By Randy Browning

Markets aren’t what they used to be. The Internet’s global reach and ability to supply a near-instantaneous flow of information have forced businesses to sustain an unprecedented scale and pace. Customers and suppliers are acting accordingly, and they’re changing their demands quickly. For every company that can’t keep up, there’s one or more that can and will.

Simply put, you need cultural and operational agility. There’s that word again—agility. It’s been permeating the corporate lexicon. But agility is more than a buzzword; it’s a survival skill. In an environment where global reach, technical prowess, and optimal efficiency are requirements, agility is a key differentiator. In fact, the ability to adapt to change was ranked as one of the most important perceived sources of competitive advantage by executives in PwC’s most recent global CEO survey. (See Figure 1.)

So, what exactly is agility, and under whose job description does it fall? Agility is infusion of your processes and decision making—your corporate DNA really—with the ability to effect strategic change. It involves everything you, your management team, and your employees choose to do. This emphasis on selectivity is key because true agility requires establishing a fine balance between flexibility and standardization. You must determine where it makes sense to create and anticipate change and where it is more prudent to require a fixed approach. This balancing act is necessary: While your customers expect unique products and services, you have to provide those custom solutions from a common, standardized supply chain and infrastructure.

The endgame, of course, is not change for its own sake but the building of an optimal foundation—one that enables you to respond to crucial opportunities and challenges with maximum results and minimal organizational stress.

Figure 1: Perceived sources of competitive advantage According to our recent survey of more than 1,100 global CEOs, agility is squarely at the top of the executive agenda. The ability to adapt to change was cited as one of the most important sources of competitive advantage over the next 12 months—trumping even technological innovation and talent.

Source: PricewaterhouseCoopers, 11th Annual Global CEO Survey, 2008

Getting to agility

As a result, most businesses are efficient at what they need to do today, but they can’t adapt themselves quickly or affordably to what they need to do tomorrow. This lack of flexibility isn’t limited to a company’s static systems or production processes; it’s also embedded in the organization’s human processes, such as workflow and decision making.

Most companies lock on to a singular business strategy based on a set of assumptions about what’s driving markets, customers, and suppliers, but what if something unanticipated alters the landscape?

Worse, there’s an organizational bias that actively inhibits agility. Businesses typically are organized around specialties, thereby creating operational silos. And each is optimized for a specific task, such as sales or engineering.

In today’s market, the Model T–era approach whereby each group does its own thing and then hands off the result to the next in the chain just doesn’t work. Being agile requires working across multiple silos simultaneously. Marketing and production, for example, need to collaborate at all stages of a product’s life cycle to ensure that changing customer needs get incorporated rapidly into a product that is cost-effective to produce.

Yet most executives lack such an integrated view of their organizations. Because they have no idea how all the pieces fit together, there’s no way to orchestrate all the silos operationally. And there’s even less ability to execute on new or changed business strategies. Instead, executives are reactive, scrambling as changes occur.

Planning for what-if

Businesses greatly improve their long-term success by anticipating key opportunities and challenges before they occur and then preparing their organizations to be ready to make the needed changes quickly. That may sound like Business Strategy 101, but it isn’t. Most companies lock on to a singular business strategy based on a set of assumptions about what’s driving markets, customers, and suppliers, but what if something unanticipated alters the landscape, such as a new data privacy regulation, a supplier’s public relations misstep, or a competitive merger?

What’s needed is a way for companies to collectively assess such potential scenarios in order to determine which are worth considering and then to build in the ability to execute them. To determine where to start and how to get there, most companies could use a high-level map of present and future value creation. We call this map a business agility blueprint. The process of creating the blueprint requires companies to take a hard look at how they conduct their businesses today, how they hope to in the near-term future, and ultimately, how they might prepare for bigger disruptions in the longer term.

The business agility blueprint will articulate the set of requirements and expected outcomes needed for a company to respond to future market demands or opportunities.

The blueprint provides a singular corporate view that is often missing, and it helps make an unknown future easier to predict. First, it provides a complete picture of current business processes—where value gets created, where there are redundancies, who owns which processes, and where there are connection points. Then—through high-level scenario analysis—the blueprint facilitates thinking about potential changes and about how to operationalize responses to those changes.

When it’s done, the blueprint will articulate the set of requirements and expected outcomes needed to respond to future market demands or opportunities. The blueprint might reveal that it’s more cost-effective to implement a change today—as part of a greater operational excellence effort— than to ramp up later. In other cases, the approach may be to ensure that processes and technologies are open and changeable so that they can accommodate future capabilities.

