The world is changing and will never be the same again. Incremental tweaks to your business are unlikely to create long-term gains.
Instead, organisations must combine shorter-term profit protection with more fundamental changes to their strategy and the way they operate.
There are three different types of response and levels of organisational agility and these reflect the confidence and progressiveness of the management team.
- Cost minimisation is the first level of agility and involves cutting back on any costs that do not immediately drive the top line.The philosophy behind this approach is that if you get your heads down and keep things lean and tight you will survive to fight another day.Investments in future growth programmes are consequently reduced — training, advertising and R&D are cut back to protect current margins.
If the company has enough clout, supplier terms are renegotiated.Qantas, for example, has recently announced a new wave of job cuts, delayed expanding its international reach and pushed back the delivery dates for new aircraft.But this approach is inadequate.
The post-recession world will be different to the pre-recession world and new forms of value will be required.
- Trading agility is the second level of action, where companies repackage existing products and services in order to maintain and drive customer interest, volumes and sales.At the low end of the scale, this simply means reducing the price of existing products.
Last week, for example, I was on business in Las Vegas and discounts and deals on rooms and meals were everywhere. But at the top end, trading agility can involve reaching out to new customers who may now be more interested in your proposition.
For the past few months, Virgin Atlantic has been advertising its Premium Economy offer presumably to cash-strapped business executives who can no longer afford business-class travel on rival carriers.
- Strategic agility represents the highest level of agility — the corporate cheetah. It is a business’s ability to shift its allocation of resources and reposition its customer value in order to drive future success in a changed world.It is present in those organisations where executives (1) believe that the markets in which they operate are fundamentally changing, and (2) have the foresight and cash to take advantage of new opportunities as they arise.
Cisco Systems fundamentally changed its organisational approach in 2001 in the light of the bursting of the dot.com bubble.
In addition to refocusing its product range and cutting costs dramatically,CEO John Chambers also transformed a top-down management approach into a more democratic and responsive organisation.
How agile is your business?
Is it focused on cost minimisation, on trading its way out of the recession or on building a new business that can both survive the current recession and the potential to thrive in the future upturn?
(Photo: frederic.salein, CC2.0)
