Advance with Agility
Report | June 2016 | Kanvic Grey Matter
In today’s world growth requires an agile stance that allows companies to quickly sense, interpret, act and adapt to a constantly changing external environment.
In the new era threats and opportunities can appear suddenly from any direction. In order to grow, companies must take advantage of these emerging opportunities and move to counter potential threats. Thus, they need to shift to an agile stance that allows them to quickly sense, interpret, act and adapt to the evolving external environment.
The first imperative for companies to get agile is to develop organisational antennae that are constantly tuned-in to market changes. This includes developing formal and informal networks - inside and outside the organisation - to tap sources beyond decision makers’ usual circles.
Furthermore, companies need to leverage the internet and new technologies like social media to constantly stay in touch with the latest developments. These unconventional sources can often be better informed of the emerging trends at the periphery, which might not yet have made themselves felt in the course of the business’ day-to-day activities.
However, it is important that an organisation’s intelligence gathering operation is formalised through company-wide processes so that weak signals coming from different sources are tracked, rigorously screened, and escalated wherever necessary. Otherwise, today’s weak signals risk being lost in the background noise, rather than getting flagged up as potential disruptive forces.
It is also imperative that the activity of monitoring emerging trends is undertaken by individual decision makers at each level of the organisation. Gavin Patterson, Chief Executive at British telecommunications services company BT, says that one of the key functions of leaders is to scan the horizon: “you have to be on the bridge looking outwards, looking for signs that something is happening, trying to anticipate it before it becomes a danger’. The company has complemented this approach with innovation ‘scouting teams’ based in Silicon Valley and Israel, along with tech partnerships with universities in China, US, Abu Dhabi, India and the UK.
Even with the right systems in place for detecting market signals, the vast stream of information that flows in from today’s data rich environment needs to be correctly interpreted if it is to be effectively acted upon.
A prerequisite for accurate interpretation is that leaders move out of a mode of denial which automatically rejects any new information that contradicts their outlook. For example, as e-commerce emerged in India, one leading brick and mortar retailer was asked about the challenge it might present to his business. He stated that he didn’t consider it a threat and justified his assessment by citing rising quarter on quarter sales at his company. However, current sales growth is not the right metric to consider when evaluating future threats and opportunities.
Companies can avoid the mistake of rejecting weak signals by picking them up from different sources and then drawing a pattern. For example, tracking the flows of early stage funding into e-commerce would have indicated that concentrated entrepreneurial activity was occurring in the space, and therefore a greater likelihood of new business models emerging and scaling-up very fast.
Secondly, once companies have identified an important signal that could impact their business, they may fail to correctly assess the nature of the threat or opportunity. Faced with the emergence of e-retail, many retailers first denied that online would impact their business significantly. Then, after it grew rapidly, they became preoccupied with seeing it as a threat rather than exploring the potential opportunities it presented. Companies need to assess both how a new trend could take shape and what steps they could take to benefit from it.
Of course, the nature of nascent enterprises and industries means there is a high degree of uncertainty about their prospects and future evolution. Therefore companies can benefit by practicing contingent thinking. This means that rather than posing unanswerable questions like whether this or that company or technology will succeed, you instead ask: if the idea worked what would be the consequences for us?
Only a few years ago, established consumer goods firms would have regarded Indian ‘guru entrepreneurs’ - like Baba Ramdev and his ayurvedic brand Patanjali - as marginal players, addressing very different demographics with niche products that posed little threat to their business.
This assessment would have been based on their mental model of how success is achieved in the FMCG industry. The standard model defined a successful FMCG company as one that could leverage a portfolio of power brands, large advertising spends, a vast distribution network in established channels, and world-class R&D, all coordinated by an experienced professional management team.
However, contrary to accepted industry conventions, Baba Ramdev had already established Patanjali’s brand equity through his popular Yoga programmes. Meanwhile, his huge number of followers provided both a loyal customer base, powerful word of mouth effect, and a ready distribution network. Furthermore, the lack of professional management structure actually allowed the brand to keep costs substantially lower than their competitors.
The application of contingent thinking in this case could have led FMCG brands to focus sooner on Patanjali’s inherent strengths and how to counter them. Rather than dismissing its differences and being forced to respond only once the brand had gained significant market share in a number of core categories.
Throughout the process of interpretation it is crucial that efforts are taken to mitigate against existing assumptions and mental models. To do this companies should bring a diversity of mindsets to a problem. They should then encourage participants to argue the case for competing visions of how an emergent trend or competitive threat could play out and impact their business.
Once a change has been detected and identified as having a potential to impact the business, the next stage is for the organisation to take the appropriate actions fast. The key here is to overcome the instinct of inertia and adopt a bias for pre-emptive action.
For example, TATA Group has stressed in the company’s Vision 2025 of the need for the organisation to build ‘strategic and organisational agility’ given the rapid rate of change, and the need to have a ‘sense of urgency’ to identify new opportunities in the face of such discontinuity. To achieve this, CEO Cyrus Mistry emphasised that leaders must ‘foster experimentation and accept risks’ if they are to create ‘new capabilities and next generation businesses’.
Even when the extent of the emergent threat is unclear, companies can take preemptive action by either replicating the idea, acquiring it, or building defences against it to ensure they are well placed under different eventualities.
Once any action is taken, companies need to implement continuous feedback loops to test the response to their experiments. From this feedback they gain valuable inputs on how to tweak their actions further to generate sustained success.
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