By Dave Farber
For years, Columbia Business School professor Rita McGrath has been telling us that the traditional strategy of finding and exploiting a sustainable competitive advantage is becoming outdated.
The world is evolving too quickly for competitive advantages to last for a meaningful amount of time. Moreover, companies have gotten better at competing asymmetrically, blurring the definitions of who a company is even competing against. And new entrants have been finding scrappy ways to ensure that they have sufficient funds, information, and talent to compete with incumbents. Or so the argument goes.
While the value of leveraging your organization’s competitive advantages isn’t gone, it is diminishing. Consider Facebook as an example. The breadth of its user base is certainly a competitive advantage. When Google+ tried to compete directly, it was unable to build a critical mass of users who would shift away from Facebook for a few feature improvements. Meanwhile, other newcomers have shown progress. Snapchat, for example — with its $1B in annual revenue and its IPO — seems to have overcome Facebook’s advantages. Yet it has only started to do so. Facebook continues to hold nearly 20% of the digital ad market while Facebook-owned Instagram (5%), Twitter (1%), and Snapchat (1%) lag behind. Facebook’s advantages endure, even if they do show signs of cracking.
So the question isn’t what to do instead of finding your competitive advantages; they’re still useful. It’s how to build agility into your organization such that you can adapt as the strength of those advantages diminishes. To help your organization become more agile, I offer four pieces of advice, each of which ties to an essential element of agility.
Set a strategy that ensures core strength while allowing exploration. According to a recent McKinsey survey, one of the biggest differentiators between agile organizations and non-agile organizations is a commitment to actionable strategic guidance. While we often prioritize the dynamic elements of agility — the ability to respond quickly to a changing world — that fluidity only manifests if the organization has a strong core that can provide the resources and the capabilities to create change. And part of keeping the core strong means ensuring that new initiatives aren’t pursued simply for the sake of change or to compete against an apparent rival, but rather to support a clearly articulated strategy that the organization can rally around. Agility without strategy can quickly turn into anarchy.
An organization’s strategy needs to focus not just on how to strengthen the core and win in today’s world, but also on how the core business will fit into the organization’s vision for growth. While a clear path is essential, there are dangers in either changing the path too frequently or not often enough. Agile organizations reevaluate their strategy annually to ensure that the chosen path still makes sense even as the broader landscape has evolved.
Build processes that allow you to explore opportunities. While the notion of being agile suggests an ability to make (relatively) frequent changes, those shifts cannot be arbitrary. This is especially true in industries with long product development timelines. Truly agile organizations have processes in place that allow them to ensure consistency in determining where changes can be made, when a shift is necessary, and whether identified priorities should be given resources. This last point is often given too little attention. Companies rarely have trouble finding opportunities in which they can invest. The challenge is in comparing those opportunities and determining which ones are most worthy of attention, especially when the options are wildly different.
Ultimately, processes that are designed to promote agility need to be considered in the context of the larger organization. Agile processes not only ensure that teams are able to make the right choices at the right times, but they also ensure that shifts aren’t disruptive to other teams or the overall effectiveness of the organization.
Create an insights library that allows you to adapt. Recognizing the need to shift direction or reallocate resources is an important step in practicing agility. Equally important, however, is ensuring that you’re able to quickly respond to the new challenges that emerge. A big part of that is having a deep understanding of customer needs that transcends the particular projects and products that teams may be working on. While I often encourage companies to find quick, scrappy ways to gather insights, I also can’t overstate the importance of building an underlying foundation of research into your customers’ Jobs to be Done. Because customer jobs tend to be relatively stable over time, building a comprehensive understanding of your customers’ jobs gives you a platform for innovation — one that you can return to as technological or competitive changes force your teams to shift directions. An agile team with that kind of platform can quickly pull crucial insights to help advance a new project, operating far more efficiently than a team that needs to develop a baseline understanding. While companies often have more research than they know what to do with, not just any insights will do. Being agile requires having shelf-stable research that you can turn to again and again.
Cultivate a culture that fosters innovation. Ultimately, preparing your teams to be agile requires first building an underlying culture of innovation. Agile team members need to have many of the same skills as innovators, and many of the conditions that allow innovation to flourish also allow teams to be agile. Teams need an understanding of trends and marketplace dynamics so that they can sense opportunities, experience working cross-functionally so that new capabilities can be added to a team when it comes time to shift, and a test-and-learn mentality so that they can quickly capitalize on new findings. Beyond the characteristics of the team itself, the organization needs to offer the structure that lets agility succeed. Job descriptions, performance metrics, training opportunities, and frameworks all need to be updated to reflect the mobile and fluid nature of an agile team member’s role.
Building agility into an organization’s DNA can be a long and difficult process. According to one study, only 4% of respondents worked at a company where an organization-wide agile transformation had been completed, though 37% said that such transformations are in progress. With the technological pace of change accelerating and the sustainability of competitive advantages declining, the transition into the age of agility is inevitable. By putting in place some of the essential elements of agility early on, organizations can ensure that the road forward is as smooth as possible.
Dave Farber is a strategy and innovation consultant at New Markets Advisors. He helps companies understand customer needs, build innovation capabilities, and develop plans for growth. He is a co-author of the award-winning book Jobs to be Done: A Roadmap for Customer-Centered Innovation.