Companies be nimble: developing true agility is tougher than it looks. After years of hard work, CEOs are still searching for the best way to pick up speed - RoundTable

Chief Executive, The, Dec, 2003 by Jennifer Pellet

The casual business observer might conclude that after a decade devoted to reengineering, restructuring and realigning, CEOs must have achieved their ideal business models.

But in truth, a great deal of painful work lies ahead. The ultimate goal is an agile organization with the flexibility to quickly read and heed shifting competitive signals while also delivering solid financial performance. Thai agility is suddenly more important than size. Even in industries where size once mattered, nimble upstarts--think JetBlue, Capital One and Whole Foods--are edging out behemoths by identifying and responding to changing consumer needs more efficiently than industry powerhouses.

When it comes to winning the race to capitalize on change, pointed out Mitchell Modell, CEO of New York City-based Modell's Sporting Goods, speed is essential. "The big never eat the small--the fast eat the slow," Modell told CEOs gathered for a recent roundtable discussion on agility held in partnership with Unisys.

Unfortunately, the hurdles facing large, established companies on the path to agility are many and varied, the roundtable participants agreed. "Culture is one of the biggest challenges," said Wallace Parker, president of Brooklyn-based KeySpan Energy Delivery, who pointed out that success breeds complacency. "It's almost easier if you're a company that's going out of business. If you're meeting earnings targets, your employees will ask, 'Why are we doing this? I thought we were okay.' You need that burning platform."

Disconnects among an organization's departments, divisions or" global operations can further complicate a firm's pursuit of agility, added Joe McGrath, executive vice president of Blue Bell, Pa.-based Unisys. "Achieving alignment is tough enough in large enterprises," he pointed out. "When you give a direction to your teams and finally get them aligned, how do you quickly realign them in a new direction?"

Add to those obstacles rigid processes further constrained by inflexible, nonintegrated applications and technologies and it's easy to see why even successful companies struggle to recognize and adapt to the creep of a rising tide--much less a sea change. "The more successful we are, the harder it is to be agile," said Jim Hagedorn, president and CEO of The Scotts Company, based in Marysville. Ohio. "It's as if there's a default in people, a bias toward bureaucracy."

And yet, any company with a history must, by definition, also have a history of reinvention, argued Farooq Kathwari, chairman and CEO of Ethan Allen Interiors, a furniture business with a 72-year legacy. "You cannot stay in business that long without reinventing periodically," said Kathwari.

Cultural change

Unfortunately, that track record doesn't necessarily mean the reinvention process is baked into a company's culture. In fact, when Ethan Allen faced a seismic shift in the home furnishings market 15 years ago, steering the necessary image and attitude overhaul proved challenging. "We had done a number of reinventions previously, some unconsciously, but over the last decade we had to do it consciously," said Kathwari, describing the company's effort to counter flagging consumer interest in its mainstay product--Colonial American furniture. "That required creating a culture of change."

Ethan Allen began tackling that feat by communicating the challenge to its 10,000-plus employees through an internal marketing program (see sidebar, page 52). "Developing a plan is critical, but managing the process is even more critical," said Kathwari, reflecting on an overhaul that changed 40 percent of the company's product line between 1991 and 1992 alone. "We needed to convey the need for change in such a way that our people would be able to digest it."

Often, that's a tricky proposition. "We were fortunate to be running one business," he explained, adding that sales doubled after the transition. "For the CEO of an operating company, steering that kind of change [across divisions] would be much more difficult."

The more complex an organization, the harder the task, agreed Ralph Welborn, a managing partner at Unisys, who describes a "semantic disconnect" between employees from dirt)rent divisions or departments. "There are the T-shirts (operations), the turtlenecks (marketing), and the suits (executive management)," noted Welborn. "The language they use, their perspectives and how they prioritize is fundamentally different. So you've got to bridge that disconnect to get the alignment and executional consistency critical to agility."

How do you unite specialized silos or focus the disparate views of various corporate functions into one cohesive mission? Sidney Harman, chairman of Harman International Industries, likens the process to forming a jazz quartet. "Each of the four key executives in my company is very gifted at his or her specialty, but everyone is intimately aware of and profoundly interested in the areas of discipline of the others," he explained. "Each listens attentively and responds to the others. It's a form of organization that turns its back on historic, top-down, specialized silos--and makes for leaps of imagination, innovation and agility."