how to make giants nimble

November 26, 2016

With increasing industry disruption, efficiency is fast becoming of secondary importance to innovation and agility. Many large organizations have too little capacity for external sensing, strategic reflection, and business transformation.* Raising the agility quotient is an uphill task, all the more so for big organizations. Baba Prasad presents a five-step methodology for CEOs of giant organizations to strategize successfully amid turbulence.

 

What one capability do you think would be most critical for tomorrow’s CEOs to develop?” This was the question PwC Global asked 1400 CEOs across the world for its 2016 survey. The majority answered? “Business agility.” Another survey of 400 CEOs in the US, KPMG’s CEO Outlook 2016, summarizes: “In fact, the corporate playbook is being rewritten and replaced by one that takes business agility to a level we have never seen before.” Surveys by PwC, KPMG, and many others are discovering that thousands of CEOs across the world are kept awake at night by some variant of the following set of questions: “In these times of turbulent change—with lightning shifts in technology, unpredictable customers and labour, unending market disruptions, and unforeseeable competitors—‘how’ can I make and keep my company agile?” And CEOs of big companies further wonder about the complications brought by size: can my giant company become nimble at all in the first place?

Based on my research and experience, I have become convinced that even in the midst of chaotic change, there is a specific methodology and a set of steps CEOs can take to make their giant companies nimble. I have dwelt on this in some detail in my book, Nimble: How Intelligences Can Create Agile Companies and Wise Leaders. This article will provide an overview of the methodology.

Let us first answer the question of whether giants can be nimble by using a real-life story. The Chennai-based sugar giant, EID Parry, towers over its competitors with revenues of over R1500 crore, and a market capitalization of over R4000 crore. Every day, its five factories in Tamil Nadu and Puducherry crush more than 19,000 tonnes of sugar cane, and as byproducts, the factories generate 82 MW of power and distil about 135 kilolitres of alcohol. The company sources its sugar cane from about 100,000 farmers who grow sugar cane on land that cover about 200,000 acres.

In late December 2011, a cyclone named ‘Thane’ badly damaged EID Parry’s biggest factory in Nellipukam, which was directly in its path. It blew off the factory’s roof, twisted the production machinery, and flattened 4000 acres of sugar cane. The company suddenly found it had to handle a massive task. Initial estimates suggested that it would take at least thirty days for the plant to be operational. But this was further complicated by the fact that the shelf life of sugar cane is limited—the juice content starts going down by the hour after the cane is cut—and this meant that EID Parry had to process 100,000 tonnes of sugar cane in ten days. In a remarkably acrobatic act, in five days flat, they got the plant running and finished crushing the cane. Giants also can be nimble.

Being nimble has tremendous long-term benefits also. EID Parry’s farms have a 20% higher yield: 32 tonnes per acre against the national average of 27 tonnes per acre. Moreover, its relationship with its farmers ensures that they will not abandon it for other factories or for other crops. Consequently, its stock market performance is significantly better than most of its competitors.

Consider the story of another giant. Thirty years ago, a dismal manufacturer of refrigerators in China started its journey under an intrepid CEO, Zhang Ruimin. The ragged story of Haier was transformed with the visionaryleadership of Zhang into a fairy tale. It is the largest appliance seller in the world today. Despite its size, Haier has demonstrated a fundamental nimbleness throughout its existence. In fact, it has changed the business model itself in four distinct phases—in the first phase, it focused on becoming a category leader through high-quality products; in the second phase, it became customer-centric, focusing on sensing the market and developing appliances responsive to customer needs; in the third phase, it became a solutions-provider, helping customers figure out and manage problems such as home design and energy efficiency; and finally, in the fourth and current phase, it is becoming a global player working with the networked world through services based on the Internet of Things.

If EID Parry demonstrated its agility in the face of a natural disaster, Haier has shown its nimbleness by refashioning itself in a fast-changing world. Underlying both models is a capability to be nimble that has been carefully cultivated. How does a CEO make a large organization nimble?

