Strategic agility - Panel Discussion

Chief Executive, The, Dec, 1996 by J.P. Donlon

IN A WORLD WHERE SPEED, FLEXIBILITY, AND CUSTOMER VALUE PUT A PREMIUM ON ORGANIZATIONS ABLE TO REINVENT THEMSELVES OVERNIGHT IN RESPONSE TO GLOBAL DEMAND, AGILITY IS BECOMING THE NEW COMPETITIVE METRIC.

The nature of competition is changing. More than ever, Companies need to build maximum flexibility around their core competencies. Companies know they must be both fast and lean. Manufacturers must be able to mass customize and deliver at low cost. When all these abilities are harnessed, the enterprise can grow profitably, even during times of rapid change. Using an information-centered framework, strategic agility in its purist form permits a company to organize around customer needs to offer the right product or service at the right time in the right quantity. In the following roundtable, held in partnership with EDS, CEOs describe the steps both the organization and its chief need to take to achieve strategic agility on a sustained basis.

The roots of agility go back to 1991, when Congress directed the Department of Defense to create a task force to examine U.S. manufacturing competitiveness. When U.S. manufacturers realized in the early 1980s that they had fallen behind their Japanese counterparts, some recognized that merely adopting their competitors' techniques would leave them forever playing catch-up. A way had to be found to leap ahead - to anticipate change, to find a new way to compete and lead. Formative thinking was developed by Roger Nagel of Lehigh University's Iacocca Institute, which later spawned the Agility Forum to serve as a central resource for ideas and methods. Until recently, such worthy goals as TQM, lean manufacturing, just-in-time, CIM, mass customization, supply chain management, and customer satisfaction have been pursued more or less separately. An agile enterprise may choose to integrate some, all, or none of these. It is neither a consultant's quick fix nor a technique limited to manufacturing. A company becomes strategically agile when it can maximize the value of all its core strengths in a seamless way. The greater the agility, the more power a company has to reconfigure its ability to produce what's needed at the right margins at the right time to the right customer. It also brings with it a new way a CEO can size up the future, regardless of how it unfolds.

Heaven knows the business world does not need another buzzword, yet participating CEOs recognize that the imperative of speed and the growth of integrated information systems is driving change. EDS' Les Alberthal estimates that nearly half the current Fortune 100 may not find themselves listed in a similar ranking 10 years from now. Agility will require companies to assimilate information from customers sooner and better. Research, design, and set-up for production may have to be concurrent. Some companies may become totally virtual in the sense that all but the most vestigial competencies may be out-sourced. Agile Web, a corporation formed by 18 small-to-medium-sized companies in Eastern Pennsylvania and New Jersey, is virtually virtual today. It reconfigures itself by selecting from among member companies capabilities to meet the precise needs of each customer. As President and CEO Bill Adams, a former GE executive, suggests, future corporations may find it useful to morph themselves into information-linked strands of competencies.

AMP's Bill Hudson and JCPenney's Barger Tygart outline how the demands of fast-moving global technology and domestic retailing markets are driving the need for speed and flexibility. In a situation where a product is designed in Scotland and built in Indonesia for sale in Japan, there is no inventory pipeline, little room for error, and a very tight profit margin. "Increasingly we need to be agile," says Hudson, "but across borders and across corporate cultures."

- J.P. Donlon

ANTICIPATING CHANGE

Lester M. Alberthal Jr. (EDS): Strategic agility revolves around understanding your industry and market and being positioned to take advantage of change as it happens. This is particularly necessary in today's global world, which has tremendous economic development potential. China, for example, could do to the rest of the world in the automobile business what Japan did to the U.S. What happens to the American auto industry when the Chinese Lexus hits town? It's 30 percent cheaper, you can have any color or options you want, and it can be delivered in five working days. So why would you wait months for a Suburban or a Cadillac?

Technology will allow developing countries to more quickly move forward in developing their ability to create goods and services. Why? Because when you're starting from nothing, you're not encumbered by legacy systems and thought processes. Developed countries and their companies have automated processes that were conceived 75 or 100 years ago, but we haven't rethought the processes. We've just been creating technology and mapping it to the old thought processes.

That will change though, with the young generation entering the work force. These workers are computer literate - and they expect computers and equipment to be sitting on their desks when they take a job. They expect to be linked into all the databases and to be the decision makers. In this regard, the real issue for business is that such workers will become the major consumer band, meaning their buying habits will affect how goods and services are procured and moved around the globe. More and more, purchases will be made electronically, which will create a new demand process. The challenge for CEOs is getting their corporate cultures to accept that change and figuring out how to address it with customers. I don't know how to bring those disciplines and issues together. I'm not sure you can.