The 21st century marketplace is characterised by an increasing number of changes, which are often unpredictable. This increasingly forces organisations to be agile. Business agility can be described as the ability of enterprises to cope with unpredictable changes, to survive unprecedented threats from the business environment, and to take advantage of changes as opportunities. Several Consultancies and ICT vendors have made it their key strategy to help organisations to achieve agility. They provide a variety of organisational and technical solutions that should help to achieve the proper level of agility to handle unexpected waves of change. However, there is by far no consensus as to what exactly agility is, nor on how one could achieve agility. Very few studies have attempted to empirically study the need for agility.
This is a summary of the results of a research project, initiated on the request of Hewlett-Packard Netherlands, and executed by a research team of the Rotterdam School of Management, Erasmus University Rotterdam in the period January - August 2004. The main goals of this research were to explore the concept of business agility in general, to analyse four business sectors in the Netherlands in more detail and to understand what the enablers and barriers for companies and business networks are to become more agile and achieve high performance levels in increasingly competitive and changing environments.
The following conclusions can be drawn from this study, which involved 37 extensive surveys, 181 shorter surveys and 47 face to face interviews with high level executives and sector experts operating in four sectors: Finance, Logistics, Mobile Telecom and Utilities.
Dutch executives state that the current level of business agility of their organisations is in many aspects insufficient to easily cope with the key drivers of future change. There is a clear gap between the current level of agility and the level of agility that is needed. The business community conceives itself as moderately agile.
The emerging price war and the need for lower priced products & services combined with fast changing customer requests is dramatically influencing all sectors analysed. Companies feel severe difficulties in coping with the required changes. In many cases it requires a totally different way of organising the company and its business network.
Companies are very worried about the pace at which solutions can be implemented. To a large degree this can be explained by the existing organisational structures, cultures and legacy infrastructures.
The results also indicate that the need for agility is not just created by unpredictable changes in the outside world (e.g. price wars, quicker consumer response, new IT technologies). Many times internal changes (like mergers and acquisitions and changes in systems and procedures) cause organisations to become more agile as well.
Since perceived agility needs are substantially different across the sectors, a sector specific approach is needed in order to achieve the necessary level of business agility within sector companies.
Executives in all researched sectors feel the unpredictability of government regulation and government measures forcing them to make their processes and systems more agile. Especially the lack of implementation details and timing makes it necessary to implement the required changes in a short time-frame.
Companies state that an agile ICT infrastructure is an important basis for business agility. Due to the current legacy systems and a lack of standards ICT is still felt as a main disabler for business agility in larger organisations. Escalating IT costs of systems maintenance & support and the fact that changing requirements take too long to implement, cause many companies to feel worried about their current ICT infrastructure.
In line with the above, companies address the need for a centrally orchestrated structure, based on simplification of processes and components, standardisation and interoperability, scalable architectures, reusability of components, shared service centres and flexible reconfigurable architectures.
A key enabler for business agility is formed by the company culture (i.e. change oriented, customer oriented) and human resources (i.e. flexible employability, job rotation, cross-functional teams). Agility can be stimulated by changing reward systems, giving people room for innovation and out-of-the box thinking and the ongoing focus on innovation and renewal.
Many companies see outsourcing and off-shoring as one of the measures to become more agile. But, this only relates to processes which are seen as non-core, where the contract party has the size, flexibility and knowledge to quickly react to (unpredictable) changes. It is believed that in the long run outsourcing & off-shoring can increase the level of agility of organisations, but migrating from the current way of working to the new way of working is not easily done. Outsourcing contracts should not be purely focused on cost reduction only; the opportunity to increase the level of business agility should be included as well.
Executives indicate it is extremely difficult to make large product- and function-oriented bureaucratic organisations more agile. In practice, agility is often based on the ‘tricks’ of individuals to overcome the rigid procedures to quickly react to unforeseen changes. In board room terminology ‘business agility’ is not a well known term. However, when confronted with the drivers and gaps as described in this report, executives surely recognize the need to become more agile.
Being agile is not enough to be successful. Even a very agile company can do nothing without a certain level of clout in the market. The management challenge for the coming years is to become more agile, while obtaining and preserving clout.