 

five steps to making a giant nimble step 1: rethink strategy

One of the key priorities for the CEO should be to change the organizational mindset. The concept of strategy itself has to be rethought. In times of rapid and substantial change, strategy is no longer about creating a plan for actions that will be performed in the future. It is about planning and building a set of flexibilities the organization can use to handle an uncertain future as it unfolds. A focus on agility-building also reduces the infamous gap between strategy design and strategy execution that has dogged practitioners and academics for years.

 

step 2: reconceptualize agility as multidimensional

One of the key misconceptions in business today is that agility is only of one kind. My research discovered that a leader or a company should be agile in five dimensions—analytical, operational, inventive, communicative, and visionary. Analytical agility allows the organization to change frames and methods of analysis quickly. Operational

agility enables it to be flexible in its various business processes. Inventive agility drives creativity and innovation. With communicative agility, the organization can handle various crises regarding communication Finally, visionary agility, the overarching agility, enables the company to examine the impact of its actions both in the long run, and in terms of the width of its impact (how many processes will it affect; how many people, and so on). Visionary agility transforms the tactical response of the company into a strategic one. We can now thus talk of agility being strategic, if not all of strategy. As is obvious, the company will need different agilities in different contexts. For instance, a labor strike will call for communication agility (to handle negotiations), operational agility (to deal with the stalled production), and visionary agility (to examine the strategic implications of the negotiated terms and the decisions made about production. The roles of analytical agility (say, to analyse the financial impact of decisions) and inventive agility will be muted in this case.

 

step 3: figure out which agilities are important in your business (both short-term and long-term)

While in our consulting practice, we use a sophisticated instrument for this purpose, an informal check can illustrate the process. Get a group of executives who have a good overview of the organization and its opportunities and challenges (usually, this is the CXO group). Have the group discuss and chart which agilities will be in demand in your industry and in your market space. For instance, does your group see a technology trend in the near future? What demands does this trend place on your company in terms of the five agilities? Would you need more analytical agility to handle this upcoming curve, or do you need to create new products or services using inventive agility? Once you are through with this step, you have what we call the Vivékin Agility Map. This can include the agilities needed by a company, along with a timeline by which the agilities should become available in it.

 

step 4: assess your company’s agilities

In this step we use an instrument we have developed over several years of research at leading business schools. Obviously, this tool provides robust results; but in order to illustrate the process, I will describe a less formal way to go through this step. Get your group to refer to the agilities map created in Step 3, and discuss and assess where your company stands in terms of each of the five agilities. In which agilities is your company strong? In which ones is it weak? With the map and assessment done, now comes the final step.

 

step 5: work with the organizational culture to build strategic agility and make your giant company nimble

In this final step, you are drawing up a plan to build strategic capabilities. You are not thinking about sales targets or market shares or specific actions. In this new version of strategy, the actions and timelines you are thinking of are the ways in which you will build specific agilities; how will you allocate resources to the development of the five agilities? Are you overinvested in an agility that is not really necessary? Can you think of an outside company providing some of the agility when needed in a crisis? (For example, during the Bhopal gas tragedy in India, Union Carbide outsourced its communicative agility needs to a PR firm, Burson-Marsteller.) What practices do you need to build into the organizational culture to make nimbleness become ingrained? This step should result in a detailed roadmap of how to build the agilities that are necessary for the company. The five-step cycle is repeated frequently at chosen intervals so that the company is dynamically responding.

 

culture

The importance of an organizational culture oriented toward nimbleness cannot be overstated. While the five steps cited above can be done at the CXO level and a strategy and business process can be created around it, companies like Haier are taking this methodology down to team level so that it becomes part of the company’s way of being. Every team in your organization, however large or small your company may decide the team size to be, can become engaged in the same five-step process. The result is a multitude of units building and using agilities in different ways, contributing to a collective whole that is constantly sensing and responding to the changes in the business environment, a nimble giant.

 

baba-prasad