looked at “losing companies” – companies that experienced significant drops in their valuations over a 10 year period, to try to understand the lessons that could be gleaned.

To deal with the increasing rate of change, conventional wisdom suggests that companies need to become more “agile” and move quickly to deal with threats, or more quickly to pursue attractive opportunities. However, the research findings were counter-intuitive.

The winning companies weren’t more agile than the losers, in the sense of being able to respond faster to changes in their industry environment. Yes, the winning companies were proactive in their strategic moves, but more importantly, they were very measured and consistent in the big, strategic choices they made.

The research found that 80 percent of the value destruction in the losing companies was because of “strategic blunders”. It was the poor strategic decisions made by the losers that brought about their decline.

The big lesson from the research is that “changing fast” to chase after opportunities is not a recipe for success. It’s a recipe for strategic incoherence and volatile performance. A winning strategy is not about being agile, it’s about being “smart agile”. In other words, the winning companies won because they made wise strategic choices, not because they moved fast.

Here is my take on the five key practices common to the winning companies; many of which run counter to conventional business wisdom:

1. Stay true to who you are.

This does not mean that you do not change. You do change. But you remain clear about what you stand for in terms of your Core Purpose. “What” you do, and “how” you do it may change, but “why” you do it should stay constant. Go through a disciplined process (at minimum every 12 months) to conduct a thorough industry analysis to identify and understand the forces of change, then choose a small handful of long-term strategic moves that will set you up for future success. Your short term strategic projects (big rocks) should be moving you in the direction of these long-term moves. You play the strategy “long game”.

2. Lead your customers.

Peter Drucker said, “The truly important events on the outside are not the trends. They are the changes in the trends. These determine ultimately the success or failure of an organization and its efforts.”

You need to understand the key forces that are impacting (or likely to impact) your industry and get out ahead of changing trends. From there you shape what your customers want. The winning companies did not base their strategies on researching what their consumers wanted and responding to customer needs. Rather, they anticipated what the customers would want in the future, and created demand.

3. Figure out what is “Core” to your future success.

Meeting or exceeding industry best practices is just table stakes. Winning companies identify the Core Activities (including products and services) that matter now, and those activities, products, and services that will matter the most in the future, and invest in these. They place “strategic bets” on the capabilities that will matter most in the future and then execute relentlessly.

4. Put your culture to work.

Identify your Core Values and bring them to life every day. Winning companies leverage their unique behaviors to make them even more powerful and effective.

5. Prune the rose bush.

I have a saying, “You have to constantly prune the rose bush to create beautiful blooms.”

Peter Drucker wrote about the importance of “purposeful abandonment”. He said, “The temptation of business is always to feed yesterday and starve tomorrow.”

Strategy Execution requires courage. Your “stop doing” decisions are where you demonstrate true strategic leadership. It is easy to keep adding products, services, and new projects. It takes real courage to say, “No”.

Winning companies do not control expenses across the board. They strategically cut costs to grow stronger. Winning companies treat expenses as investments. They double down on investments in the Core Activities that will create value in the future and they ruthlessly prune off those activities, products, and services which no longer serve their long-term strategic moves.

Winning companies have the discipline to say “No” to everything that does not help them win the strategic game they have chosen to play.

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Until next time…
Stephen