Good management processes help a company execute its strategy and exercise its capabilities. But in fast-changing business environments, companies also need agile management processes that can help the organization change when needed.
The word “agility” has entered the business lexicon like few other terms in recent memory.1 Today’s strategists extol the importance of strategic agility and resilience. IT professionals talk about the need for agile software development. Yet even as agility is mentioned more often and in more management contexts,2 we believe that the core concept is misunderstood. Agility refers to an organization’s ability to make timely, effective, and sustained changes that maintain superior performance.3
An essential feature of agility is repeatability. Agile organizations continuously adjust to changing circumstances by, for example, launching new products or eliminating old ones, entering new markets or exiting underperforming ones, or building new capabilities. This requires management processes that can support adaptability over time.
Agility Routines and Management Processes
To develop our ideas on agility, we studied performance data from the largest public global companies in 22 industries between 1980 and 2012. (See “About the Research.”) We also administered strategic change and organizational design surveys in more than 50 companies. We sought to understand the factors that explained sustained levels of high performance and concluded that organizational agility required four routines:
- The strategizing routine establishes the purpose, direction, and market position of the organization, and supports what management scholars James O’Toole and Warren Bennis referred to as a “culture of candor” that expects organization members to challenge the status quo;4
- The perceiving routine connects organizations to their external environment; they can accurately sense and interpret relevant shifts better than their peers do;
- The testing routine encourages organizations to experiment with different ideas, allowing them to learn on a continuous basis;
- And, finally, the implementing routine facilitates day-to-day changes in products, operations, structures, and systems, but more importantly, orchestrates the development of new capabilities, business models, and strategies.