Creating a business agility blueprint

Many executives focus on onetime or short-term activities that achieve agility through force of will, but once the initiative is over, the agility dissipates and the original processes and behaviors reassert themselves. That’s why it’s critical to approach agility as a foundational effort that you execute with the same planning, broad reach, and accountability as you would an operational excellence effort such as Six Sigma or Balanced Scorecard.

The business agility blueprint is at the heart of your company’s quest to be ready—really ready—for whatever the future brings. As with construction of a house or other building, the blueprint is the focal point of all of your efforts. To create the final blueprint—a process that may take several months and that involves your entire executive team—you will need to synthesize from a number of internal constituents their information and input, including:

• Current business strategy
• Mapping of your discrete business processes
• Current business architecture: a complete view of the organization’s business processes and their connection points
• Current enterprise architecture: your company’s technical blueprint that shows how and where the supporting information technology (IT) systems are used
• Senior management’s beliefs about possible strategic opportunities and potentially disruptive market changes that will require alteration of your business model
• Input from customer-facing departments such as marketing and sales, describing the ways current operations limit flexibility in delivering additional value to customers.

You can begin to get a glimpse of the potential of the business agility blueprint when you consider the example of telecommunications company BT. Realizing that the British telecommunications market and the regulatory rules governing it were likely to undergo profound change, BT decided to rethink its business. Facing the prospect of having to open up its business to competitive service providers, the company consolidated its business processes into 14 platforms to ensure there was only one version of each process, no matter where in the company it was used. Next, it aligned its functional groups with those process platforms. For instance, BT standardized the process of validating service availability for its current and future offerings, such as landline, cellular, DSL, or any other future product. Before the reorganization, each functional group at the company had its own ways of meeting this very common requirement. Now, when BT wants to bring a new service online, this piece of the offering can be dropped into place easily.¹

¹ PricewaterhouseCoopers, Business Agility white paper, 2008.

Taking a team approach

Managing change is difficult even under the best of circumstances, when all the factors and requirements are known. It’s even harder to manage for the possibility of future change.

Is it the chief marketing officer’s job to determine potential customer demands that should be anticipated? Should the chief operating officer expand the procurement system to ensure it can source products and services not currently needed? Does the chief information officer need to upgrade the company’s Web platform so it can better analyze customer data? Maybe—but all of these discrete activities miss the point. Acting alone, each of these executives has little chance of preparing the organization as a whole for agility.

Perhaps a new C-level executive is required—a chief agility officer (CAO), who would oversee the initiative much as a chief financial officer ensures financial efficiencies and standards across the business. But as tempting as it is to name an agility czar who can manage such efforts, doing so is not the whole answer. Agility must be embedded into the overall management structure rather than treated as yet another specialty function. In other words, agility should be an integral part of all aspects of a company’s strategic and operational efforts. Agility is a responsibility of every executive team member and should be part of each one’s mandate and mission. These executives will need to act both as a team and as individuals to develop an agility plan and ensure that it gets implemented.

As a team, the officers’ responsibilities are twofold: First, using the business agility blueprint, they must define where agility should be designed into the business. Second, they must ensure that the requisite changes get implemented and are maintained. Much of the detail work will be delegated to appropriate staff, under the officers’ direction and review.

The executive officer team should be prepared to make changes in pursuing agility. Many processes that used to be self- contained would, under an agility mindset, span multiple departments, requiring greater alignment across business units. Such efforts may require reworking departments to bring together processes that are now closely related, or they may require coordinating entities to ensure that their efforts are mutually supportive. At the very least, the executive team needs to set incentives—for the desired actions—that are consistently applied no matter what department is involved. This can be tricky in culturally siloed organizations, but it is fundamental to success.

A CEO who delegates agility solely to operational experts sends a clear message: Agility is not important. And with that kind of tone from the top, the results from any agility initiatives will likely be disappointing.

In essence, the CEO owns the business agility blueprint. Because the CEO ultimately sets business strategy, he or she also bears final responsibility for determining which future scenarios the business should support through agility. Of course, the rest of the executive team and other key staff will help identify and evaluate potential scenarios. Managing the details of the blueprint, however, is not the CEO’s job. That responsibility rests with a person or an entity responsible for coordination and oversight and might fall to the chief strategy officer or to an agility program office.

The CEO also bears the ultimate responsibility for ensuring success. While much of the work for facilitating agility falls to other executives, the CEO must ensure the desired outcome by periodically assessing whether the goals set forth in the business agility blueprint are being met. While a monitoring group, such as a program office, can help provide the information to determine compliance, only the CEO can decisively act on that information.

Randy Browning is the clients and industries leader of our US Advisory services practice.